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21Sep2015 Market Update: Averages Slipping Off Morning Highs, Now Sea-Sawing Just Above The Unchanged Line, Oil Continues To Melt Upwards

Written by Gary

The large caps have fallen off their morning highs slipping to the unchanged line where they are sea-sawing. The small caps are just in the green and oil continues to melt upwards but slowing and may reverse. The averages as a whole are looking to fall further during the afternoon session and most likely close mixed. The averages are still trading sideways when looking at the daily chart and should break the trend soon.


Here is the current market situation from CNN Money

North and South American markets are mixed. The S&P 500 is higher by 0.32%, while the Bovespa is leading the IPC lower. They are down 3.41% and 0.05% respectively.

Goldman Sachs has predicted the SP500 will reach 2100 before the end of 2015 and somewhere along the line GS says, WTI oil will fall to $20. If you believe that, I too, have a bridge for sale, in fact it is 39% off right now; act now before it is too late.

WTI oil is in the mid $46's rising from Friday lows of $44.25 (Chart Here) and the U.S. Dollar is regaining lost ground now in the low $96's, up from its low at $94.20 on Friday (Chart Here).

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 65%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 15%
Investors Intelligence sets the breath Above 50 bullish 33.8%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. 27.76
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 23.27%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 41.14%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 43.40%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 21.30
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 75.46
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,032

What Is Moving the Markets

Here are the headlines moving the markets.

Wall St. trims gains, dragged down by biotechs

(Reuters) - U.S. stocks lost most of their morning gains on Monday, dragged down by biotechs after U.S. Democratic presidential candidate Hillary Clinton said she would announce a plan to stop "price gouging" for specialty drugs.

Volkswagen shares plunge on emissions scandal, U.S. widens probe

(Reuters) - Volkswagen shares plunged more than 20 percent on Monday, their biggest one-day fall, after the German carmaker admitted it had rigged emissions tests in the United States, and U.S. authorities said they would widen their probe to other manufacturers.

When Doves Cry: Bedeviled By Dollar "Dilemma", Trapped Fed Faces FX Catch-22

Last Thursday, Janet Yellen revealed something "shocking". As it turns out, monetary policy impacts exchange rates! Who would have thought? Here's the exchange with BBC's Michelle Ferry:

Ferry: You talked a lot about the strong dollar I wondered do you see your policy actions affecting the dollar? Is it something you consider when you're making your policy decisions?

Yellen: So monetary policy, U.S. monetary policy is directed toward trying to achieve the goals that Congress has laid out for us. When monetary policy tightens and interest rates rise, it commonly is the case, either when it happens or in expectation, the expectation that that's coming. Interest rate differentials globally do tend to induce capital flows that have impacts on exchange rates.

So monetary policy often has some effect on the exchange rate. And it's not in my view the main channel by which monetary policy works. It's one of a number of different channels by which monetary policy works. But it does have some impact on exchange rates and of course yes we need to take that into account.

Why yes, monetary policy does have "some" effect on the exchange rate and despite Yellen's deliberate attempt to act as though Ferry's question came completely out of left field, and the ridiculous communiqué that came out of the G20 meeting in Ankara earlier this month notwithstanding, there's a global currency war going on and the collective central banker effort to throw a tarp over the elephant sitting in the corner of the room looks ever more ridiculous with each passing policy meeting. Here's an example of what we mean, from Riksbank Governor Stefan Ingves on September 3:

Oil rallies on gasoline jump, worries over drop in U.S. drilling

NEW YORK (Reuters) - Oil prices rallied on Monday, with U.S crude up as much as 3 percent, amid a jump in gasoline prices and on concerns that U.S. crude production may slow as drilling steadily declines.

Fed Cred Dead!

Submitted by Howard Kunstler via Kunstler.com,

The economy is a two-headed monster. One head is the trade in real goods and real services. The other head is the financialized traffic in swindles and frauds that surrounds banking. There is some deception and overlap about which is which. For instance so-called health care might be perceived as a real service. In fact, it's a hostage racket, designed to victimize "patients" at their weakest, with a "protection" premium that easily runs to $12,000-a-year for a married couple, even when they aren't sick, and vulnerable. Just see what happens if you go to an emergency room with an injury that requires six stitches. Next stop: re-po land.

Most of the remaining on-the-ground economy consists of people merely driving their cars absurd distances, burning gasoline, between exquisitely-tuned giant warehouse store operations that were designed to destroy local Main Street trade - and accomplished that, by the way, to the applause of the local citizens whose towns were destroyed ("We want bargain shopping!").

Now, of course, even WalMart is looking over its shoulder at the collapse of the complex arrangements that allowed it to metastasize across North America like some cancerous fungus. Globalism is winding down as the gargantuan matrix of Ponzi schemes based on owed money dissolves debt by debt. It isn't long before nobody is a credit-worthy borrower, and no transaction in real goods can be risked unless cash hits the barrelhead — which turns out to be a very awkward way of doing business.

Time Warner Cable shareholders approve deal with Charter

(Reuters) - Time Warner Cable Inc's shareholders approved the company's $56 billion takeover by Charter Communications Inc, according to preliminary votes at a special shareholder meeting.

