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13Jul2015 Market Update: Averages Up Over One Percent, Quiet Trading At Opening Highs, No Indication Of Market Weakness Yet

Written by Gary

Markets opened higher as expected and have traded quietly near the session highs but below the 50 DMA. WTI oil edged up from its morning lows after a Tehran official indicated the Islamic Republic might miss another deadline. The U.S. dollar slowed its climb just pennies below 97.00 with no indication of stopping, but still remaining below its resistance of 97. Breaking through is bearish for the equities markets.

Trading indicators are at neutral and further volatility will be news generated.


Here is the current market situation from CNN Money

North and South American markets are higher today with shares in U.S. leading the region. The S&P 500 is up 0.89% while Brazil's Bovespa is up 0.68% and Mexico's IPC is up 0.41%.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 59%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 15%
Investors Intelligence sets the breath Above 50 bullish 47.1%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. +13.03
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 45.16%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 53.74%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 55.80%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 24.19
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 78.66
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,923

What Is Moving the Markets

Here are the headlines moving the markets.

The Latest: Eurozone top official says new bailout program for Greece likely to take 'weeks'

BRUSSELS (AP) — The latest from Greece's financial crisis (all times local): ___ 7:00 p.m. The eurozone's top official thinks it's likely to take around four weeks for a new bailout program for Greece to be worked out. Jeroen Dijsselbloem, who was re-elected Monday for a second two-year term as Eurogroup President, said finance ministers are assessing how to get Athens some immediate financing help, or bridge financing, to help it meet upcoming commitments.

Greeks relieved they will stay in EU, but years of financial hardship await

ATHENS, Greece (AP) — In a middle-class Athens neighborhood full of boarded-up storefronts, customers lined up at the Rizos Bakery on Monday to inhale the lovely smells of fresh bread and emerge with loaves still warm from the ovens.

Co-owner Alexandros Rizos stood behind the counter and worried whether he would have to lay off workers, or whether his 15-year-old business might go under. Greece secured a third bailout Monday that averts financial catastrophe but hits some of its already struggling citizens hard.

Rizos, 36, who owns the small bakery with his brother, said the deal serves up a double blow: Greece's sales tax on food looks likely to rise from 13 percent to 23 percent — meaning he'll have to raise prices for already struggling customers — and the deal liberalizes laws to let many more businesses open on Sunday, something that favors big chain stores because many small businesses like Rizos' can't afford to open seven days a week.

BOE May Accept Stocks As Collateral

Way back in October of 2009, a little over one year after the collapse of Lehman froze money markets and nearly brought down the entire global financial system, we brought you a rare and fascinating look at what goes on at the Fed's discount window when financial armageddon is playing out before everyone's very eyes.

We won't delve into the specifics now (you can revisit them for yourself here), but suffice to say that in the days after Lehman's bankruptcy, over $50 billion in securities had been assumed by the Fed via FRB and DTCC programs, which also included anywhere between $3 billion and $4.5 billion in equities. In other words: the Fed was lending against a portfolio of stocks (which amusingly included 5,136 shares of recently bankrupt retailer Shaper Image).

Seven years later and it appears as though the UK is set to dust off the Fed's Lehman lending playbook because as The Telegraph reports, the BOE is looking at making equities eligible for repo ops. Here's more:

Banks could be able to offer the Bank of England shares as collateral under a scheme being considered by officials, executive director Chris Salmon has revealed.

Currently, banks can offer assets such as asset-backed securities, government bonds and pools of loans as collateral to ensure the central bank does not lose its money. In future, they could be able to offer shares, too.

Although the haircut on equities has not yet been decided, it ...

Wal-Mart takes on Amazon's 'Prime Day' with online sale

(Reuters) - Wal-Mart Stores Inc is launching an online discount sale on Wednesday to counter Amazon.com Inc's highly-publicized "Prime Day", a shopping event for members of its Amazon Prime service on the same day.

UAW, Detroit Three could revise healthcare packages in talks: WSJ

(Reuters) - Healthcare packages and profit-sharing agreements could be revised in talks for new contracts between the United Auto Workers (UAW) and the Big Three U.S. automakers, the Wall Street Journal reported, citing people familiar with the negotiations.

Lehman creditors' recovery may soon reach $7.8 billion

NEW YORK (Reuters) - The trustee liquidating Lehman Brothers Holdings Inc's brokerage unit on Monday asked a federal bankruptcy judge for permission to distribute another $1.89 billion to unsecured creditors, boosting their total recovery to $7.78 billion.

Greece faces tough conditions under deal with euro zone

BRUSSELS (Reuters) - Euro zone leaders made Greece surrender much of its sovereignty to outside supervision on Monday in return for agreeing to talks on an 86 billion euros ($95 billion) bailout to keep the near-bankrupt country in the single currency.

