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14Aug2015 Market Update: Disappointing Growth Figures Out Of The EU, China's Worrisome Stock Market And Low Crude Prices Make Investors Worried And Indecisive

Written by Gary

Today is a day of indecision as U.S. stocks bounced around the flatline. Low volume, markets open lower rise to green, fall to red then rise again to green. Oil is fractionally higher, but remains static near the 6-1/2 year lows and the U.S. dollar can't seem to climb out of its 'funk' as investors continued to assess the pace of global growth.


Here is the current market situation from CNN Money

North and South American markets are mixed. The S&P 500 is higher by 0.11%, while the Bovespa is leading the IPC lower. They are down 0.75% and 0.04% respectively.

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Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 56%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 10%
Investors Intelligence sets the breath Above 50 bullish 42.0%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -3.92
StockChart.com NYSE % of stocks above 200 DMA Index ($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.

39.90%

StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 48.12%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 51.80%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 21.87
StockChart.com Consumer Discretionary ETF (XLY) As long as the consumer discretionary holds above [66.88], all things being equal, it is a good sign for stocks and the U.S. economy 78.21
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,755

What Is Moving the Markets

Here are the headlines moving the markets.

Euro ministers set to launch Greek bailout, wooing IMF on debt

BRUSSELS (Reuters) - Finance ministers from the euro zone were meeting in Brussels on Friday expecting to give their final blessing to lending Greece up to 85.5 billion euros after parliament in Athens agreed to stiff conditions overnight.

U.S. crude edges up after six-and-a-half-year low, expiring Brent dips

NEW YORK (Reuters) - U.S. crude oil edged higher after posting a fresh 6-1/2-year low early on Friday amid concerns over global oversupply, while Brent futures slipped as the front-month September contract approached expiration.

The Great China Ponzi - An Economic And Financial Trainwreck Which Will Rattle The World

Submitted by David Stockman via Contra Corner blog,

There is an economic and financial trainwreck rumbling through the world economy. Namely, the Great China Ponzi. In all of economic history there has never been anything like it. It is only a matter of time before it ends in a spectacular collapse, leaving the global financial bubble of the last two decades in shambles.

But here's the Wall Street meme that is stupendously wrong and that engenders blind complacency with respect to the impending upheaval. To wit, the same folks who brought you the myth of the BRICs miracle would now have you believe that China is undergoing a difficult but doable transition - from an economy driven by booming exports and monumental fixed asset investment to one based on steady as she goes US-style consumption and services.

There may well be some bumps and grinds along the way, we are cautioned, such as the recent stock market and currency turmoil. But do not be troubled—-the great locomotive of the world economy will come out the other side better and stronger. That's because the wise, pragmatic and powerful leaders and economic managers who deftly guide China's version of capitalism have the capacity to make it all happen.

No they don't!

China is not a clone-in-the-making of America's $18 trillion consume till you drop economy—-even if that model were stable and sustainable, which it is not. China is actually sui generis—-a histor ...

Autos buoy U.S. industrial output; consumer sentiment dips

WASHINGTON (Reuters) - U.S. industrial output advanced at its strongest pace in eight months in July as auto production surged, another bullish sign for third-quarter economic growth that boosts the prospects of a Federal Reserve interest rate hike next month.

Greek PM faces biggest party revolt yet as bailout approved

ATHENS (Reuters) - Greek Prime Minister Alexis Tsipras faced the widest rebellion yet from his leftist lawmakers as parliament approved a new bailout program on Friday, forcing him to consider a confidence vote that could pave the way for early elections.

Stock Buybacks In Jeopardy: High Grade Bond Funds Suffer Biggest Outflow In Over Two Years

US corporations watched with detached amusement as Hillary Clinton, in branching our her populist campaign to pander to key Wall Street donor firms such as Blackrock (where her personal advisor and liaison Cheryl Mills just happens to be a board member), threatened to crack down on stock buybacks. Couple of points: i) by now it is far too late to crack down - most companies, even investment grade ones, are well on their way to being saddled with so much debt the next crisis and/or rate spike will result in a supernova of "fallen angels" and bankruptcies, ii) the government is hopeless to stand in the way of the "other people's money" juggernaut, and if career risk-threatened bond managers demand to hand over cash to management teams who promptly give that money back to shareholders, nothing can stop them.

Which is why for all the huffing and puffing from presidential wannabes about ending the buyback bonanza , corporate C-suites are laughing.

In fact, there is just one variable they care about - the amount of cash entering Investment Grade bonds funds because as long as the dry powder arrives, it has to be used up somehow, that somehow being almost exclusively stock buybacks in recent months and years.

