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24Aug2015 Market Update: DOW Recovers From 1,100 Loss, Oil Dips To 37, Near Term Market Reversal Expected, China Continues To Unwind

Written by Gary

By noon the market had partially recovered their heavy losses at the opening (@ 9:30 DOW off 1,100 / -6%) to a more manageable down one percentage point. Savvy investors are not surprised at today's volatility which occurs after large moves and some made nice profits. WTI oil fell to a low not seen since February 2009, $37.79, the U.S. dollar rebounded from a mid $92 2004/2005 double top support, deemed important.

This decline is being blamed on everything from China's weakening economy to politicians dirty diapers. The guessing game continues where investors stand.

Here is the current market situation from CNN Money

North and South American markets are sharply lower today with shares in Mexico off the most. The IPC is down 3.35% while U.S.'s S&P 500 is off 1.44% and Brazil's Bovespa is lower by 1.07%.

The $VIX shot up to 50 where investors were in an all-out selling frenzy then dropped back to 30 to where this is the toughest range to gauge as there isn't really a clear signal to what is going to happen next.

World stock markets fell sharply again as panic selling in China has picked right back up to start the week. China's stock markets have now wiped out the gains built up during the year. The Shanghai Composite Index closed down 8.5% after the lack of an official policy move from Beijing increased the level of anxiety. Many index futures contracts in China fell by their 10% limit in an indication more selling could unwind.

The 'Sheeples' were shocked by almost a mini market crash, what certainly looked like a very serious situation, to them at least. The good news is indicators show a very serious oversold condition which has to be relieved and savvy investors are now reviewing the odds of a near-term market reversal.

Many industry watchers believe market prices will continue their fall even further as OPEC producers continue to pour out more oil than needed and fueling the glut. The so-called 'correction' is believed my many to be the start of a full blown market descent and not likely to return to the previous highs for several years. In other words, the bear market has started with earnest.

Traders Corner - Health of the Market

Index Description Current Value Members Sentiment: % Bullish (the balance is Bearish) 45%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear


Investors Intelligence sets the breath Above 50 bullish

36.1% 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.

-71.56 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.

26.21% NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash.

30.10% 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.

22.60% 10 Year Treasury Note Yield Index ($TNX) ten year note index value 20.42 Consumer Discretionary ETF (XLY) As long as the consumer discretionary holds above [66.88], all things being equal, it is a good sign for stocks and the U.S. economy 73.55 NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,058

What Is Moving the Markets

Here are the headlines moving the markets.

Why investors are dumping stocks 6 years into bull market, and what to watch in coming weeks

NEW YORK (AP) — Well, that was fun while it lasted. For years, investors in U.S. stocks shrugged off threats — a government shutdown, fear of a euro collapse, a near U.S. debt default — and just kept on buying.

At the sixth anniversary of the bull market in March, the Standard and Poor's 500 index had more than tripled in value. Now, buyers are hard to find. A wave of selling has hammered major indexes, with the S&P 500 losing nearly 6 percent last week.

That was its worst weekly slump since 2011. U.S. stock futures Monday are indicating another steep decline that could pull the index into what Wall Street calls a "correction," or a fall of 10 percent from a recent high.

Corrections are natural in a bull market, a pause in the market's march higher, and this one is long overdue. They usually come about once every 18 months. The last one was four years ago.

China's stock market suffers biggest one-day fall since 2007, defying government intervention

BEIJING (AP) — China's stock market fell Monday by its biggest margin in eight years, defying the government's multibillion-dollar effort to stop a slide that has wiped out the gains of this year's price boom.

The decline threatened to weigh anew on global markets after last week's Chinese losses triggered a worldwide selloff. The benchmark Shanghai Composite Index fell 8.5 percent to close at 3,209.91 points, its biggest one-day loss since an 8.8 percent decline on Feb. 27, 2007. T

he index is down 38 percent from its June 12 peak and just under 1 percent below its closing on Dec. 31, last year's final trading day. "A disastrous result for China, after working so hard to breathe life back into domestic equities after the 2007 crash and having spent hundreds of billions of dollars propping up the market since June," said Angus Nicholson of IG Markets in a report.

Dow Pares Losses After Plunge But Still Down Sharply in Global Rout

U.S. stocks pared some of Monday's steep losses after a rocky morning during which the Dow Jones Industrial Average briefly plummeted more than 1,000 points.

U.S. 10-Year Note Yield Dips Below 2%

A deepening rout in global stocks and commodities sent investors piling into U.S. government bonds, sending the yield on the benchmark 10-year note below 2% for the first time since April.

Apple's China business strong in July and Aug: Cook to CNBC

(Reuters) - Apple Inc's China business experienced "strong growth" in July and August, Chief Executive Tim Cook told CNBC on Monday, seeking to assuage investor concerns over the company's prospects in a market considered critical for its growth.

