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08Jun2015 Market Close: Markets Close And Trend Downward As Investors Hope For A Turn Around

Written by Gary

$SPX closes below the 100 DMA, the DOW closes below the 145 DMA and the small caps are sneaking up on the 50 DMA. Not is all well on Wall Street as worried investors are skeptical of markets returning to previous highs. The good news is the markets have reversed course after 4 days of red candles, tomorrow is the test.

Todays S&P 500 Chart

WTI closed below its support as has the US dollar along with gold. Something is about to give as all of these can't go down together, one is going to break out and that will set the equities markets trend! The question is who is right, the bulls or the bears?

The Market in Perspective

Here are the headlines moving the markets.

Airlines hit headwinds from investors as they try to capture growth

(Reuters) - Major U.S. airlines' shares tumbled on Monday amid fears that the carriers are grabbing for market share at the expense of profits.

Some airlines taking closer look at A380 than before: Airbus CEO Bregier

MIAMI (Reuters) - Planemaker Airbus's chief executive said some potential customers were studying its A380 super jumbo more seriously than before, although orders for other widebodies were more likely at this month's Paris Airshow.

Investors Pulled $11.7 Million From Gross's Janus Fund in May

Investors pulled $11.7 million from Bill Gross's new mutual fund at Janus Capital Group in May, according to new data Monday from fund-research firm Morningstar.

Apple to Add Cards From Discover, Some Stores to Apple Pay

Apple is expanding its Apple Pay mobile-phone payments service to accept cards from Discover Financial Services and certain retail stores, including Kohl's and J.C. Penney.

Why Stocks Are Not "Cheap Relative To Bonds"

Authored by Jim Quinn's Burning Platform blog,

For the lazy people who don't like to slog through Hussman's entire data laden weekly tome, I've picked out the most pertinent sections. For the really lazy, I've bolded the most important sentences.

When everyone on Wall Street is using the same algorithms in their HFT supercomputers, and John Q. Public isn't even in the market, who will these supercomputers sell to when they all get the sell signal at the same time?

When that time comes, and it won't be long, I'll be munching popcorn and watching the festivities unfold. The talking heads, government apparatchiks, and Ivy League educated big swinging dicks on Wall Street will declare a national emergency and demand another bailout.

Will we be stupid enough to fall for it again, or will we start hanging bankers?

Every valuation ratio used on Wall Street is simply an effort to approximate the Iron Law of Valuation by comparing price with some fundamental "X," instead of explicitly modeling the long-term stream of deliverable cash flows for that investment. And here's the central issue - if your fundamental "X" is not representative and proportional to the very, very long-term stream of cash flows that stocks are likely to deliver over time (think 50 years), valuing stocks as a ratio to X is meaningless. At the extreme, paying $100 for a one-year promise of $25 would represent a ...

Apple announces new streaming music service

SAN FRANCISCO (Reuters) - Apple announced its new music streaming service on Monday, dubbed Apple Music, entering a hotly competitive market but offering a product that comes with tremendous strengths.

U.K. Bond Auction Could Fail Because of Volatility

A U.K. government bond auction could soon fail to attract enough buyers because of market volatility, the head of the country's debt-management office said.

If Things Were Bad in 2008, What's Coming Will be Far Far Worse

For six years, the world has operated under a complete delusion that Central Banks somehow fixed the 2008 Crisis.

All of the arguments claiming this defied common sense. A 5th grader would tell you that you cannot solve a debt problem by issuing more debt. If the below chart was a problem BEFORE 2008... there is no way that things are better now. After all, we've just added another $10 trillion in debt to the US system.

Similarly, anyone with a functioning brain could tell you that a bunch of academics with no real-world experience, none of whom have ever started a business or created a single job can't "save" the economy.

However, there is an AWFUL lot of money at stake in believing these lies. So the media and the banks and the politicians were happy to promote them. Indeed, one could very easily argue that nearly all of the wealth and power held by those at the top of the economy stem from this fiction.

So it's little surprise that no one would admit the facts: that the Fed and other Central Banks not only don't have a clue how to fix the problem, but that they actually have almost no incentive to do so.

So here are the facts:

1) The REAL problem for the financial system is the bond bubble. In 2008 when the crisis hit it was $80 trillion. It has since grown to over $100 trillion.

2)The derivatives market that uses this bond bubble as collateral is over $555 trillion in size.

Kansas Poor Tax A Reflection Of Nationwide Fiscal Crisis

In the course of covering America's deepening state and local government fiscal crisis, we've touched on Kansas quite a bit.

As a reminder, an ill-fated tax cut â€'experiment' by Governor Sam Brownback contributed to a rather large funding gap which has in turn squeezed the public sector to the point that some schools have had difficulties making payroll. This well-publicized scenario has left many Kansans disgruntled as evidenced by the now famous Boss Hawg's Bar-B-Q incident wherein Brownback's waitress famously refused gratuity from the Governor, instead advising Brownback to "tip the schools."

Here's what the situation looks like visually (note that the tax cuts came in 2012):

In early April, Brownback signed a welfare reform bill into law. The goal, the Governor said, is to "get people back to work, because that's where the real benefit is getting people off public assistance and back into the marketplace with the dignity and far more income there than the pittance that government gives them. And I hope we don't lose track of the primary focus of what we're after."

Well, it turns out some observers did "lose focus" because the bill contained a number of rather â€'innovative' riders, one of which limits the amount of cash that can be withdrawn from ATMs with state-issued assistance cards to $25 per day.

The idea, according to Kansas, is to ensure that poor people spend public assistance on necessities, where "necessities" must not mean rent because after all, rent costs more than $25 and because there's a $1 fee for each withdrawal, plus the standard ATM fee for those with no checking account ...

