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07Oct2015 Market Update: Crude Inventory At Record Levels, Averages Retreat From Major Resistance, Volatility Takes Center Stage

Written by Gary

U.S. markets opened higher and promptly moved up to its resistance and failed when the Cushing inventory data showed U.S. stockpiles of crude oil and petroleum products at a record high. Oil prices retreated from their resistance in a big way and everyone is acting surprised. Did you think for even a moment that the oil 'glut' was going to disappear?

The averages are still in the green, short-term indicators are neutral and I have serious doubts seeing the markets moving higher this week, next week maybe.


Here is the current market situation from CNN Money

North and South American markets are broadly higher today with shares in Brazil leading the region. The Bovespa is up 7.51% while U.S.'s S&P 500 is up 0.38% and Mexico's IPC is up 0.20%.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 66%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 35%
Investors Intelligence sets the breath Above 50 bullish 31.1%
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.

56.87

StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 25.72%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 38.49%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 41.60%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 20.69
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 76.32
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,202

What Is Moving the Markets

Here are the headlines moving the markets.

Oil seesaws; struggles to extend rally after U.S. crude build

NEW YORK (Reuters) - Oil prices seesawed in volatile trading on Wednesday, barely hanging onto a third day of gains after government data showing a large U.S. crude inventory build surprised traders the morning after an industry group had reported a draw.

Profits at big U.S. banks soar since crisis: New York Fed

NEW YORK (Reuters) - Profits have soared since the global financial crisis at the five biggest U.S. banks with market-making dealing operations, New York Federal Reserve economists said in an article released on Wednesday.

Bombardier shares sink as Airbus talks fail, focus turns to funding woes

TORONTO (Reuters) - Bombardier Inc shares plummeted on Wednesday as the Canadian plane and train manufacturer's failed attempt to sell a majority stake in its troubled CSeries jet program exposed the depths of its financial problems.

Wall St. turns negative as oil rally fades, tech stocks drag

(Reuters) - Wall Street turned negative in late morning trading on Wednesday as tech stocks, led by Apple, fell and a rally in crude oil prices was checked.

Monsanto slashing 2,600 jobs, buying back shares as sales fall

(Reuters) - Monsanto Co, one of the world's largest seed and agrichemical companies, said on Wednesday that it was slashing 2,600 jobs and restructuring operations to cut costs in a slumping commodity market that it expects to squeeze results well into 2016.

Yum China's Pizza Hut restaurants hard hit by economic slowdown

LOS ANGELES (Reuters) - Yum Brands Inc's all-important China division took a hit this summer as businesses there pulled back on parties and events at its upscale Pizza Hut Casual Dining chain amid volatility in financial markets and cooling economic growth.

Faith In Central Banks Dwindles

Submitted by Pater Tenebrarum via Acting-Man.com,

Even Bloomberg Notices that Something is Amiss

As anyone who hasn't been in a coma knows, assorted central bank interventions have failed to achieve their stated goals over the past several years. A recent article at Bloomberg focuses on their failure to reach their "inflation" targets.

Of course, this particular failure is actually reason to celebrate, as it means that consumers have at least been spared an even sharper decline in their real incomes than has been underway in spite of relatively tepid increases in consumer prices (whereby it should always be kept in mind that whether or not such price increases are considered "tepid" depends on on the composition of the basket of goods and services relevant to each individual).

inflation expectations

Market-based inflation expectations in the major currency areas have crashed again - click to enlarge.

Of course central banks have succeeded in blowing up the money supply at truly astonishing rates since 2008, so prices in the economy have certainly been vastly distorted. The devastating effects of such price distortions are currently being visited on the oil patch, where credit-financed malinvestment on a stunning scale has occurred as a result of an erroneous appraisal of future oil prices. ...

Shadow Over Asia

Shadow Over Asia

Five years ago, almost to the day, I was interviewed by David Galland, who worked at Casey Research at the time. This interview covered three topics: the Chinese overcapacity bubble, the Japanese debt bubble, and my sideways markets thesis. Five years is a long time, but with the exception of updating some statistics (for instance Chinese debt has gone up fourfold since), I really would not change anything. I have not been writing much on Japan or China lately because things haven't really changed much their respective bubbles have just gotten much bigger.

I hope you enjoy this interview. Don't kill your eyes; kill a tree (print it). Or you can watch a presentation I gave on the same subject at the Johns Hopkins University Applied Physics Lab (link here).

The Casey Report (TCR): Is China's system better than everyone else's? Is it really possible the Chinese economy can keep steamrolling along?

Vitaliy Katsenelson (VK): A few months ago, I watched a movie about Ayn Rand and it talked about how Americans in the 1930s looked at the Soviet Union's flavor of managed economy as being superior to the American version of capitalism. At the time America was just coming out of the Great Depression, so that view made a lot of sense. ...

The Real Definition of Money in a Modern Economy

This article continues the corrections introduced in The Central Banker's Definition of Money is Obviously Wrong, And That's Not Taking Into Consideration Veritaseum Technology. Yesterday at the New York Blockchain conference conference I told those in the financial and fintech communities that banking as we know it is done. As a result, banks as we know it are done. One very important aspect of this observation is that banks define money as debt... Which it is not....

Money in a Modern Economy Reggie Middleton and Veritasum

Money is a proxy for one's labor, and not debt. Here, I break it down in detail...

Even gradeschool stu ...

Mortgage Applications Soar 25% (Ahead Of Regulatory Regime Change)

Mortgage applications rose 25.5% week-over-week - the 2nd largest surge since 2009 - to the highest level (for this time of year) since 2012. Both refis and purchases soared, and exuberance immediatoley extrapolated this surge as 'proving' the housing recovery is healthy. However, as MBA admits, "many applications were filed prior to the TILA-RESPA regulatory change," strongly suggesting this is anything but sustainable.

2nd biggest week-over-week gain in mortgage apps since 2009...

Both applications to refinance and to purchase a home were almost equally juiced. Refinance applications rose 24 percent, seasonally adjusted, and purchase applications were up by 27 percent. Purchase applications, which are usually less rate-sensitive week-to-week, are now 49 percent higher than one year ago, an astonishing jump given that the latest reads on home sales show the market appears to be weakening. They are now at the highest level in five years.

This pushes the overall mortgage application index to its highest for this time of year since 2012... but note mortgage apps remain half what they were at the previous peak norms.

But as CNBC's Diana Olick notes,

Once the Biggest Buyer, China Starts Dumping U.S. Government Debt

Central banks are selling U.S. government bonds at the fastest pace on record, the most dramatic shift in the $12.8 trillion Treasury market since the financial crisis.

Senate Democratic Inquiry Targets Banks, Wall Street Settlements

A powerful senator has launched an inquiry into bank misconduct, asking top financial institutions to turn over information about the settlements they have entered into with federal agencies over the past decade.

Europe Markets: European stocks end higher, notch longest win streak since August

European stock markets close with gains for a fourth straight session on Wednesday, with miners and oil companies providing a big lift.

MarketWatch First Take: The fantasy-sports scandal is more like front running than insider trading

The headline on the New York Times story about the scandal in fantasy sports refers to “insider trading,†but the closer comparison in the stock-market world is to front running.

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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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