Stocks Are Tanking - Nasdaq Gives Up All "Bullard" Gains

For a brief shining moment this morning, the lack of a total bloodbath in Asia, some desperate spin about how China is not collapsing, and a hawkish Bullard provided just what the market wanted - higher USDJPY and thus soaring stocks. Once Europe closed, the mysterious bid for the dollar (EUR offered) disappeared... and so did Nasdaq gains...

Charts: Bloomberg

Bailout World: Volkswagen "Cheating" Fine Is 20 Times Higher Than GM's For 'Killing 174 People'

When bailout-darling GM 'fessed up to an intentional ignition-switch defect, tied to at least 174 deaths, The Justice Department fined them $900 million (and no employees faced criminal charges). So, in this consequence-less world in which we live, when Volkswagen admits to literally cheating emissions-standards tests, it faces up to $18 billion in fines from The EPA, one has to wonder whether "we" have our priorities right?

VW shares have been monkey-hammered this morning after the "cheating" scandal was exposed...

As The Washington Post reports,

For hiding a fatal ignition-switch defect tied to at least 174 deaths, General Motors employees will face no criminal charges and the automaker will pay a $900 million fine — less than a third of its $2.8 billion in profit last year.

The settlement with the Department of Justice, announced Thursday, signals a close to the criminal investigation that has long tarnished the car giant. But critics say the automaker got off easy for mishandling one of the worst auto safety crises in history, and years of lying to safety regulators and leaving Americans at risk.

"I have a saying about GM: T ...

GE's Immelt rules out India nuclear investment under current law

NEW DELHI (Reuters) - General Electric Co will not invest in atomic energy in India until accident liability laws are brought in line with global rules, Chairman Jeff Immelt said on Monday, in a setback for top-level efforts to get U.S. firms to build power stations.

What On Earth Is Going On With Caterpillar Sales?

We have been covering the ongoing collapse in global manufacturing as tracked by Caterpillar retail sales for so long that there is nothing much to add.

Below we show the latest monthly data from CAT which is once again in negative territory across the board, but more importantly, the global headline retail drop (down another 11% in August) has been contracting for 33 consecutive months! This is not a recession; in fact the nearly 3 year constant contraction - the longest negative stretch in company history - is beyond what most economists would deem a depression.

Perhaps CAT should come up with a new economic term to describe the true state of global manufacturing.

Bullard Slams "Unsavory" Jim Cramer's "Permanent Cheerleading," Admits "Fed Can't Support Stocks Forever"

When The Fed's own cheerleader-in-chief (see October 2014) slams you for cheerleading, you know it's gone too far. In a stunning 30 second clip on CNBC this morning, St.Louis Fed head Jim Bullard sent a message to "your friend Cramer", saying "The Fed cannot permanently raise stock prices," adding, rather astonishingly to the anchors, "to have [Cramer] cheerleading for lower rates 24 hours a day is unsavory."

We assume Cramer will rebut this statement later in the day by exclaiming "they know nothing!!"

Remember what happened the last time someone dared to criticize Cramer...

EURUSD Dumps To 1.1200 After Bullard's Hawkishness

It appears Jim Bullard's words (since his deeds are of no use as he is not a voter) were just enough to reassure the world that Yellen was "just kidding" about the whole global growth worries and market turmoil and is quiote ready to raise rates as soon as possible (even if FF futures say "nein"). EURUSD is now down over 250 pips since Friday highs, battered back near a 1.1100 handle...


*BULLARD SAYS IT'S TIME TO GET OFF EMERGENCY FED POLICY SETTINGS

*BULLARD SAYS DECISION TO HOLD RATES LAST WEEK WAS CLOSE CALL

*BULLARD SAYS THERE'S A CHANCE OF OCTOBER RATE RISE BY FED

Charts: Bloomberg

Buckle Up: Profits Are Falling, the Fed is Cornered, and the Uptrend Has Been Broken.

The stock market is rapidly running out of props.

First off, corporate sales and profits are rolling over. As Charlie Bilello recently noted, we've had two straight quarters of Year over Years drops in corporate revenues.

Moreover, corporate profits are also falling at a pace usually associated with recessions:

Profit growth for the S&P 500 companies is at its weakest point since 2009. That's because, in fact, there isn't any profit growth.

S&P 500 earnings for the first half of the year are expected to show a 0.7% contraction compared to a year ago, according to numbers from FactSet research. Growth in the first quarter was a meager 1.1%, but the second quarter is more than offsetting that, expected to contract at a 2.2% rate, FactSet estimates. The last time the S&P 500 saw a year-over-year decline for the first half of a year was 2009, when earnings positively cratered at the depths of the global recession, down 30.9%.

Source: Wall Street Journal

With the fundamentals no longer supporting a stock rally, this leaves the Fed and momentum as the sole providers of support for stocks.

Regarding the Fed, it failed to raise rates for the umpteenth time last week. Despite this, stocks actually FELL on the news.

One by one the various Fed doves are throwing in the t ...

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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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