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06Oct2015 Market Update: Averages Slipping Over 1%, Crude Near Tough Resistance, Session Bottom Evident, More Slippage Due Tomorrow

Written by Gary

Small caps are taking a beating while the large caps (DOW) is flat. Nasdaq is down 1.3%, DOW down 0.1%, and the SP500 down 0.65%. Crude is up a whopping 4.3%, U.S. dollar down 0.7% and gold up 0.9%. Something to watch are the near-term double tops and inverse ETF's double bottoms. Crude is approaching a resistance / double top and the U.S. dollar is dangerously close to breaking through an up-trend line. Now is NOT the time to take chances going long with so many negatives abound.

Here is the current market situation from CNN Money

North and South American markets are mixed today. The Bovespa is up 5.42% while the IPC gains 0.10%. The S&P 500 is off 0.58%.

Traders Corner - Health of the Market

Index Description Current Value Members Sentiment: % Bullish (the balance is Bearish) 64%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 30%
Investors Intelligence sets the breath Above 50 bullish

28.7% 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.

58.7 NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 26.52% NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 36.37% S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 38.80% 10 Year Treasury Note Yield Index ($TNX) ten year note index value 20.40 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 76.18 NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,130

What Is Moving the Markets

Here are the headlines moving the markets.

Big U.S. firms hold $2.1 trillion overseas to avoid taxes: study

WASHINGTON (Reuters) - The 500 largest American companies hold more than $2.1 trillion in accumulated profits offshore to avoid U.S. taxes and would collectively owe an estimated $620 billion in U.S. taxes if they repatriated the funds, according to a study released on Tuesday.

Oil hits month-high; eyes on less output, Saudi-Russia talks

NEW YORK (Reuters) - Crude prices hit one-month highs on Tuesday after a new U.S. forecast showed tighter oil supplies next year, while and Russia, Saudi Arabia and other big producers hinted at further talks to support the market.

Goldman, Morgan Stanley win back hedge fund trading business

NEW YORK (Reuters) - Goldman Sachs and Morgan Stanley are winning back the trading business of hedge fund clients that they lost to European rivals during the financial crisis, as new capital rules spur banks like Deutsche Bank to scale down their businesses. The two U.S. banks together now have about 37 percent of the market for trading with hedge funds and financing positions, known as "prime brokerage," up about 6 percentage points from the end of last year, according to research firm Preq

Wall St. moves lower as global growth worries resurface

(Reuters) - The S&P and the Nasdaq fell on Tuesday morning as worries about economic growth resurfaced at U.S. companies begin to report quarterly results, while a surge in DuPont helped the Dow move higher.

VW under pressure for answers as emissions scandal deadlines loom

WOLFSBURG, Germany (Reuters) - Hans Dieter Poetsch's first board meeting as chairman of Volkswagen on Wednesday could turn out to be his most important, coming just hours before a deadline set by German regulators and testimony by the company's top U.S. executive in Congress.

U.S. trade deficit widens as exports sag, imports from China surge

WASHINGTON (Reuters) - U.S. exports took a hit from an ailing global economy in August and imports from China surged, fueling the largest expansion of America's trade deficit in five months.

IMF cuts global growth forecasts again, cites commodity and China worries

LIMA (Reuters) - The International Monetary Fund cut its global growth forecasts for a second time this year on Tuesday, citing weak commodity prices and a slowdown in China and warned that policies aimed at increasing demand were needed.

One Trader Says Central Banks Need To Just Shut Up

On Monday, in “Central Banks Now In 'Dangerous Situation': 'You've Thrown The Kitchen Sink At It, What's Next?'", we said the following about the global fiat confidence game:

Here's the real danger: the degree to which unconventional monetary policy is effective is in no small part dependent on perception. That is, the fiat regime is in large part a giant confidence game. If that confidence starts to evaporate in the minds of very "serious" people, this will all come to an end, and that's not simply the latest rant from a "fringe blog", that's just the way confidence games work. Ironically, the best thing developed market central bankers could do right now is simply stop the madness and allow capital markets to crash and reset. There may still be some hope of preserving the notion of central bank omnipotence here if everyone suddenly comes to their senses, steps back from the money printing, and lets creative destruction purge the system. That would allow the world's foremost monetary authorities to start from scratch and perhaps reclaim some credibility on the way to rebuilding things.

Well, we aren’t the only ones with serious questions about just how long this charade can hold up and indeed, when traders start questioning the central planner narrative, it’s proof positive that said narrative has been lost.