U.S. Stocks Fall, Led by Tech Shares

U.S. stocks fell, led by a slide in technology shares, one session after an upbeat May jobs report bolstered expectations for higher interest rates later this year.

First Fed Rate Hike Timing Expectations Plunge To Lowest In 5 Years

Thanks to Friday's "good" news, the (non-equity) market has priced in just 5.86 months until the first Fed rate hike - this is now the soonest expected level for 'tightening' since April 2010...

and judging by stocks since Friday morning, the gap between fundamentals and stock prices are starting to converge...

As The Fed's "confidence-inspiring" wealth-effect appears to have broken...

If stocks discount six-months forward... bulls may have a problem

Charts: Bloomberg

Greece talks of compromise as Merkel warns time short for deal

ATHENS/KRUEN, Germany (Reuters) - Greece proclaimed a new willingness to compromise with its international creditors on Monday, as German Chancellor Angela Merkel warned that time was running out for an reform-for-aid deal to keep the country in the euro.

Stocks Rebound On Greek Bailout Extension Proposal, One Already Slammed By Tsipras

DAX futures have jumped 50 points (back above 11,000), and Dow Futures are up 60 points off the day's lows as yet another Greek rumor headline hits the wires. While the market reads the WSJ headlines on the extension of third Greek bailout to March 2016 as positive, Tsipras has already, according to the WSJ, rebuffed it as "unacceptable" because in exchange for the offered extension, Juncker and Dijsselbloem require implementing policy overhauls as well as pension cuts and tax increases, both of which just happen to be the Greek 'red lines.'

The apparent good news from the The Wall Street Journal:

Greece's international creditors have suggested extending the country's bailout program until the end of March 2016...

And the bad news:

... but disagreements over the conditions attached to the continued support and what would happen afterward risk undermining that plan, three people familiar with the negotiations said Monday.

In exchange for bailout extension, Juncker and Diesel required "pension cuts and tax increase ...

Wall St. Is Down, With Airline Sector Dragging

Overseas markets were on tenterhooks as the standoff continued between Greece and its creditors.

White House Admits Economies Of European Allies Crippled By Russian Sanctions

Just over a year ago when the Obama administration first introduced the vague, scary-sounding, all encompassing concept of "costs" when it explained how US sanctions would cripple the Russian economy, we mocked this latest bout of amateurism by the US State Department, noting that ig anything it would instead crush Europe's dominant, and far more intertwined with the Russian economy, powers such as Germany.

A few months later, Europe was on the verge of a deflationary bust and triple dip recession, and only the launch of €E has allowed the continent to kick the can for a few months before the crippling economic reality comes back with a vengeance. Incidentally, some skeptics (such as this website) wondered in late 2014 whether the Russian sanctions weren't precisely what Mario Draghi ordered: without the collapse in the German economy in the second half of 2014, the ECB surely would not have been allowed to proceed with its current courtesy of debt monetization.

But more importantly, overnight it was none other than the White House itself which finally admitted that the entire brilliant idea of collapsing the Russian economy by way of sanctions across the western world, ended up hurting European nations (i.e., US partners) who had no choice but to "sacrifice their own economies."

This is what Josh Earnest, White House press secretary, said yesterday.

Wall Street loses ground as investors eye September rate hike

(Reuters) - U.S. stocks fell on Monday afternoon, with the Nasdaq down 1 percent, as investors mulled the prospect of the Federal Reserve raising interest rates as early as September.

Delinquencies Jump on Home-Equity Credit Lines

Another post-crisis hangover looms for banks as principal comes due on lines of credit extended during the property boom. Delinquencies have risen as homeowners face sharply higher monthly payments.

Did The World's Last Big Oil Price Support Just Falter?

China's trade balance surged once again, spiking to near the highest on record according to data released this weekend, driven by a collapse in imports (and a roughly in line export print). Exports dropped 2.5% YoY, dropping for the 4th month of last 5 but it was Imports that createred. Down a stunning 18.1% YoY (the 5th drop in a row) China imports collapse reflects both volume and price effects and crucially, as Goldman notes, volume effects may be even more critical. Hidden deep inside the data, China exposed the oil market's greatest fear - it appears to be done restocking its SPR.

As Goldman Sachs reports,

The weakness in import growth is likely to be a reflection of both price and volume effects (an official price index is not yet available for May) -- though volume effects might be more important this month amid modestly higher oil prices. Based on the released breakdown, the value of crude oil imports went down 50.3% yoy in May (vs. -43.9% yoy in April), cutting 6.3 percentage points from headline import yoy growth (in April it cut 5.6 pp). Imports of other major commodities such as steel and coal also declined further in yoy terms in May.

But while a lot of the drop in imports is related to price, it is the scale of plunge in volume that is of most concern...

The biggest YoY drop since 2013 and biggest MoM drop since 2010, strongly suggesting China is done (for now) filling its strategic petroleum reserve.

Consumers Expectations May 2015 Shows Expected Income Growth Mixed

from the New York Fed

The results from the May 2015 Survey of Consumer Expectations indicate that median one-year ahead inflation expectations rose to 3.0 percent. Median earnings growth expectations declined for the second consecutive month to 2.3 percent, driven by younger and higher income workers. On the other hand, median household income and spending growth expectations increased slightly, with more pronounced increases for lower income households.

McDonald's European meal deals help offset weak U.S. May sales

(Reuters) - McDonald's Corp posted a smaller-than-expected drop in worldwide sales at established restaurants in May after a lift from value meal deals in Europe helped offset continued weakness in the United States, its top market for profit.

BTF50DMA MIA Amid WTF AAPL WWDC Disappointment

"...and we're calling it iOS 9" appears to have triggered more than a little selling in AAPL and tumbled it below its 50-day moving-average for the first time since March... Of course, given its weighting, it is dragging major stock indices lower...

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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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