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10Aug2015 Market Update: Markets Gaped Up, Oil Remains Higher For Now, Investors Are Worried Over Chinese Stock Markets

Written by Gary

Markets gaped up at the opening and then fractionally melted up as volume fell off to anemic. Oil has traded sideways at its morning highs and the U.S. dollar is still at its low point but showing signs of life in a halfhearted way.

Markets are expected to close on the high side, but if the Chinese markets slide 'tonight' I hope you have hedged to the bearish side. Short term indicators are currently very bullish, but that is not expected to carry over in tomorrow's session.


Here is the current market situation from CNN Money

North and South American markets are broadly higher today with shares in Brazil leading the region. The Bovespa is up 1.65% while U.S.'s S&P 500 is up 1.32% and Mexico's IPC is up 0.84%.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 60%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 10%
Investors Intelligence sets the breath Above 50 bullish 41.6%
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.

-10.55

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.

39.44%

StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 48.01%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 52.00%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 22.40
StockChart.com Consumer Discretionary ETF (XLY) As long as the consumer discretionary holds above [66.88], all things being equal, it is a good sign for stocks and the U.S. economy 78.99
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,896

What Is Moving the Markets

Here are the headlines moving the markets.

Chinese warning lights flash as tumbling factory gate prices pave way for more stimulus

Exports and factory gate prices collapse in July, suggesting government will launch fresh stimulus measures to support the world's second largest economy

Read More >>

Fed 'close' to hiking rates, U.S. economy near normal: Lockhart

ATLANTA (Reuters) - Economic conditions in the United States have largely returned to normal and a Federal Reserve decision to raise interest rates should come soon, Atlanta Fed President Dennis Lockhart said on Monday.

Crude oil rebounds along with U.S. gasoline, weaker dollar helps

NEW YORK (Reuters) - Crude oil prices jumped as much 3 percent on Monday after a rally in U.S. gasoline and diesel due to a refinery outage helped crude futures advance from multi-month lows earlier in the session.

More disappointing data reports are coming out of China, reinforcing expectations that Beijing will roll out more stimulus to support the world's second-largest economy. Exports tumbled 8.3% in July, their biggest drop in four months, as weaker global demand and a strong yuan policy hurt manufacturers. Imports also fell heavily, dropping 8.1% from a year earlier. China's central bank has already lowered interest rates four times since November, but more cuts and other support measures may now be on the way. Shanghai +4.9%; Shenzhen +4.3%; Chinext +5%.

More disappointing data reports are coming out of China, reinforcing expectations that Beijing will roll out more stimulus to support the world's second-largest economy. Exports tumbled 8.3% in July, their biggest drop in four months, as weaker global demand and a strong yuan policy hurt manufacturers. Imports also fell heavily, dropping 8.1% from a year earlier. China's central bank has already lowered interest rates four times since November, but more cuts and other support measures may now be on the way. Shanghai +4.9%; Shenzhen +4.3%; Chinext +5%.

Beware 1200 On The Russell - Breadth Breakdown Is Big Risk To Small Caps, BofA Warns

The US equity market struggled last week but the S&P 500 held the rising 200-day MA once again, but as BofAML notes, the much broader-based NYSE stalled at 200-day MA resistance last week. The NYSE has a potential head and shoulders top as well as a breakdown for the NYSE stocks only advance-decline line through the March low. Similar to the NYSE Comp, the Russell 2000 also shows a potential head and shoulders top with a breadth breakdown a big risk to 1200 support...

Via BofAML,

NYSE: 200dma holds as resistance; Big support = 10,600 Unlike the S&P 500, which held its 200-day MA as support last week, the NYSE stalled at 200-day MA resistance last week. The NYSE has a potential head and shoulders top as well as a breakdown for the NYSE stocks only advance-decline line through the March low. This breakdown for breadth is a potential leading indicator for a breakdown in the index below its early July and March lows at 10,659-10,622 toward 10,060-9886 (projection and October 2014 low). It would take a move above 11,032-11,170 to improve the pattern.

Russell 2000: A-D breakdown is risk to big 1200 support

Similar to the NYSE Comp, the Russell 2000 also shows a potential head and shoulders top. After holding its 200-day MA in late July, the Russell 2000 broke and closed below this important longer-term moving average on Thursday and Friday. This coincides with a fresh break to new lows on the small cap advance-decline line and places big Russell 2000 support at 1212-1206 or 1200 at ...

Buffett pays high price for Precision Castparts

(Reuters) - Warren Buffett is paying a hefty price for the biggest acquisition of his career, now that his Berkshire Hathaway Inc has agreed to buy Precision Castparts Corp in a merger valuing the maker of aerospace and other parts at $32.3 billion.

