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26Aug2015 Market Update: Markets Sinking Fast, Gas Inventories Up, Oil Dropping And Two Dollar Gas At The Pump Expected

Written by Gary

U.S. stocks have fallen fractionally and given up some of their early opening gains at midday today after slumping for six straight days amid concern that growth in China was slowing according to some analysts. Gas inventories rose and WTI oil prices fell fractionally, but remaining steady in the high 38 range.

The averages have continued their melting downward from a +2.5% opening to below +0.7%. Markets are now expected to close in the red on moderate volume.


Here is the current market situation from CNN Money

North and South American markets are mixed. The S&P 500 is higher by 0.99%, while the Bovespa is leading the IPC lower. They are down 1.79% and 0.62% respectively.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 50%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 3%
Investors Intelligence sets the breath Above 50 bullish

22.9%

StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -92.38
StockChart.com NYSE % of stocks above 200 DMA Index ($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.

15.74%

StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 29.34%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction.

22.40%

StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 21.26
StockChart.com Consumer Discretionary ETF (XLY) As long as the consumer discretionary holds above [66.88], all things being equal, it is a good sign for stocks and the U.S. economy 71.34
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 9,739

What Is Moving the Markets

Here are the headlines moving the markets.

Airbus to delay delivery of first A380 to Russia's Transaero

PARIS (Reuters) - European planemaker Airbus is delaying the delivery of Russian carrier Transaero Airline's first A380 superjumbo, an Airbus spokeswoman said on Wednesday, as the recession-hit Russian economy dents travel demand in the region.

Retail gas prices are set to drop below $2 for first time since 2009

Oil prices have already fallen to their lowest level in 6 ½ years, and gasoline prices at the pump may soon follow suit.

Oil futures CLV5, -0.69% fell below $40 a barrel on the New York Mercantile Exchange Monday, their lowest level since February 2009. On Wednesday, futures dropped below $39.

"If oil remains at this level, it is practically guaranteed that average gas prices will fall below $2 per gallon by Christmas," said Michael Green, a spokesman for AAA.

See: Oil turns lower as gasoline futures drop nearly 5%.

As of Wednesday, the average retail price for a gallon of regular gas nationwide stood at $2.556.

Based on history, "average gas prices should be at or below $2 per gallon when oil is cheaper than $40 per barrel," he said. But "there is an enormous disconnect between oil and gasoline prices due to ongoing refinery problems and record-high driving demand."

Among the refinery problems was an unscheduled outage at BP PLC's BP, -0.02% BP., -1.24% Whiting, Ind., refinery, the largest in the Midwest. That sent prices climbing throughout the Midwest. BP confirmed a restart of the Whiting refinery late Tuesday following the shutdown that began on Aug. 8.

Read: Why gas prices are rising as oil falls to 6-year lows

Aside from this week, the last time West Texas Intermediate crude oil was under $40 was on Feb. 24, 2009. At that time, the national average price of gas was $1.90 a gallon, according to Green.

"Driving demand remains high, major refineries are still experiencing problems and we expect heavy refinery maintenance this autumn," said Green.

"This means that it may take some time for the national average to reach $2 per gallon," he said. "Nevertheless, gas-price declines should accelerate quickly by the end of September when people drive less and as stations switch over to less costly winter-blend gasoline."

But he also emphasized that "California is not one of those parts" that will see $2 gas.

According to AAA's Green, 12 states already had at least one station selling gas for less than $2 as of Monday. They included Alabama, New Jersey and Texas, and "the number of states with stations [selling gas for] under $2 is likely to grow fast in the coming weeks."

Read More >>>

Oil turns lower as gasoline futures drop nearly 5%

Oil futures turned lower Wednesday despite a weekly decline in U.S. crude inventories, dragged down by a nearly 5% drop in gasoline futures, which were pressured by the restart of a key refinery and an unexpected increase in domestic stockpiles.

Investors also remained cautious amid volatile financial markets and continued uncertainty over China's growth outlook, but oil had managed to find some support earlier Wednesday from China's recent easing measures.

A midday correction is "probable," but "the low's have yet to be tested and [we] expect further weakness through the week," he said.

Read More >>>

Schlumberger to buy oilfield gear maker Cameron in $14.8 billion deal

(Reuters) - Schlumberger Ltd will buy oilfield equipment maker Cameron International Corp in a deal valued at $14.8 billion to streamline supply chains and offer cost-effective services to oil and gas customers who have slashed budgets.

Fed Bank President Sees Less Chance of September Rate Rise

William C. Dudley of the Federal Reserve Bank of New York said the case for an interest rate increase next month had become "less compelling."

Bill Gross's Janus bond fund drops second consecutive day

NEW YORK (Reuters) - Bill Gross's Janus Global Unconstrained Bond Fund suffered its second day of declines in its net asset value on Tuesday, wiping out gains for the year, according to fund-research firm Morningstar Inc on Wednesday.

Global stock markets diverge, commodities fall as China jitters persist

NEW YORK (Reuters) - Wall Street advanced while European shares and commodities fell on Wednesday as investors balanced strong U.S. economic data with fears about China's slowing economy.

