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28May2015 Market Update: Opening Market Commentary: Markets Trending Downwards As Investor Concerns Escalate Over China, Europe And Greece

Written by Gary

Afternoon markets have been sea-sawing along the morning resistance lows accompanied with lower highs on each swing upwards. Investors see more downside as another day of conflicting statements on Greece's long-running debt talks with international creditors creates sour investor sentiment.


Here is the current market situation from CNN Money

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 62%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 52%
Investors Intelligence sets the breath Above 50 bullish 58.0%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -9.99
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 59.33%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 62.79%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 64.00%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 21.24
StockChart.com Consumer Discretionary ETF (XLY) As long as the consumer discretionary holds above [66.88], all things being equal, it is a good sign for stocks and the U.S. economy 76.71
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 11,102

What Is Moving the Markets

Here are the headlines moving the markets.

No change in Greek debt talks after another day of spin

BRUSSELS (Reuters) - The euro leapt, Greek bond yields fell, global financial markets brightened, but nothing actually changed in another day of conflicting statements on Greece's long-running debt talks with international creditors.

Avago to buy Broadcom for $37 billion in biggest-ever chip deal

(Reuters) - Avago Technologies Ltd agreed to buy Broadcom Corp for $37 billion in the biggest chip industry deal ever,

Justice Dept reaches deals with four banks under Swiss program

WASHINGTON (Reuters) - Four more Swiss banks cut deals with the U.S. Department of Justice to avoid prosecution for helping Americans evade taxes, the DOJ said on Thursday.

Abercrombie signals better year as Hollister sales improve

(Reuters) - Abercrombie & Fitch Co said its business was showing signs of recovery as sales of its Hollister-branded clothes improved, suggesting that recent efforts to revitalize the teen apparel retailer may be starting to pay off.

U.S. pending home sales race to nine-year high in April

WASHINGTON (Reuters) - Contracts to buy previously owned U.S. homes rose for a fourth straight month in April to a nine-year high, buoying the outlook for the housing market.

The American "Economy" (Summed Up In 1 Cartoon)

Having previously explained why "average joe" will never be wealthy from the stock market, we thought this summed up the new-normal America perfectly...

h/t @Stalingrad_Poor

U.S. housing data, sturdy jobs market buoy growth outlook

WASHINGTON (Reuters) - Contracts to buy previously owned U.S. homes rose for a fourth straight month in April to a nine-year high, buoying the outlook for the housing market and the overall economy.

Shanghai Stocks Plummet After Months of Gains

Chinese stocks began the day less than 60 points from the 5000 mark, following seven sessions of gains. Thursday ended with a 6.5% loss as investors raced for the exits.

Median Household Income Up 0.6% in April 2015

from Sentier Research

According to new data derived from the monthly Current Population Survey (CPS), median annual household income in April 2015 was $54,578, about 0.6 percent higher than the March 2015 median of $54,259. The Sentier Household Income Index for April 2015 was 96.0 (January 2000 = 100).

Wall Street lower as Greece, China weighs

(Reuters) - U.S. stocks were lower in late morning trading, a day after the Nasdaq closed at a record high and amid concerns about a Greek default, a tumble in Chinese shares and an unexpected rise in weekly jobless claims.

How Healthcare Is Dooming the U.S. Economy (In Just 3 Charts)

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

As it stands now, U.S. healthcare will bankrupt the nation and doom it to permanent stagnation and recession.

That healthcare alone is dooming the U.S. economy is not news to Of Two Minds readers, as I have been covering the catastrophic consequences of our runaway healthcare system for the past decade.
Three charts crystallize the healthcare dynamics that are dooming the U.S. economy. The first depicts the runaway growth of healthcare costs--a rapid expansion that is a permanent feature of U.S. healthcare, regardless of which party is in office or what reforms are instituted.
This expansion of costs has many drivers, most of which result from the system's perverse incentives for fraud, overbilling, marginal treatments and defensive medicine.Technological and medical advances offer more options for treatment, and can push costs up--but advances can just as readily push costs down, too.
The primary drivers of rapidly increasing costs are:
1. The cartel/crony-capitalist structure of U.S. healthcare
2. Defensive medicine to stave off litigation
3. Profiteering from needless or ineffective tests, procedures and medications
4. Fraud and overbilling
5. The concentration of expenditures in a small sector of the population
6. America's inability and/or unwillingness to have an adult discussion over end-of-life care fo ...

Citigroup CEO defends credit card deal with Costco

NEW YORK (Reuters) - Citigroup Inc CEO Mike Corbat said the deal the bank made with Costco Wholesale Corp to replace American Express Co as the issuer of credit cards for the retailer will be profitable for his shareholders.

Crude Prices Bounce On Inventory Draw Despite Biggest Production Spike In 19 Months

Following last night's surprise inventory build (as reported by API), as one trader noted, "inventory declines are expected this time of yr and more or less expected, we need to see inventory draws accelerating," and DOE didn't disappoint reporting a 2.8 million barrel draw (against expectations of a 2 million barrel draw). Inventories remains massively high though and Crude Production soared 3.28% - the biggest rise since Oct 2013. Crude prices initially ripped on the inventory news but are fading.