Wall St. rises on Berkshire deal, China stimulus hopes

(Reuters) - Wall Street was up more than 1 percent on Monday, bouncing back sharply from last week's steep lows, buoyed by optimism around China and Greece, and as Warren Buffett's latest billion-dollar deal showed the M&A boom was alive and well.

It appears that prices in the oil market will stay lower for longer, as traders and oil companies see the global glut of crude persisting beyond this year. Benchmark U.S. oil futures for September delivery are nearing the six-year low struck in March, but contracts for delivery in later years have taken an even bigger hit, with prices for 2016 and 2017 already trading below their March lows. Crude futures -0.3% to $43.76/bbl.

Dollar Dumped As Fed's Lockhart Fails To Mention Word "September"

A scan through Fed's Lockhart's speech and it is quite apparent that he said absolutely nothing new whatsover. But, seemingly because he failed to mention the word "September," frantic FX algos have sold Dollars and bought everything else as hype hope shifts to December... Just a reminder, this is the same Fed that says a 25bps rate hike is irrelevant and priced in...

Twitter interim CEO Dorsey buys more shares in show of faith

(Reuters) - Twitter Inc interim Chief Executive Jack Dorsey joined other insiders in buying more shares in the company in a show of confidence in the stock, which traded at a record-low last week.

The Mysterious Tails Of AAPL's After-Hours Trading

Today's panic-buying ramp in AAPL stock - its best since January - got us thinking. We previously noted the odd after-hours spikes (and troughs) in AAPL that appeared to act as strange attractors for the market during the day and sure enough, today's high (for now) appears to correspond almost perfectly with last Monday's after-hours spike highs... Signals? or just pure coincidence (5 times in 5 days)....

Additionally, as volume dwindles towards zero, it appears the S&P just cannot break last Thursday's waterfall open...

Credit not enjoying the day...

Charts: Bloomberg

Greece and lenders in final push to seal new bailout

ATHENS (Reuters) - Greece and international creditors sought to put final touches to a multi-billion euro bailout accord on Monday to keep the country financially afloat and meet an important debt repayment to the European Central Bank within days.

Oil Futures Signal Weak Prices Could Last Years

The oil market indicates that prices could stay lower for longer, delivering a fresh blow to hard-hit energy exploration-and-production companies.

China's Bohai Leasing in exclusive talks to buy Avolon for $2.64 billion

LONDON (Reuters) - China's Bohai Leasing Co Ltd is in exclusive talks to buy Irish aircraft leasing firm Avolon Holdings Ltd for $2.64 billion, after raising its offer to put it ahead of a rival bidder.

Adobe joins tech industry push in increasing maternity, parental leave

NEW YORK (Reuters) - Software company Adobe Systems Inc. said on Monday it is doubling the maternity leave it grants, making it the third company in the U.S. technology industry in a week to give new parents more paid time off.

Forget The Fake Statistics: China Is A Tinderbox

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

When China's tinderbox economy implodes, who will be left to bid up the world's surplus commodities and real estate?

After 30 years of torrid expansion, perhaps the single most consequential factor in China's economy is how much of it is a "black box": a system with visible inputs and outputs whose internal workings are opaque.

There are number of reasons for this lack of transparency:

1. Official statistics reflect what officials want to project, not the unfiltered data.

2. Policy decisions are made behind closed doors by a handful of leaders.

3. There is little institutional history of transparency.

4. Many important statistics are self-reported and prone to distortion.

5. Large sectors of the economy are informal and difficult if not impossible to measure accurately.

6. Endemic corruption distorts critical economic yardsticks.

7. There is little historical precedent to guide policy makers and individual investors.

None of these is unique to China, of course, with the possible exception of #7: few nations in history (if any) have experienced an equivalent boom in infrastructure, credit, housing and wealth in such a short span of time.

Saving Face By Editing Data

As anyone who has lived and worked in Asia can attest, public perception (i.e. "face") is of paramount concern. There is tremendous pressure to put a positive spin on everything in the public sphere. Negative publicity causes not just the individual to lose face, but his boss, agency, company and family may also be tarnished.

For this reason, reporting potentially negative numbers accurately may put careers and hopes for advancement at risk.

This accretion of fear of rep ...

Americans expect to tighten purse strings: NY Fed survey

NEW YORK (Reuters) - Americans last month said they expected to tighten their purse strings in the coming year, according to a Federal Reserve of New York survey that also found home and gasoline prices were expected to weaken.

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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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