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20Aug2015 Market Update: DOW Down Over 230 Points, Dark Clouds On The Horizon, China's Woes Deepen, Investors Jittery Over Decelerating Global Markets

Written by Gary

Today's session continues to deteriorate and melt further down as oil and the U.S. dollar flirt with their respective supports. Moving through their supports would certainly be bearish on anyone's radar. Analysts are certain we will see $30 oil in the very near future and China's continuing issues is not weighing well on investors thoughts and renewed jitters across global markets.


Here is the current market situation from CNN Money

North and South American markets are broadly lower today with shares in Mexico off the most. The IPC is down 1.66% while U.S.'s S&P 500 is off 1.38% and Brazil's Bovespa is lower by 0.48%.

The storms on the horizon are closer and darker, but it is possible to see a recovery, but I think I am trying to fool myself. Markets are expected to close lower today at over one percentage point lower.

The Nasdaq has dropped almost 3.5% in the last 3 days - the biggest drop since October 2014 collapse. The DOW is down over 230 points, the NASDAQ is down over two percentage points and the $VIX has climbed to over 17. Have faith, the markets will recover someday as they always do, but it might not be this year!

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 51%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 14%
Investors Intelligence sets the breath Above 50 bullish 42.0%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -14.33
StockChart.com NYSE % of stocks above 200 DMA Index ($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.

39.16%

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.

47.18%

StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 51.60%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 20.89
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 77.35
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors

10,557

What Is Moving the Markets

Here are the headlines moving the markets.

The Battle at the Heart of Global Markets

The clash between developed-market growth and emerging-market turmoil means more volatility for investors.

Home sales near eight-and-a-half-year high, brighten economic outlook

WASHINGTON (Reuters) - U.S. home resales rose to a near 8-1/2-year high in July and factory activity in the mid-Atlantic region picked up this month, fresh signs of steady economic growth that likely keeps the Federal Reserve on track to raise interest rates this year.

China's Weak Yuan Temptation Could Prove Irresistible

The next time Beijing eases monetary policy, it will be hard for China to resist the call to let the yuan depreciate in tandem.

Refineries Could Push Oil Over the Edge

Oil's drop into the $30s could come from U.S. refiners throttling back after an intense summer.

Senators urge recall of all vehicles with Takata air bags

(Reuters) - Two U.S. senators on Thursday called on Japanese auto supplier Takata Corp to immediately recall all vehicles containing the company's air bags.

Fundamentally Flawed Markets & The Grey Area Between Cheating And Edge

Submitted by Ben Hunt via Salient Partners' Epsilon Theory blog,

Always confess to a small crime if you want to hide the big stuff. I remember reading this in a Robert Heinlein sci-fi novel when I was a kid, and it's stuck with me ever since. Once you start looking for this trope you see it everywhere, and even if it goes a little over the top at times in scripted media (anyone remember the "24" season where Jack Bauer tortures his own brother, who gives up a partial truth to hide their father's role as an arch-villain of treason?), I'm always on the look-out for it in the Narrative construction of our unscripted investment news media.

The problem in mass Narrative construction is not (or at least is very rarely) an issue of intentional misdirection through selective confession. But you don't need intentionality for this dynamic to take root and misdirect all the same. Much more commonly, it's the spreading of an easy to understand revelation of old fashioned greed that generates such a sense of outrage among all of us that regulators and policy makers mobilize to "crack down" on a few obvious bad guys while leaving the underlying flawed system intact. The result is that the flawed system often gets a new lease on life, as both the popular and regulatory attitude becomes "Oh ... well, I guess so long as you're not doing THAT, then I suppose we've got nothing to worry about."

Case in point: the record $20 million fine levied by the SEC last week on ITG for its egregious wrongdoing in management of its trading dark pool. I can say that this was egregious wrongdoing without any fear of contradiction because - in sharp contrast to almost every settlement you've ever see ...

China smartphone sales fall for first time: Gartner

(Reuters) - Smartphone sales in China, the world's biggest market for the devices, fell in the second quarter for the first time, market research firm Gartner Inc said on Thursday.

Nasdaq Breaks Below Key Technical Support, Plunges Most In 10 Months

The Nasdaq has dropped almost 3.5% in the last 3 days - the biggest drop since October 2014 collapse. This drop has pushed the all-important tech high-flyer back below its 200-day moving average for the first time since Oct 10th... just before Bullard unleashed the threat of QE4...

The Nasdaq has gone nowhere now in six months.