Market turmoil makes September rate hike 'less compelling': Fed's Dudley

NEW YORK (Reuters) - An interest rate hike next month seems less appropriate given the threat posed to the U.S. economy by recent global market turmoil, an influential Federal Reserve official said on Wednesday.

Monsanto drops pursuit of Swiss agribusiness rival Syngenta

(Reuters) - U.S. agribusiness leader Monsanto Co. on Wednesday abandoned efforts to acquire Swiss rival Syngenta AG , which has rejected a recently sweetened offer.

Iran Prepared To Defend Old Market Share "At Any Cost"

Submitted by Andy Tully via OilPrice.com,

Iran's oil minister says his country supports calls for an emergency OPEC meeting to explore ways to shore up the price of oil, but even without such an effort, Tehran is willing to regain its market share "at any cost."

Iran once was OPEC's second-leading producer, after Saudi Arabia, but output has plunged since 2012, when international sanctions forbade any country or energy company to buy, ship, finance and insure its crude because of Tehran's nuclear program. In 2011, Iran's output was 3.7 million barrels per day. With the sanctions, production dropped to 1.2 million barrels per day.

Iran and six world powers - Britain, China, France, Germany, Russia and the United States - reached an agreement in July on controlling that program and lifting the sanctions, probably by early 2016. Oil Minister Bijan Zanganeh has said repeatedly that his country can quickly boost production by more than 1 million barrels per day within a month after the sanctions are lifted.

This could further depress the price of oil, which has dropped precipitously since summer 2014. Already there is a glut of oil, and OPEC members lately have been producing at near-record levels. The group already is exceeding its output cap of 30 million barrels a day by at least 1.5 million barrels ...

China's Economy Is...

Google delivers its verdict...

h/t @ChuBailiang

And here is how Hong Kong sees China...

Wow! Hong Kong media declare China is already in economic crisis and its impact will be like "nuclear explosion"... pic.twitter.com/qQqLYepLpT

â€" George Chen (@george_chen) August 26, 2015

Is This Where VIX Is Going Next?

Once again the HFTs appear to be signaling market direction, this time in VIX. The earlier flash-smash perfectly signaled where VIX would top in the short-term, so did today's VIX flash crash signal traders to sell vol.

As we noted previously, 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)....

Dudley Says "We Are A Long Way From Additional QE"

And scene:

FED'S DUDLEY SAYS "WE ARE A LONG WAY FROM" ADDITIONAL QUANTITATIVE EASING

So, how far is the "away": another 5% drop in the S&P "data"? 10%? 20%? And what is measured in: milliseconds or nanoseconds. Inquiring frontrunning vacuum tubes want to know.

Dudley Sends Rate-Hike Odds Plunging, Hammers USDJPY, Slams Stocks

Comments from Fed's Dudley have sparked USD weakness as a sooner-rather-than-later rate-hike appears off the table. USD weakness drags USDJPY lower which in turn fun-durr-mentally slams US Stocks. September rate-hike odds slide to 26% from 28% yesterday...

Odds tumbling...

as are stocks thanks to USDJPY...

Charts: Bloomberg

Dudley Just Killed The Rate Hike: "September Less Compelling; I Hope We Can Raise Rates This Year"

Goodbye September rate hike. From the much anticipated Dudley Q&A:


DUDLEY: CASE FOR SEPT RATE HIKE LESS COMPELLING

DUDLEY:INTNL DEVELOPMENTS TIGTHEN FINL CONDNS, MAY HURT ECON

DUDLEY: RATE HIKE CASE COULD BE MORE PANICKY BY SEPT FOMC

DUDLEY SAYS INTL DEVELOPMENTS HAVE RAISED DOWNSIDE RISKS

10:36 08/26 DUDLEY: HAVE TO CONSIDER INTNL DEVELOPMENTS; CAN AFFECT ECON

Transitory:

DUDLEY: EXPECTS DOLLAR, OIL EFFECTS TO BE TRANSITORY ON U.S. INFLATION

On inflation:

DUDLEY: LOW INFL APT TO BE TRANSITORY

Because it is only a matter of time before the money paradrops begin?

DUDLEY: US DATA GOOD, BUT CAN'T JUST LOOK AT DOMESTIC DATA

Yes, have to also look at domestic stocks. Oh but wait:



DUDLEY: I DON'T HAVE A VIEW ON WHY THE STOCK MARKET IS DOING WHAT IT IS DOING

DUDLEY: STOCK DROP HAS LITTLE S-TERM EFFECT ON U.S. ECON

And the punchline:

DUDLEY: I REALLY HOPE WE CAN RAISE RATES THIS YEAR

But the markets won't allow us.

TSYs jumping on the news, USDJPY dumping on USD weakness with stocks shocked, and waiting until the algos reverse the correlation trackers so tthey can push stocks higher on a weaker dollar, resulting from this latest admission of Fed policy failure.

'Bad bank' path worn by Ireland and Spain looks steep for Greece

LONDON (Reuters) - Greece is under growing pressure to take care of banks' problem loans so they are free to lend again, but the depth and complexity of its crisis will make it tough to replicate the comprehensive "bad bank" models set up in Ireland and Spain.

Earnings Summary for Today

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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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