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27Jul2015 Market Update: Markets Down, DOW Off Triple Digits, Oil Down But Stable, More Markets Losses Feared

Written by Gary

Markets opened lower as expected pushing the DOW down triple digits. The sharp slump in Chinese markets piled further pressure on stocks this morning, after patchy economic data and corporate earnings spurred declines last week.

The averages are moving in a choppy sideways motion on very low volume resulting in a lot of investors deciding to sit this session out.

Short-term indicators are mildly bearish, oil is down but stable and the U.S. dollar continues to trend slowly downward.


Here is the current market situation from CNN Money

North and South American markets are lower today with shares in Mexico off the most. The IPC is down 0.74% while U.S.'s S&P 500 is off 0.44% and Brazil's Bovespa is lower by 0.36%.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 63%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 9%
Investors Intelligence sets the breath Above 50 bullish 44.1%
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.

-42.77

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.

37.66%

StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 49.23%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 51.00%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 22.37
StockChart.com Consumer Discretionary ETF (XLY) As long as the consumer discretionary holds above [66.88], all things being equal, it is a good sign for stocks and the U.S. economy 78.60
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,666

What Is Moving the Markets

Here are the headlines moving the markets.

Chinese shares tumble 8.5 percent in biggest one-day drop since 2007

SHANGHAI (Reuters) - Chinese shares slid more than 8 percent on Monday as an unprecedented government rescue plan to prop up valuations ran out of steam, throwing Beijing's efforts to stave off a deeper crash into doubt.

Orders for US Durable Goods Jump 3.4 Percent in June

Orders to U.S. factories for big-ticket manufactured goods posted a sizable gain in June, but the advance was fueled by higher demand for commercial aircraft. Outside of this volatile category, a key category that represents business investment rose by a far more modest amount.

Here Come The Witch Hunts: Chinese Regulator Urges Traders To Rat Out "Malicious Sellers"

After pledging a whopping 10% of China's GDP, or just about $1 trillion, to its various (at last check over 40) discrete measures to prop up its collapsing market, among which such threats as arresting shorters of stock and "malicious sellers", actions which have merely slowed down the bursting of the world's biggest stock bubble in recent years, China has finally reverted to what the communist regime does best to preserve "order" - implement witch hunts in which the population rats out any criminals who dare to go against the protocols of the communist party. In this case, the targets are "malicious sellers."

This is what appeared moments ago on the website of the Chinese stock market regulator, the CSRC - an interactive online box allowing "traders" to rat out anyone who sells... maliciously (as opposed to non-maliciously).

Google translated:

Online Reporting Notes

Note: This website is in trial operation stage, the event can not normally access, please understand!

According to "securities and futures law violations Report Interim Re ...

UBS Leads on Capital But Payouts Won't Come Quick

The Swiss bank has the best capital ratio among large global banks but it still faces regulatory hurdles.

U.S. business capex gauge rebound offers hope for factories

WASHINGTON (Reuters) - A gauge of U.S. business investment plans rebounded solidly in June after two straight months of declines, suggesting the drag on manufacturing from capital spending cuts was starting to ebb.

Teva to buy Allergan generic drug business for $40.5 billion, drops Mylan bid

TEL AVIV (Reuters) - Teva Pharmaceutical Industries has agreed to buy Allergan Plc's generic drugs business for $40.5 billion in a cash and stock deal that will turn the Israeli company into one of the world's largest pharmaceutical firms.

New Greek bailout talks start, creditors seek more action

BRUSSELS/ATHENS (Reuters) - Talks between Greece and its international creditors on a third bailout began in Athens on Monday but the lenders want to see more reforms turned into law before they disburse the first loans to keep the near-bankrupt country afloat.

Goldman Sachs must pay $1.8 million for reporting failures-FINRA

(Reuters) - A Goldman Sachs Group Inc unit must pay $1.8 million for not reporting "substantial" details about its alternative trading system orders to a system that tracks that information, and also for other lapses, Wall Street's industry-funded watchdog said.

Wall St. dips after China stocks tumble

(Reuters) - Wall Street began the week in the red on Monday and fell sharply on concerns about China's slowing growth in the wake of the biggest drop in Shanghai shares in eight years.

Here Beginneth The Lesson...

Submitted by Grant Williams via TTMYGH.com,

There is a salutary lesson being given right now to anybody who invests in Western markets but few are paying attention. If the penny drops, things could get very ugly indeed.

Overnight, the Shanghai Composite Index fell another 8.5% - with the real damage being done in the last hour as sellers, spooked by a Bloomberg story which suggested intervention in Chinese markets may be curtailed at the behest of the IMF (who, somewhat hilariously, feel that the level of intervention from the Chinese government is a little over the top).

Was the IMF story the cause of the meltdown? Well, it's hard to see why anybody would think for a second that the Chinese would listen to the IMF about such matters (not even in the face of their desire to be admitted to the SDR), and anyway, it doesn't matter. There doesn't have to be a reason for falls like this one.