Apple to replace some iPhone 6 Plus cameras over blurry photos

(Reuters) - Apple Inc said it would replace a limited number iPhone 6 Plus phone cameras due to faulty back cameras that take blurry photos.

Wall Street pares losses as Apple rebounds

(Reuters) - U.S. stocks staged a dramatic recovery off their lows on Monday, helped by a turnaround in Apple's shares, but the three main indexes remained in or within spitting distance of correction territory amid fears China's growth is slowing.

China stock plunge hits world stocks, dollar; U.S. stabilizes

NEW YORK (Reuters) - World stock markets plunged on Monday, after a near 9 percent dive in China shares and a sharp drop in the dollar and major commodities sent investors rushing for the exits.

Today's Historic Market Open, Caught On Tape

During the flash crash of May 6, 2010, the 1000 plunge in the Dow Jones seems historic, unprecedented and surely unrepeatable - after all the regulators had "learned their lesson" and would never allow a move like this ever again, right? Wrong.

h/t CNN

Tim Cook of Apple Seeks to Quell China Fears in Email to Jim Cramer

The chief executive of Apple said business was booming for the tech giant in China. Apple shares recovered by midday after falling sharply in the morning.

Energy Sector Stocks Crash To 4-Year Low (As Credit Predicted)

The S&P Energy sector ETF - XLE - collapsed at the open to its lowest since October 2011... Of course, this should come as no surprise whatsover to those who watch credit...

Fool me thrice?

Something Is Very Wrong In Saudi Arabia...

Ever since Kazakhstan stormed onto the radar of market participants who, prior to last week, didn't know the country existed, the world has awoken to the fact that a sharp and persistent decline in oil, that most financialized of commodities, comes with very real and far-reaching consequences.

For producers, crude's slide strains budgets and pressures FX reserves and as we documented at length on Sunday in "Saudi Arabia Faces Another 'Very Scary Moment' As Economy, FX Regime Face Crude Reality," nowhere is this more apparent than in Saudi Arabia where the country faces a fiscal deficit on the order of 20% and the first current account deficit in a decade.

The situation has some betting that Saudi Arabia will not be willing (or able) to retain the riyal's peg to the dollar and as you can see from the 12-month forwards, it might be time for sellside FX strategists to reconsider their position that the currency regime isn't likely to change anytime soon.

A Few Examples Of Just How Broken The Market Was This Morning

With 4,500 'crash' events this morning, we thought it worth surveying some of the carnage that 'liquidity-providing' high-frequency scapegoats left in their wake at the open...

In some big ETFs:

And some major individual names:

Aside from the above, it really is all about the fundamentals, we "promise"

Charts: Bloomberg

Is This Black Monday Crash The BIG ONE? It Doesn't Matter

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

After losing 11% last week, Shanghai this morning was down almost -9% at one point, after lunch went back up to -6.5%, and ended its day at -8.49%. A Black Monday for sure, but is this the BIG ONE? It really doesn't matter one bit. Unless perhaps you persist in calling your self an investor, in which case we pity you, but not for losing your shirt. Because God knows we've said enough times now that there are no functioning markets anymore, and therefore no-one who can rightfully lay claim to the title 'investor'.

Plenty amongst you will be talking about economic cycles, and opportunities, and debate how to 'play' the crash, but all this is useless if and when a market doesn't function. And just about all markets in the richer part of the world stopped functioning when central banks started buying assets. That's when you stopped being investors. And when market strategies stopped making sense.

Central banks will come up with more, much more, 'stimulus', but what China teaches us today is that we're woefully close to the moment when central banks will lose the faith and trust of everyone. After injecting tens of billions of dollars in markets, which thereby ceased to function, the global economy is in a bigger mess then it was prior to QE. The whole thing is one big bubble now, and we know what invariably happens to those.

More QE is not an answer. And there is no other answer left either. Those tens of trillions will need to vanish from the global economy before any market can be returned to a functioning one, and by that time of course asset prices will be fraction of what they ...

What Is Really Going On: Market Liquidity Worse Than During The Flash Crash; 4500 Crash Events; Constant Halts And Unhalts

Curious why few if any traders can actually execute any trades, whether buys or sells? The reason is that despite the relative calmness of the index prints, what is going on beneath the surface is an unprecedented wave of constant halt and unhalts as all stop levels were taken out, many in circuit breaker territory, making it virtually impossible for any matching enginge to, well, match buyers and sellers.

Here is a sample:

The resulting halts made it impossible for regular traders to step in, requiring central banks to buy via the CME's Central Bank Incentive Program, to restore some market stability.

And just to add to the pain, there is absolutely no liquidity in either stocks...

eMini Liquidity since 2009 - today is the black line $ES_F

â€" Eric Scott Hunsader (@nanexllc) August 24, 2015

... Or bonds:

Treasury Liquidity (10-year) is as low as it was during Treasury Flash Crash of Oct 15:

â€" Eric Scott Hunsader (@nanexllc) August 24, 2015

As the market breaks:

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