4th week in a row of inventory draws

For some context as to what this inventory change means...

But production exploded by the most in 19 months... Lower 48 States increased production at an average of 209,000 barrels per day

Crude ...

"The Greek Endgame Is Here": Probability Of IMF Default Now 70%, Says Deutsche Bank

As the farcical negotiations between Greece and its creditors unfold ahead of a June 5 IMF payment and as Alexis Tsipras is forced to spread false hope just to avoid a terminal bank run, a picture of the Greek endgame has emerged.

We've discussed the political implications of both an agreement or a Grexit and we've also taken an in-depth look at what a missed IMF payment means for the country's EU creditors. On the political front, the troika is intent on sending a strong message to leftist political parties (such as Spain's Podemos and Portugal's "ascendant" socialists) that using the threat of a euro exit as a way to extract austerity concessions is not a viable negotiating strategy. What this amounts to is an attempt on the part of the "institutions" to subjugate the political process to economics. In terms of skipping a payment to the IMF â€" who, as a reminder, effectively paid itself earlier this month by allowing Greece to tap its SDR reserves to pay the bills â€" there are a number of cross acceleration concerns which you can review by referring to the following graphic:

April 2015 Pending Home Sales Index Improvement Continues

Written by Steven Hansen

The National Association of Realtors (NAR) seasonally adjusted pending home sales index again improved and continues in expansion. Our analysis of pending home sales agrees - and we are projecting a relatively good month for existing home sales in May 2015.

Gold Capped As Soros Warns Of "Threshold Of A Third World War"

Gold Capped As Soros Warns Of "Threshold Of A Third World War"

- War "inevitable" if U.S. meddles in South China Sea - Global Times
- Senior NATO official warns that "we'll probably be at war this summer"
- Soros warns of â€'New World Order' and war with China
- Soros warns could be "on the threshold of a Third World War"
- Many countries in Pacific lay claim to strategically important and mineral rich islands
- Tensions between U.S. and China and Russia escalating
- War would have many facets including cyberwarfare and currency wars

George Soros George Soros

The â€'war' word is being increasingly heard internationally as the U.S., EU, Russia and China adopt provocative postures over various disputes including Ukraine and in the Pacific.

War with the U.S. is "inevitable" if the U.S. involves itself in the dispute which has arisen over the Spratley Islands in the South China Sea according to China's state controlled newspaper the Global Times.

"If the United States' bottom line is that China is to halt activities, then a US-China war is inevitable in the South China Sea" according to an editorial in the popu ...

Oil Prices Drop To 7-Week Lows - Here's Why

WTI Crude hit new 7-week lows, dropping below $57 (front-month) for the first time since April 15th's 'inventory draw' rip. In addition to reports from Reuters of leaked details about OPEC not expectated to cut production (did anyone really expect that), a combination of renewed inventory builds (as reported by API last night) and reports that Iraq is increasing its supply to new record highs is forcing futures prices to catch down to physical markets.

Weakness driven by...Iraq supply concerns...(as RT reports)

Iraq is ready to increase its crude exports to a record 3.75 million barrels per day in June, continuing OPEC's strategy of ousting US shale producers from the market.

The extra oil from Iraq comes to about 800,000 barrels per day, more than from another OPEC member, Qatar, said Bloomberg, referring to Iraq's oil shipments schedule.

Iraq is increasing oil exports in two directions. The first is in the Shiite south, where companies such as BP and Royal Dutch Shell work. The second is Nothern Iraqi Kurdistan, whose government last year received Baghdad's consent to independent oil deliveries.

In April, Iraq exported almost 3.1 million barrels of oil per day, which is a record.

And Iran remains a worry...

Dollar General says COO Vasos to replace Dreiling as CEO

(Reuters) - Discount retailer Dollar General Stores Inc said Chief Operating Officer Todd Vasos would replace Rick Dreiling as chief executive, effective June 3.

Pending Home Sales Jump Most Since September 2012 To Highest Since 2006, Driven By The Northeast

Following the March pending home sales report which saw growth moderate after February's 3.6% surge to 1.1%, the flurry of contract signings, not actual purchases, in April rebounded by 3.4% - the biggest jump since September 2012 - far above the 0.9% consensus estimate and 14% higher than a year ago, pushing the pending home sales index to 112.4, the highest level since 2006. The driver: pending sales in the Northeast, which soared 10.1% from the month before, and 9.4% from a year ago.

Quote NAR's chief economist Larry Yun:

"Realtors are saying foot traffic remains elevated this spring despite limited â€" and in some cases severe â€" inventory shortages in many metro areas," he said. "Homeowners looking to sell this spring appear to be in the driver's seat, as there are more buyers competing for a limited number of homes available for sale."

Adds Yun, "As a result, home prices are up and accelerating in many markets."

He is hopeful the jump in contract signings means a comparable increase in actual existing home sales:

Following April's decline in existing-home sales, Yun expects a rebound heading into the summer, but the likelihood of meaningful gains will depend on a much-needed boost in inventory and evidence of moderating price growth now that interest rates have started to rise.

...

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

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