This is exactly what I wrote about in my most recent Things That Make You Go Hmmm... 'The Sum of Both Fears' (www.ttmygh.com).

Whatever the reason, the selling overwhelmed the bids of both natural buyers AND the massive interventionist forces of the PBoC and the seemingly myriad regulatory bodies.

75 stocks fell for each one that rose and those hit hardest were the stocks ...

Chinese Stocks Suffer Second Biggest Crash In History, 1,500 Companies Halted Limit Down

This was not supposed to happen.

After pledging, investing and otherwise guaranteeing the Chinese stock market to the tune of 10% of GDP, and intervening on at least 40 different occasions in the past month ever since China's stock bubble burst in late June, with the subsequent crash nearly taking the Shanghai Composite red for the year, overnight China officially lost control for the second time, when after a weak start to the Monday trading session, things turned very ugly in the last hour, when the Shanghai Composite plunged by 8.48%, closing nearly at the lows, and tumbling some 345 points for its biggest one-day drop since February 2007 and its second biggest crash in history!

The selling was steady throughout the day, but spiked in the last hour on concerns China would rein in its market-supporting programs following IMF demands to normalize its relentless market intervention. According to Bloomberg's Richard Breslow: "fear that the extraordinary support measures employed to hold up the market may be scaled back caused heavy afternoon selling resulting in a down 8.5% day." Of course, one can come up with any number of theories to explain the plunge: for example the PBOC did not buy enough to offset the relentless selling.

There Is No Exit: Why China's Plunge Protection Is Here To Stay

When rhetoric and simultaneous policy rate cuts failed to arrest the slide in Chinese equity markets late last month, Beijing resorted to threats, trading halts, and finally, to central bank intervention.

An unwind in official and unofficial margin lending channels had put immense pressure on the country's stock market bubble and when it became apparent that the only way to arrest the slide was to prop up margin lending, the PBoC moved to backstop China Securities Finance and in the process created an $800 billion, state-controlled, margin lending Frankenstein.

For a few days, calm returned to Chinese equities but to those with a keen eye, it was clear that the relative tranquility would not last.

As we noted last week, China was apparently so confident that three week's worth of unprecedented (and comically absurd) intervention had stabilized the situation and repaired what we still contend is irreparable damage to the collective psyche of the Chinese retail investor, that the PBoC was set to wind down the CSF's plunge protection activities just days after several commercial banks pledged billions more in support for the margin lender. We got a good look at just how unstable the situation still was when, last Monday, Bloomberg (citing Caijing) reported that the CSRC was "studying [a] stock stabilization fund exit plan."

Here's what happened next:

Fast forward exactly one week, and although it's not entirely clear what actions the CSF has taken recently (i.e. to what extent more money ...

July 2015 Texas Manufacturing Survey Manufacturing Activity Continues to Contract for Fifth Month

Of the four Federal Reserve districts which have released their July manufacturing surveys - two forecast weak growth and three are in marginal contraction. A complete summary follows.

Dallas Fed Misses Expectations After June's "Miracle" Bounce; Jobs, Wages Decline

After bouncing dramatically in June (the biggest surprise beat in over 3 years) - on the back of 'hope' surgiung to 6-month highs - July data continued to improve marginally but missed expectations -4.6 vs -3.5 exp). On the bright side New Orders inched into positive territory (although inventories are surging) but prices received tumbled, wages dropped, and employment fell (as hours worked rose). The biggest driver, once again, of the headline rise was 'hope' as the outlook rose to 18.8 - the highest since August.

As Hope over reality is averaging near 6 year highs...

Full Breakdown...

As one responmdent noted,

It is very odd for us to be so slow this time of year. June had decent billing but really low incoming orders, and July is starting out even worse than ...

Algos Vigorously Defend Crucial S&P 500 Support, Dow Hits 6-Month Lows

The S&P 500 and Russell 2000 are very close to joining the Dow Industrials and Transports in negative territory for the year. The S&P 500, which has fallen 5 straight days for the first time since January, is now back below its 200DMA, having swung from euphoric "Greece is fixed" exuberant record highs in just a week of rising volume. The Dow is the furthest below its 200DMA since October's Jim Bullard-rescued dump. Treasury yields are plunging.

Notably the S&P 500 was unable to make higher highs after testing the 200DMA for the first time since the rally began in 2009...

And The Dow is near 6-month lows...

The selling pressure pushed the S&P 500 near red year-to-date...

But the machines are holding the 200DMA line for all they are worth...

McGraw Hill to buy SNL Financial for $2.23 billion

(Reuters) - McGraw Hill Financial Inc , the parent of the Standard & Poor's ratings agency, said it would buy financial data and information company SNL Financial LC for about $2.23 billion.

Oil Prices Hit by Chinese Stock Market Rout

Oil prices kicked off the week in the red, pressured by a rout in Chinese stock markets and continuing worries about the world-wide oversupply of crude.

Earnings Summary for Today

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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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