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28Sep2015 Market Update: Testing, Testing, Supports Holding, Strange Session, Foretelling Of Things To Come?

Written by Gary

U.S. stocks off 2%, WTI oil falling, Brent testing support, U.S. dollar falling and gold stable. As I write this the U.S. markets are still trending downward with no letup in sight. The lower Bollie Band (SP500) has been penetrated, but watch for a late afternoon pullback and if that doesn't happen look for an up session tomorrow. If that doesn't happen . . .

Here is the current market situation from CNN Money

North and South American markets are sharply lower today with shares in U.S. off the most. The S&P 500 is down 2.03% while Brazil's Bovespa is off 2.02% and Mexico's IPC is lower by 1.17%.

I am expecting some weakness in the markets going into this week and further testing of WTI oil at $43. The movement of indexes going below the Bollie Bands mostly means, sometimes, a 'slowing' of the decent and pressure to slide sideways to consolidate. The U.S. dollar falling along with the stock market and oil is unusual and needs to be watched as the $VIX climbs into the high26's.

It should be noted that NO major supports have been violated and this could be the first step of going higher. Not likely, but I don't want to be called a bear all the time, so we really need to see what the next few days are going to bring..

Traders Corner - Health of the Market

Index Description Current Value Members Sentiment: % Bullish (the balance is Bearish) 63%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 13%
Investors Intelligence sets the breath Above 50 bullish 29.8% Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -10.22 NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 21.25% NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 32.74% S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 32.00% 10 Year Treasury Note Yield Index ($TNX) ten year note index value 21.04 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 72.93 NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 9,643

What Is Moving the Markets

Here are the headlines moving the markets.

Stocks Fall Sharply on China Worries

U.S. stocks extended losses, as fresh evidence that China's economy is slowing added to investors' concerns about global growth.

The Echo Bubble In Housing Is About To Pop

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

And here's the knife in the heart of the Echo Housing bubble: declining household income.

The Federal Reserve-induced Echo Housing Bubble is finally starting to roll over, and the bubble's pop won't be pretty. Why is the bubble finally popping now?

All the factors that inflated the Echo Housing bubble are running dry. These include:

-- unprecedented low mortgage rates

-- FHA mortgage approvals for anyone who fogs a mirror

-- frantic cash buying by Chinese millionaires desperate to get their money out of China

-- the Federal Reserve buying up trillions of dollars in mortgages

-- lemming-like buying of housing for rentals by everyone from Mom and Pop to huge hedge funds.

The well's gone dry, folks. There isn't going to be another push higher or a third housing bubble after this one pops.

Let's start with the basics: demographic demand for housing and the price of housing. There are plenty of young people who'd like to buy a house and start a family (a.k.a. new household formation), but few have the job or income to buy a house at today's nosebleed level--a level just slightly less insane than the prices at the top of Bubble #1.

Charts courtesy of Market Daily Briefing)

It's considered bad form to describe today's prices as insane. It tends to hurt the feelings of everyone who's counting on the Echo Bubble to 1) make them even richer or 2) bail them out of the hole they fe ...

Currency Warfare: Ruble Plunges As Putin Speech Ends

We are sure it's just a coincidence but seconds after Vladimir Putin concluded his speech at The UN calling for a broad anti-terrorist coalition, the Russian Ruble was sold aggressively (after a relatively news-less and quiet day in the currency)...

It appears the USD weakness evident during President Obama's earlier speech was reciprocated.

Charts: Bloomberg

UBS Is About To Blow The Cover On A Massive Gold-Rigging Scandal

With countless settlements documenting the rigging of every single asset class, it was only a matter of time before the regulators - some 10 years behind the curve as usual - finally cracked down on gold manipulation as well, even though as we have shown in the past, central banks in general and the Fed in particular are among the biggest gold manipulators.

That said, we are confident by now nobody will be surprised that there was manipulation going on in the gold casino. In fact, ever since Germany's Bafin launched a probe into Deutsche Bank for gold and silver manipulation, it has been very clear that the only question is how many banks will end up paying billions to settle the rigging of the gold market (with nobody going to prison as usual, of course).

Earlier today, we learned that the Swiss competition watchdog just became the latest to enjoin the ongoing gold manipulation probe when as Reuters reported, it launched an investigation into possible collusion in the precious metals market by several major banks, it said on Monday, the latest in a string of probes into gold, silver, platinum and palladium pricing.

Here are the details that should come as a surprise to nobody:

Global precious metals trading has been under regulatory scrutiny since December 2013, when German banking regulator Bafin demanded documents from Deutsche Bank under an inquiry into suspected manipulation of gold and silver benchmarks by banks. Even though the market has ...