U.S. stocks advance on Greek deal; tech stocks lead

(Reuters) - U.S. stocks rose on Monday, with the Dow Jones industrial average moving into positive territory again for the year, after euro zone leaders reached an agreement with Greece to move forward with a bailout loan for the country to avert bankruptcy.

Spot The Odd One Out

US Treasury bond yields are now lower on the day; EURUSD is plunging; and US equities are bid still near the highs of the day...

Charts: Bloomberg

Deal Is a Disaster for Greece, and Maybe for Europe

The conditions Germany got to punish the country are so severe that it could easily topple the Greek government and tear at the eurozone's fabric. Above, Greek Prime Minister Alexis Tsipras arrives at his office in Athens on Monday.

Calpers' Return Falls Short of Annual Target

The nation's largest public pension fell just short of its annual return target in fiscal 2015 as the California Public Employees' Retirement System wrestled with a slowdown in the markets and weak private-equity returns.

U.S. Stocks Rise on Greece Deal

U.S. stocks rose Monday after eurozone leaders said they reached a deal to provide further bailout aid to Greece.

Greece Fails To Make Another IMF Loan Payment But It Is Tonight's Samurai Bond That Everyone Is Watching

Moments ago, in what was a generally expected development, taking advantage of Grimbo and the IMF's tacit grace period following the June 30 default to Christine Lagarde, and perhaps in an indication of just how serious Greece truly is to honor its creditor committments (not really: it just shows that without additional creditor funds, Greece can never repay its creditors), Reuters reported that Greece will not meet a 450 million euro ($496.7 million) loan repayment to the International Monetary Fund that falls due on Monday given its severe cash crunch, citing two sources close to the issue.

Reuters adds that the missed payment will follow a 1.6 billion euro payment to the IMF which Greece also missed paying last month, making it the first advanced economy to ever be "in arrears" with the fund - the IMF's official euphemism for default. The head of the debt agency, Stelios Papadopoulos declined to comment.

However, it was not today's IMF (non) repayment that traders, if not Eurocrats and economists, are concerned about but tonight's maturity of a JPY 20 billion (about $160 million) Samurai note sold in 1995 and which matures on July 14. The reason why this paltry, in the grand scheme of things, payment is critical is that while continuing to repay the IMF is not an event of default if only purely technically, and for the rating agencies, a non-payment on the Samurai bond would start a cross-default cascade.

As Bloomberg reported in June: "If the Samurai bond isn't paid, it could cause a cross default on other public bonds," said Ryosuke Kaneko, a credit analyst in Tokyo at Mizuho Securities Co., a unit of Japan's third-biggest bank. If Greece can't repay the IMF at the end of the month, then "market participants may start focusing on the Samurai bond ...

Oil steadies as Iran indicates no nuclear deal yet

NEW YORK (Reuters) - Oil prices came off their lows on Monday after a Tehran official indicated the Islamic Republic might miss another deadline in securing a nuclear deal integral to lifting Western sanctions on its crude exports.

No plan to change small car production in U.S.: GM CEO

DETROIT (Reuters) - General Motors Co Chief Executive Mary Barra said Monday the automaker has "no plans to change" its strategy of building the Chevrolet Sonic small car in the U.S.

Alibaba's Ma-backed Hundsun defends role in stock market rout

BEIJING (Reuters) - Hundsun Technologies Inc , the financial information technology company controlled by Alibaba Group Holding Ltd founder Jack Ma, on Monday rejected local media criticism that blamed its platform for China's stock market rout.

Goldman: The Greek Solution "Exposes The Whole System To Collapse"

While not its base case (unlike JPM and Citi) Goldman Sachs was expecting an adverse outcome from this weekend's negotiations, and admits that this morning's pre-deal announcment "is thus a positive surprise, at least from a shorter-run, tactical perspective." So does is Goldman optimistic now on the outcome of the Greek deal for Europe and the prospects for further Eurozone utopia?

Hardly.

Echoing the harshly bitter sentiment of Wolfgang Munchau (and all non-Eurozone fanatics everywhere) who said that "The Eurozone As We Know It Is Destroyed", this is what Goldman has to say:

In our view, there are two main factors keeping investors sidelined. One is the residual implementation risks involved in the latest arrangements. Political hurdles in Greece and among those creditor countries most recalcitrant to offer concessions without guarantees will leave short-term investors unwilling to bear the volatility from headline news in relatively illiquid markets. The second, of much broader importance, is the accumulated evidence of the inadequacy of the Euro area's present fiscal governance, which takes up too many resources and exposes the whole system to collapse. Unless rectified by credible steps towards greater integration and ex ante risk-sharing, long-term investors seeking exposure to duration will shy away.

In other words, the only thing that could potentially "fix" Europe now, after an episode that may have terminally torn Europe apart following the stark juxtaposition in the "Grexit" reasoning "northern" vs "southern" countries, is closing the loop on Europe's federalization.

Unfortunately, if t ...

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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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