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05Aug2015 Market Update: DOW In The Red, NASDAQ Up Near One Percent, Oil Fractionally Into Support And May Fall As Low As January 2015 Lows

Written by Gary

Oil prices fell below multi-month lows this afternoon after weekly inventory data showed a larger-than-expected drop in U.S. crude supplies but a small increase in production. The oil prices are dropping sharply and are within 0.30 cents of the April, 2009 era lows. The U.S. dollar rose back up once again testing its resistance at 98.25, but no cigar - yet!

The DOW is flat after being higher by 110 points earlier and now in the red, while the other major averages are headed south, though they will most likely remain in the green by the close.


Here is the current market situation from CNN Money

North and South American markets are higher today with shares in Brazil leading the region. The Bovespa is up 0.34% while U.S.'s S&P 500 is up 0.26% and Mexico's IPC is up 0.22%.

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 21%
Investors Intelligence sets the breath Above 50 bullish 43.2%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. +3.76
StockChart.com NYSE % of stocks above 200 DMA Index ($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.

40.75%

StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 48.70%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 53.20%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 22.63
StockChart.com Consumer Discretionary ETF (XLY) As long as the consumer discretionary holds above [66.88], all things being equal, it is a good sign for stocks and the U.S. economy 79.35
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,849

What Is Moving the Markets

Here are the headlines moving the markets.

Greek bank shares plunge for third day, drag down broader market

ATHENS (Reuters) - Greek bank shares sold off sharply for the third day in a row on Wednesday with buyers yet to emerge on a scale large enough to counter continued dumping of the stocks.

Greece's Tsipras says loan deal with lenders close

ATHENS (Reuters) - Prime Minister Alexis Tsipras said on Wednesday that Greece was close to concluding a deal with lenders on a multi-billion-euro bailout, which he said would end doubts over its place in the euro zone.

Robust U.S. services sector keeps Fed rate hike in play

WASHINGTON (Reuters) - U.S. private job growth slowed in July, but a surge in services industry activity to a near-decade high suggested solid economic momentum that strengthens the case for a Federal Reserve interest rate hike this year.

Are Bond Markets and the Fed on Same Page?

The Federal Reserve has signaled the economy can withstand a round of interest-rate increases but the bond market may not be so sure.

Sharply divided SEC adopts controversial CEO pay ratio rule

WASHINGTON (Reuters) - A sharply divided U.S. Securities and Exchange Commission adopted new rules on Wednesday that will require certain companies to publish a ratio of how their chief executives' pay squares with the median pay of their workers.

US, Turkey To Form Anti-ISIS "Coalition" With Saudi Arabia, Qatar

Some observers have noticed something rather peculiar about Turkey's new bombing campaign against Islamic State positions.

The curious thing about the airstrikes on ISIS targets, Ankara's critics say, is that they aren't really occurring. Instead, Turkey is aggressively hitting PKK targets and although Turkey made it clear in its appeal for NATO support that it doesn't discriminate between one "terrorist" group and another, commentators say the air raids have been noticeably one-sided. "Opponents [of] President Tayyip Erdogan [have] pointed out the air strikes against the PKK have so far been heavier than those against the Islamist radicals," Reuters notes.

As we've detailed exhaustively (here and here for instance), this is no coincidence. Rather, Erdogan has effectively engineered a renewed conflict with the PKK in order to weaken support for the pro-Kurdish HDP, an upstart political rival which won a stunning victory at the ballot box in June. With the country facing snap elections after attempts to form a coalition government unsurprisingly stalled, Erdogan is banking on voters abandoning their support for the Kurdish cause in the face of the escalating violence.

Presumably feeling the pressure from heightened media scrutiny around the politically-motivated anti-PKK air campaign, Turkey is out with an explanation for why it looks like the Turkish military is more interested in eradicating the PKK than they are fighting ISIS. Put simply, Ankara is just waiting on everyone to show up at Incirli ...

Chinese Retail Investors Flee Plunging Markets

Nearly a third of China's individual investors, or more than 20 million people, pulled out of the stock market in July, as the Shanghai Composite Index suffered its biggest drop in six years.

WTI Plunges To $44 Handle, Near 5-Month Lows

Despite CNBC's focus on 'lows are in' after a bigger than expected inventory draw, the realization that production continues to surge has cratered WTI crude which is now trading with a $44 handle!! This is the lowest in 5 months. Energy credit risk is back near 1000bps once again - near its record wides vs the broad HY index.

Crude plunges from $46 to $44

... and credit risk soars:

Facebook launches feature to allow businesses to privately message users

SAN FRANCISCO (Reuters) - Facebook Inc rolled out features Wednesday that enable businesses to privately communicate with customers through messages as part of the social networking company's push to make its Messenger app a stand-alone platform.

