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24Aug2015 Market Close: SPY Closed Down 4%, DOW Dropped 586 Points, Oil Slips To 37, Short Term Indicators Very Bearish

Written by Gary

Another interesting day and no news of anyone jumping out of tall building - yet. There should have been a mini relief correction to elevate a very oversold market, but that hasn't happened, maybe tomorrow after a positive PMI, Consumer confidence and a slew of new homes being built - I bet you don't buy that either.

Short term indicators, weighted on oil, are very bearish, but in light of a market falling so far without stalling is unusual and an up market is in the forecast.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Monsanto sweetens offer for Syngenta, values firm at $47 billion

NEW YORK and CHICAGO (Reuters) - U.S.-based Monsanto Co sweetened its offer to buy Switzerland's Syngenta AG , valuing the company at around $47 billion as it tries to lure the Swiss firm to the negotiating table, a person familiar with the matter said on Monday.

Fed's Lockhart sees interest rate hike 'sometime this year'

BERKELEY, Calif. (Reuters) - The Federal Reserve will likely begin raising interest rates this year, but a strengthening dollar and a drop in oil prices make forecasting economic growth difficult, a top U.S. central banker said on Monday.

China stock plunge smacks global shares, U.S. stocks dive

NEW YORK (Reuters) - World stock markets plunged on Monday after a near-9 percent dive in China shares and a tumble in oil prices, while U.S. stocks were on track to end the day with steep losses even after a striking comeback in a volatile day.

Wall Street trades sharply lower, Apple rebounds

(Reuters) - U.S. stock indices were close to 4 percent lower in afternoon trade on Monday but held above the day's worst levels after a dramatic turnaround in shares of Apple Inc .

The Volatility Of Volatility Has Never (Ever) Been Higher

As the cost of insuring equity market risk (VIX) spiked higher this morning (having been broken for minutes after the open), catching up to the cost of insuring credit market risk (CDX HY) which has been screaming dead canaries for weeks, a funny thing happened to the volatility of volatility.

VVIX (the estimate of the uncertainty of the cost of insuring equity risk) exploded to a level never seen before - as various ETF/hedging strategies imploded - a level twice as high as during the Lehman crisis...

Finally, if credit, equity, or vol insurance is too expensive, there are always other ways to 'protect' yourself...

Can't be too careful, make sure you're packing protection. pic.twitter.com/QyGw5Zoeqa

— Quoth the Raven (@QuoththeRavenSA) August 24, 2015

Emerging Markets Hit Hard in Global Rout

As anxieties about the world's No. 2 economy mount, investors are pulling money from the developing countries that feed China's vast industrial machine with natural resources.

Forget Rate Hikes: Bridgewater Says QE4 Is Next; Warns World Is Approaching End Of Debt Supercycle

In a just released letter to clients, the head of the world's largest hedge fund delivers one of his usual sermons about the economy as a perpetual motion machine, affected by central banks, and where interest rates are supposed to boost asset returns by being below "the rates of return of longer-term assets."

None of that is terribly exciting and it is in fitting with what Bridgewater has said for a long time (incidentally, it is curious that just over the weekend, the FT released a piece in which a "US asset manager warns over risk parity" which is what Bridgewater's bread and butter is all about).

What is exciting is the following part:

That's where we find ourselves nowâ€"i.e., interest rates around the world are at or near 0%, spreads are relatively narrow (because asset prices have been pushed up) and debt levels are high. As a result, the ability of central banks to ease is limited, at a time when the risks are more on the downside than the upside and most people have a dangerous long bias. Said differently, the risks of the world being at or near the end of its long-term debt cycle are significant.

That is what we are most focused on. We believe that is more important than the cyclical influences that the Fed is apparently paying more attention to.

We suppose this gis suppoed to justify the Fed's preoccupation with hiking rates, and why Yellen has on more than one occasion spoken against soaring asset prices. And yet...

While we don't know if we have just passed the key turning point, we thi ...

Rolling A Wheelbarrow Of Dynamite Into A Crowd Of Fire Jugglers

Submitted by Jim Quinn via The Burning Platform blog,

John Hussman has the right to gloat on this Black Monday morning as global stock markets meltdown under the weight of central bank created debt, insane debt financed corporate buybacks, and stock valuations rivaling 1929 and 2000 levels. He has been scorned, ridiculed and laughed at by the Ivy League educated sociopathic Wall Street titans of greed and avarice. Only in a warped, manipulated, corrupt, rigged financial world would those who speak the truth, use facts, and honestly assess the markets based on historical relationships would a man like John Hussman be abused by the elitist Wall Street lemmings. He has too much integrity and class to lower himself to the level of Wall Street hucksters. His letter this week is heavy on substance, facts, and sound reasoning. Therefore, it is of no use to CNBC cheerleaders or Wall Street shysters. His lessons are timeless.