And it is what happened here in the latest week that is making CEO, especially those whose compensation is a direct function of how much stock they repurchase, very nervous because as Lipper reported overnight IG funds just saw $1.8 billion in outflows, the most in over two years or since June 2013.

From Reuters:

U.S-based high-yield bond funds ...

Retail Gasoline Prices Soar in Regional Markets as U.S. Oil Falls

Retail gasoline prices have soared this week as a series of refinery outages forces drivers to pay more at the pump even as it helps push oil prices further down on their historic collapse.

Wall Street inches up as investors focus on economic growth

(Reuters) - Wall Street was mostly higher on Friday as a raft of positive economic data indicated a healthy start to the third quarter.

Older Brits Holding On to Pensions

Elderly Brits are using the freedom to access their pension pots, granted for the first time ever earlier this year, to buy electric wheelchairs and medical operations rather than sports cars.

Gold & Silver Suddenly Slammed As Dollar Surges

Around 1030ET, The US Dollar suddenly went bid, driving broad-based commodity weakness. Silver had been creeping higher all morning but it appears someone wanted to keep it below its 50-day moving average and has thrown 1000s of contracts short at it, slamming the precious metal to the lows of the day... Gold also saw a sudden heavy volume monkey-hammering...

Silver back below 50DMA...

Gold slammed too...

Which all started as The USDollar went bid...

On the bright side, we asssume China will be backing up the truck at newly low prices...

Dear China, here is your chance to buy another 20 tons of gold at lower prices, signed BIS

Charts: Bloomberg

Volkswagen recalls 461,300 cars in U.S., Canada to fix air bags

BERLIN (Reuters) - Volkswagen is recalling about 461,300 cars in the United States and Canada to fix a fault that could prevent air bags from deploying.

07 August 2015: ECRI's WLI Growth Index Continues In Positive Territory and Was Unchanged Again

ECRI's WLI Growth Index which had spent 28 weeks in negative territory - is now in its 15th week in positive territory and was unchanged again this week..

Preliminary August 2015 Michigan Consumer Sentiment Almost Unchanged from Last Month

by Doug Short, Advisor Perspectives/dshort.com

The University of Michigan Preliminary Consumer Sentiment for August came in at 92.9, a very slight decrease from the 93.1 June final reading. Investing.com had forecast 93.5 for the July Preliminary. The Index is at its highest nine month average since 2004.

This Alarming Indicator Is Back At A Level Last Seen 10 Days Before The Bear Stearns Collapse

One of the most disturbing and recurring themes highlighted on this site over the past year has been the ever greater disconnect between the worlds of equity and fixed income, whether in terms of implied volatility, or actual underlying risk.

It turns out there is an even more acute, and far more concerning divergence, which was conveniently pointed out overnight by Bank of America's Yuriy Shchuchinov, one which again looks at the spread between credit and equity. Specifically, BofA notes that in just the past two weeks, credit spreads from our HG corporate bond index have widened another 9bps to 164bps while equity volatility is down another percentage point (although technically BofA uses the 3rd VIX futures as its measure of equity volatility rather than VIX itself to get a smoother series that is less affected by the daily noises and seasonalities).

This is how the resulting dramatic divergence looks like:

Why is this notable?

In BofA's own words: "this spread currently translates into 10.26 bps of credit spread per point of equity vol, the level reache ...

Consumer sentiment slips in August

NEW YORK (Reuters) - U.S. consumer sentiment eased more than expected in August, a survey released on Friday showed.

Gold Jumps After China Reveals It Bought Another 19 Tons In July

One month ago, when everyone suspected that the PBOC's dramatic, 57% jump in gold holdings after a 6 year silence, to a "record" 1658 tons would be a "one-and-done" event, meant to facilitate China's admission into the SDR, we disagreed. This is what we said:

... now that the seal has been finally broken after so many years, and since today's update indicates that Chinese gold numbers are clearly goal-seeked with a specific policy purpose - to boost confidence - we await for the PBOC to start leaking incremental gold holding data every month (and especially in months when the market crashes) which will bring us ever closer to what China's true gold holdings are.

One month later, this is precisely what happened, when overnight the People's Bank of China reported that even as the price of gold dropped once more in the month of July after the epic June drubbing (when China supposedly "bought" over 500 tons of gold), it added another 610,000 ounces of the yellow metal, or 1.1%, bringing its total to 53,930,000 ounces, or 1677 tons of gold.

Our view on China's disclosure (if not accumulation: this has already happened and now the PBOC is merely picking the right moments to gradually reveal what its true gold holdings are) of gold have not ...

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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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