Here's A Gun Advertisement You Will NEVER See Again

If your child took one of these to school these days - you would be sent to jail. Roy Rogers Quick Trigger Shooter Hat: Vintage Toy

Spotify's Content Chief Moves to Online Video Start-Up Pluto TV

Ken Parks, Spotify's chief content officer and one of its longest-serving executives, will become Pluto TV's executive chairman in October.

"I Sure Am Glad There's No Inflation"

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

I sure am glad there's no inflation, because these "stable prices" the Federal Reserve keeps jaw-jacking about are putting us in a world of hurt.

We are constantly bombarded with two messages about inflation:

1. Inflation is near-zero

2. This worries the Federal Reserve terribly, because stable prices are deflationary and deflation is (for reasons that are never explained) like the financial Black Plague that will wipe out humanity if it isn't vanquished by a healthy dose of inflation (i.e. getting less for your money).

Those of us outside the inner circles of power are glad there's no inflation, because we'd rather get more for our money (deflation) rather than less for our money (inflation). You know what I mean: the package that once held 16 ounces now only holds 13 ounces. A medication that once cost $79 now costs $79,000. (This is a much slighter exaggeration than you might imagine.)

Our excellent F-18 Super Hornet fighter aircraft cost us taxpayers $54 million a piece. Now the replacement fighter, the wallowing collection of defective parts flying in close proximity known as the F-35 costs $250 million each--unless you want an engine in it. That'll cost you extra, partner.

Despite all these widely known examples of rampant inflation, every month we're told there's no inflation. Just to reassure myself there's no inflation, I looked up a few charts on the St. Louis Fed's FRED database.

I have to say, I'm scratching my head here because the cost of things has gone up a lot since 2000.

The consumer price index is up 38% from 2000. Now if somebody were to give me a ...

IMF's Currency Reservations Send China's Yuan Lower

A cautionary statement from the IMF on the prospects for granting China's yuan international status sent the currency briefly lower, as traders bet Beijing could lower it to combat slowing growth.

Dollar Gains on U.S. Service Sector Data

The dollar rose against the euro and the yen after a measure of the U.S. service sector surged in July, helping to reinforce recent signals from the Federal Reserve that borrowing costs could rise as early as September.

Wall St. higher as data eases September rate hike worries

(Reuters) - Wall Street was sharply higher on Wednesday, after three straight days of declines, as weak private sector hiring tempered expectations of a September interest rate hike.

Six Warning Signs That The Economy Is In Trouble

Submitted by Tony Sagami via MauldinEconomics.com,

On July 14, I wrote about the danger developing in the transportation sector, and things are looking even worse today. Here's what I mean:

Look Out Below #1: Royal Dutch Shell reported its quarterly results last week—$3.4 billion, down from $5.1 billion for the same quarter a year ago—and warned that "today's oil price downturn could last for several years."

In anticipation of tough times, Shell slashed its 2015 capital expenditure budget by 20% and is going to lay off 6,500 high-paying jobs (not Burger King-type jobs) this year.

Look Out Below #2: UPS is a very good barometer of the consumer end of our economy: It's the largest component of the Dow Jones Transportation Average both by sales and market valuation.

And UPS isn't very confident about the US economy. Here is what UPS CEO David Abney said in a recent conference call with analysts:

If you just look at in [sic] January, the GDP forecast we thought was going to be about 3.1%. Now the thinking in July is about 2.3%, so let's say a pretty signi ...

SEC to adopt rules mandating disclosure of CEO-worker pay ratios

WASHINGTON (Reuters) - Companies will have to provide investors with a ratio showing how the median pay of their workforce squares with their chief executive officers' compensation, according to new rules slated for adoption by U.S. securities regulators on Wednesday.

Morgan Stanley raises $1.7 billion for real estate fund

(Reuters) - Morgan Stanley said on Wednesday it has raised $1.7 billion for its eighth direct investment real estate fund.

One Has To Laugh

So according to today's headlines, bonds yields are rising on "rate hike expectations"...

... while stocks are rising because the data is bad enough to delay a rate hike.

We will refrain from commenting on this endless farce, aside to note that the Fed would save everyone a lot of energy, nerves and vocal cords if it merely announced what the closing price in the S&P is every day and just do away with "trading" and "markets" entirely.

Crude Pumps'n'Dumps As Production Surge Trumps Inventory Draw

Following API's drawdown last night, DOE reported a significant 4.41mm barrel draw (dwarfing the 1.63mm barrel draw expectation). Thisis the 11th of last 14 drawdown in inventory. Crude spiked on the news, seemingly ignoring the 0.6% surge in production - its biggest jump since late May... but has given all the spike back now, hitting a $45 handle.

Inventories plunged...

Crude spiked...

but production surged...

and crude plunged...

Charts: Bloomberg

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Earnings Calendar provided by Investing.com.

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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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