On that note we bring you the following from Bloomberg’s Richard Breslow, the man who, you're reminded, is also concerned about whether Janet Yellen has the proper training to serve as the market's "head trader":


Momo Massacre: Biotechs Are Crashing, Turn Red For 2015

On Sunday, after the latest NYT piece by Andrew Pollack focusing on the "astronomical" prices increases by Valeant we made a simple observation: "More Pain For Biotechs Ahead: Valeant's "Astronomical" Price Increases Take Center Stage; Pfizer Gets Dragged In." Sure enough, on Monday Valeant promptly crashed over 10% as the second round of concerns about price caps emerged.

Then, this morning, the attack against biotech price gouging became two-pronged when this time the WSJ joined in the NYT with an article overnight "For Prescription Drug Makers, Price Increases Drive Revenue" in which the topic was familiar to those following the interplay between "astronomical" biotech prices and the imminent congressional crackdown on said prices:

Attention has focused lately on new drugs with eye-popping prices and on a few whose price a new owner abruptly raised several-fold. But what many drug companies rely on for sales growth is a pattern of steady increases, year in and year out, on older medicines. Wholesale-price increases for the 30 drugs analyzed by the Journal averaged 76% over the five-year stretch from 2010 through 2014. That was more than eight times general inflation.

For 20 leading global drug companies last year, 80% of growth in net profits stemmed from price increases in the U.S., according to a May report by Credit Suisse.

For those wondering, the tone's article was not conducive to further upside in the ...

Glencore Explains What Would Happen If It Is Downgraded To Junk

As part of its ongoing scramble to defend itself against "speculators" and concerns about its balance sheet, earlier today Glencore released a 4 page "funding worksheet" detailing all of its obligations.

Among the highlights was Glencore's disclosure of total available liquidity as of this moment, which the firm reported to be materially above its June level of $10.5 billion:

At 30 June 2015, available committed liquidity was $10.5 billion (p. 71 of 2015 Half-Year Report). As of today, committed available liquidity is materially above June’s level, given the recent $2.5 billion equity placement, the business generating positive free cashflow and the ongoing focus on delivery of the various other debt reduction measures, including lower net working capital. Further delivery of the debt reduction programme, including the $2 billion target for asset disposals, will similarly enhance liquidity levels.

It also presented its sources of funding among which the well-known $31.1 billion in bonds, as well as $20 billion in short-term funding split between a $15.25 revolver (of which a "substantial portion" is undrawn), $1.2 billion in AR/Inventory secured funding, and $3.4 billion in bilateral bank facilities. Glencore was quick to point out the gullibility of its bank lenders: "No financial covenants, no rating events of default or rating prepayment events, no material adverse change events of default or material adverse change prepayment events."

Next Glencore details the terms of its notes and cross-guarantees which it lays out as follows:

$36.5 billion notes outstanding at 30 June ...

Saudi Clerics Call For Jihad Against Russia, Iran; NATO Warns Of Airspace "Violations"

It’s now been nearly a week since Russia began its air campaign in Syria and as we’ve documented extensively, both Moscow and the West have put their respective propaganda machines into high gear in an effort to control the narrative and thus dictate how history will remember Syria’s four-year-old, bloody civil war.

Lacking viable options in the face of Russia’s rapid military deployment at Latakia, the US has turned to the only thing left in the spin toolbox: the contention that Moscow’s airstrikes are hitting the “good†guys. Here’s WSJ:

Russia has targeted Syrian rebel groups backed by the Central Intelligence Agency in a string of airstrikes running for days, leading the U.S. to conclude that it is an intentional effort by Moscow, American officials said.

The assessment, which is shared by commanders on the ground, has deepened U.S. anger at Moscow and sparked a debate within the administration over how the U.S. can come to the aid of its proxy forces without getting sucked deeper into a proxy war that PresidentBarack Obama says he doesn’t want. The White House has so far been noncommittal about coming to the aid of CIA-backed rebels, wary of taking steps that could trigger a broader conflict.

U.S. officials said Russia’s targeting of its allies on the ground was a direct challenge to Mr. Obama’s Syria policy. Underlining the distrust, the Pentagon decided against sharing any information with Moscow about the areas where U.S. allies were located because it suspected Russia would use that information to target them more directly or provide the information to President Bashar al-Assad’s regime.

America ...

Global Stocks Lose Momentum

A selloff in health-care stocks deepened in midday trading Tuesday, threatening to overshadow a crude-oil rally that lifted energy stocks.

Glencore Reveals Financing Deals

Glencore has launched a salvo against critics who say the firm’s books are too opaque, publishing details of its financing arrangements with banks and other creditors and the potential impact of credit-rating downgrades.

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