Rather, the key lesson to draw from recent market cycles, and those across a century of history, is this:

Valuations are the main driver of long-term returns, but the main driver of market returns over shorter horizons is the attitude of investors toward risk, and the most reliable way to measure this is through the uniformity or divergence of market internals. When market internals are uniformly favorable, overvaluation has little effect, and monetary easing can encourage further risk-seeking speculation. Conversely, when deterioration in market internals signals a shift toward risk-aversion among investors, monetary easing has little effect, and overvaluation can suddenly matter with a vengeance.

He w ...

One Millennial's Letter To CNBC

Reader Ryan M sends us this.

Hey guys,

I just wrote this letter to CNBC, thought I would share.

Dear CNBC,

I'm a millenial with some cash to throw around. I've dipped my toes in the stock market this past year but after today's action, I have to say I'm done. Forever. Gone. Don't count on another dime of mine in the market.

There is so much that is infuriating about this market that it's hard to know where to start. Let me start here: the total BS open we witnessed today. And lest you think this is a letter from a whiner who sold out in the open only to see stocks ramp higher, think again. I sold nothing out but I also bought nothing. What infuriates me is that average people like me are hurt both ways when the market does its best flash-crash impression since, well, the flash crash... I'm sure countless little guys had their stops absolutely steamrolled this morning only to see the big guys scoop up the shares on a discount. It's disgusting. What's more then that is that the only "people" that can really take advantage in such volatility is HFT's. Any normal human being staying at his screen seeing the Dow down over 1k has to sit and think for a minute, "What the heck is going on? Is there something I don't know about?" Ask yourself those two questions and it's too late. You are either stopped out or you miss an opportunity to buy shares at a price you could only have dreamed of. A price that likely won't come again for you anytime soon. The only "people" who can react to those pricing distortions in real time are computers. This isn't a place for small time people like me.

What might be worse than this is that most of us are stuck at small discount brokerages that had major execution issues this morning including TDAmeritrade and Scottrade. Let's assume you are a human being who doesn't ask the two aforementioned questions and just sees the Dow down 1k and decides to throw a dart in the blind and just hit the ...

Trading in Stocks, ETFs Was Halted More Than 1,200 Times Early Monday

Trading of U.S. stocks and exchange-traded funds was paused more than 1,200 times in early trading on Monday as the market experienced heightened volume and volatility.

The Dow Just Made the Largest Roundtrip Rollercoaster EVER

It's not your imagination ...

Dow

The U.S. stock market just took the largest roundtrip ever. Specifically, in the first 3 hours and 40 minutes of trading today, the Dow posted the largest intraday swing in history:

Intraday

This came right on the heels of the largest weekly increase in volatility in history.

Apple's Cook reassures investors on China, stock boomerangs

(Reuters) - Apple Inc's Chief Executive Tim Cook took an unusual step of reassuring shareholders on Monday in comments to CNBC about the iPhone maker's business in China ahead of a dramatic 13 percent drop and rebound in its stock that put it in positive territory.

Did Tim Cook Violate Regulation "Fair Disclosure" By Emailing Jim Cramer To Save AAPL Stock This Morning

Earlier today, as AAPL stock was plummeting and had lost a whopping $75 billion in market cap, dropping as low as $92/share, CNBC's Jim Cramer pulled a rabit out of a hat, or in this case a previously undisclosed email out of his inbox. An email from AAPL CEO Tim Cook which said the following (as subsequently conveyed by Cramer to CNBC viewers):

Jim,

As you know, we don't give mid-quarter updates and we rarely comment on moves in Apple stock. But I know your question is on the minds of many investors.

I get updates on our performance in China every day, including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August. Growth in iPhone activations has actually accelerated over the past few weeks, and we have had the best performance of the year for the App Store in China during the last 2 weeks.

Obviously I can't predict the future, but our performance so far this quarter is reassuring. Additionally, I continue to believe that China represents an unprecedented opportunity over the long term as LTE penetration is very low and most importantly the growth of the middle class over the next several years will be huge.

Tim

While we are delighted by Tim Cook's subjective take of AAPL's Chinese prospects, we have a different question: where is the public filing that accompanies this letter which constitutes nothing short of a private business update with an outside, and unregulated by Apple, market cheerleader?

Because as the AAPL reaction to Tim's letter, which wa ...

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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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