Wall St. skids as China fears rattle investors

(Reuters) - U.S. stocks were sharply down in afternoon trading on Monday, set for their worst third quarter in four years, as investors worried about the health of China's economy and its impact on the timing of a U.S. interest rate increase.

Whole Foods Market to cut about 1,500 jobs

(Reuters) - Upscale food market operator Whole Foods Market Inc said it would cut about 1,500 jobs, or about 1.6 percent of its workforce as it works to bring down costs.

Apple reports record sales of iPhone 6s, 6s Plus in first weekend

(Reuters) - Apple said on Monday it had sold more than 13 million iPhone 6s and 6s Pluses during their first weekend of availability in 12 markets, setting a record for its marquee product.

Comcast buys majority stake in Universal Studios Japan for $1.5 billion

OSAKA (Reuters) - Comcast Corp said it will buy a majority stake in Universal Studios Japan for $1.5 billion, its biggest investment outside the United States and part of an aggressive expansion of its theme park business globally.

Burger King France in talks to buy Quick

LONDON (Reuters) - Burger King France's majority shareholder Groupe Bertrand has started exclusive negotiations to buy French chain Quick, a deal that would make it the second biggest fast food restaurant in France, behind market leader McDonald's .

"We're Gonna Need A Bigger Balance Sheet" - All Major US Equity Indices Negative Post-QE3

Who could have seen that coming?

The nasdaq has joined the rest of the US equity market back in negative territory since the end of QE3...

But... the fundamentals...It appears we are going to need a bigger balance sheet...

Charts: bloomberg

Glencore slumps 30 percent as debt fears grow

LONDON (Reuters) - Glencore shares tumbled almost 30 percent to close at an all-time low on Monday, on fears that the mining and trading company was not doing enough to rein in its debt to withstand a prolonged fall in global metals prices.

Alcoa to split into two companies; shares surge

CHICAGO (Reuters) - Alcoa Inc said on Monday it will split into two companies to separate its struggling aluminum smelting operations from production of lightweight metals for its faster-growing aerospace and automotive business.

Warburg Pincus leads investment in college big data firm Civitas

(Reuters) - Private equity firm Warburg Pincus LLC [WP.UL] said on Monday it has agreed to lead a $60 million investment round in Civitas Learning, an Austin, Texas-based startup that uses data analytics to help universities improve graduation rates.

Glencore Default Risk Surges Above 50%

Glencore is in total free-fall across all markets today. Most worrying for systemic risk concerns is the rush into credit protection that has occurred, as counterparties attempt to hedge their exposures. Forthe first time since 2009, Glencore CDS are being quoted with upfront pricing (something that happens as firms become seriously distressed). Based on the latest data, it costs 875bps per year (or 14% upfront) to buy protection against a Glencore default (which implies - given standard recoveries - a 54% chance of default).

Do not panic!!

These are the highest levels of risk since the post-Lehman systemic crisis...

As Bloomberg reports,

Derivatives traders started demanding upfront payments to protect against a default by the company, the first time that's happened since 2009, according to data provider CMA

The cost of five-year credit-default swaps jumped so high that they effectively were pricing in 54% odds that the company defaults, CMA data show

"Glencore management need to make an official announcement to calm nerves," said Darren Reece, a money manager at GAM Holdings AG in London, which oversees $127b

Charts: Bloomberg

Fed to 'probably' hike this year, hit inflation target by 2016: Dudley

NEW YORK (Reuters) - New York Federal Reserve Bank President William Dudley said on Monday the Fed remains on track for a likely rate hike this year and could reach its inflation target next year, faster than many other policymakers anticipate.

U.S. consumer spending rises; core inflation firms slightly

WASHINGTON (Reuters) - U.S. consumer spending grew briskly in August and a key measure of inflation firmed a bit, signs of strength in America's domestic economy that could lead the Federal Reserve to tighten interest rates despite weakness abroad.

September 2015 Texas Manufacturing Survey Manufacturing Activity Barely Made It Into Expansion.

Of the five Federal Reserve districts which have released their September manufacturing surveys - all are in contraction except the Dallas Manufacturinng Outlook which is weakly in expansion. A complete summary follows.

Biotechs Battered For 7th Straight Day - Longest Losing Streak In 7 Years

Not since October 2008 (cough post-Lehman cough), has The Nasdaq Biotech index dropped for 7 straight days. The 18% close-to-close drop in the last 7 days is the largest since Lehman.

Click chart for massive legible version...

This is a 19% drop in 7 days...

h/t @RanSqauwk


VW ex-boss Winterkorn investigated over fraud allegations

BERLIN (Reuters) - German prosecutors launched an investigation on Monday into fraud allegations against former Volkswagen boss Martin Winterkorn over the carmaker's rigging of diesel emissions tests.

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