Depression Tracker: Unemployment Soars In Latin America's Most Important Economy

If there's anything Brazil certainly does not need, it's more bad news.

The country is, in many ways, a symbol of the great EM unwind catalyzed by falling commodity prices, plunging currencies, reduced demand from China, a looming Fed hike, and, most recently, a yuan devaluation, with the latter being particularly painful for Brazil:

As we've documented extensively, the situation is made immeasurably worse by political instability. President Dilma Rousseff is "enjoying" an approval rating of just 8% as the public calls for her impeachment amid allegations of fiscal book cooking and corruption at Petrobras where she was Chairwoman from 2003 until 2010.

The economic news - which was already bad enough between a harrowing bout of staglflaton and dual deficits on the fiscal and current accounts - just got a lot worse as unemployment spiked to 7.5%, well ahead of consensus and the worst in five years. Here's FT:

Here's another economic snapshot of Brazil that is probably not going to do much to help lift President Dilma Rousseff's approval ratings.

Unemployment in Latin America's largest economy rose for the seven straight month, hitting 7.5 per cent in July.

That's up from 6.9 per cent in June and much worse than the 7 per cent the market had forecast and the highest since May 2010.

The real fell by as mu ...

Deere resumes production at Tianjin, China facilities

(Reuters) - Deere & Co said on Thursday that production has resumed at its facilities near Tianjin after a massive chemical explosion ripped through the Chinese port town last week.

Welcome To The Fed's Theater Of The Absurd

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The world's most powerful central bank is relying on a novelty tune to maintain the hyper-speculative status quo.


Back in the Roaring 1920s, a novelty song entitled Yes! We Have No Bananas (1923) was a major hit. The song made fun of a fruit vendor who answered "yes" to every query--even when he didn't have the requested item--for example, bananas.

Today, in the Roaring Teens, the Federal Reserve has their own novelty tune: yes, we have no rate hikes.

Just like the always-positive fruit vendor in the 1920s who answered "yes" to every question, the Fed answers "yes" every time someone asks if they are indeed going to raise interest rates a smidgen.

Despite their automatic affirmative, we have no rate hikes. The reason why, oddly enough, goes right back to banana vendors--in this case, banana vendors in China, who are speculating on margin (i.e with borrowed money) in China's casino stock market.

The reason why the Fed is wary of raising rates isn't the real-world impact. As I have noted here many times, a quarter-point increase won't torpedo any auto loan or mortgage being issued to qualified buyers.

If a buyer can't qualify for a home loan because rates clicked up .25%, they have no business buying a house anyway--they are not qualified by any prudent lending standards.

As for subprime auto loans--the firms issuing these loans don't care if rates click up .25%--the subprime market world of high ...

Dow Dumps 1200 Points From Record Highs To 7-Month Lows - Unchanged Since The End Of QE3

The Dow Jones Industrial Average has gone nowhere since October 31st 2014 - The End of QE3...

The last 2 days have seen the biggest percentage drop since January.

Wall Street down 1 percent, Dow and S&P slip into red for the year

(Reuters) - Wall Street fell more than 1 percent on Thursday morning, pushing the Dow and the S&P into the red for the year, after the Federal Reserve highlighted global growth concerns and as Walt Disney dragged down consumer discretionary stocks.

Pessimism Rising - Options Markets Signal Bears Beating Bulls

Amid the tightest range in stock market history, bearish sentiment toward stocks is rapidly worsening according to the options market. As Bloomberg reports, based on the number of puts trading compared with calls on single stocks, pessimism is higher now than any time since 2012 as "upside speculation has really fallen off a cliff." Contrarians may be rejoicing but without a QE-backing and central bank omnipotence in question, as one strategist noted, "perhaps these traders fear a greater correction coming down the pike."

With about half of the S&P 500's members trading at least 10% below their 52-week highs, investor skepticism is growing, as Bloomberg reports,

About 0.75 bearish options have changed hands for every bullish one on average in the last 10 trading days, according to a CBOE index tracking daily volume through Aug. 18. The ratio reached 0.76 last week, its highest reading since June 2012.

Equity trading this month has been dominated by signs that China&rs ...

UK Stock Market Tumbles Into 10% 'Correction' - Gone Nowhere Since Feb 2013

Just as The BoE starts to hint at raising rates sometimes, maybe, possibly, never... The FTSE 100 tumbles into yet another correction - down 10% from its record highs set shortly after Draghi unleashed Q€. At current levels, the UK stock market has seen no appreciation since Feb 2013...

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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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