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08Oct2015 Market Update: FOMC 2 PM Minutes Release Expected To See Some Fireworks And Heavy Volatility In The Already Fragile Markets

Written by Gary

US large caps were climbing nicely into the green from the morning opening doldrums until 12:30 when the markets as a whole starting sea-sawing in a flurry of serious volatility. WTI oil climbed back up to yesterday's highs/resistance and backed off as investors await the U.S. Fed Releasing Minutes from Sept. 16-17 FOMC Meeting.

Expect heavy volatility and wide swings when the minutes are released at 2 pm. I expect the averages will fall off as the bulls regroup for an attack of today's highs tomorrow - maybe!


Here is the current market situation from CNN Money

North and South American markets are mixed. The Bovespa is higher by 0.28%, while the S&P 500 is leading the IPC lower. They are down 0.27% and 0.25% respectively.

We have been watching crude closely as those who have been following along already know, and the triangle under development finally broke out (and powerfully so). Additionally, the long-term trend-line we were concerned about was taken out (albeit by a very modest amount)...this brings us into 'where do we enter?' mode. We are looking for a pullback/consolidation to enter with a stop below the breakout day low (10/6). An entry around or just below $48 is our objective at this time with proper price action. With a target of $55, this will ensure a good risk/reward entry of greater than 1:2.

The Fed will publish the minutes of its September meeting later today, which may illuminate what it would take to raise rates in 2015. However, most market players feel reaction to the minutes will be limited, since a weak U.S. jobs report last week strengthened expectations a rate hike will be pushed off until next year. Speakers today also include St. Louis Fed President James Bullard, Minneapolis Fed President Narayana Kocherlakota and San Francisco Fed President John Williams.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 67
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 39%
Investors Intelligence sets the breath Above 50 bullish 33.4%
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.

77.71

StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 28.42%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 39.78%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 43.60%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 20.86
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 76.56
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,283

What Is Moving the Markets

Here are the headlines moving the markets.

Bill Gross sues Pimco for $200 million over forced ouster

NEW YORK (Reuters) - Famed bond investor Bill Gross has sued his former employer Pacific Investment Management Co and its parent Allianz SE for $200 million, claiming he was wrongfully ousted by a "cabal" of executives who wanted his share of the bonus pool.

Facebook's 'Like' button set to get more emotive

(Reuters) - Like it or not, Facebook Inc's trademark "Like" button is set to get more expressive.

German prosecutors raid Volkswagen offices

BERLIN (Reuters) - German prosecutors raided Volkswagen's headquarters and other offices on Thursday as part of their investigation into the carmaker's rigging of diesel emissions tests.

Wall St. falls ahead of Fed minutes; Apple weighs

(Reuters) - Wall Street fell on Thursday morning, hours ahead of the release of minutes of the Federal Reserve's September meeting that could provide some insight into the central bank's decision to keep interest rates steady.

Fiat Chrysler workers skeptical of new UAW deal's impact on wages

KOKOMO, Ind. (Reuters) - Workers outside the gates of a Fiat Chrysler plant here greeted news early on Thursday of a new tentative agreement between the automaker and the United Automakers skeptically, giving an indication of the challenges the union may face in getting the deal ratified by members.

GM to recall 31,685 SUVs in North America

(Reuters) - General Motors Co said it would recall 31,685 SUVs in North America to repair a manufacturing defect in the windshield wiper motor that may overheat.

Dell would offer more than $27 per share for EMC: CNBC

(Reuters) - Dell Inc, the world's third-biggest personal computer maker, is in talks to buy data storage company EMC Corp for more than $27 per share, CNBC reported on Thursday.

IMF's Lagarde sees tough policy trade-offs

LIMA (Reuters) - International Monetary Fund chief Christine Lagarde urged global policymakers on Thursday to support economic growth while also tackling financial risks stemming from the provision of easy money amid a "rapidly changing and uncertain world."

WTI Crude Surges Back Above $49 After OPEC Comments

WTI Crude has recovered the losses following yesterday's DOE-reported inventory and production rise as it appears comments from OPEC Secretary-General Al-Badri told The IMF that demand will climb more this year than previously projected (coming on the heels of EIA's comments that oil companies worldwide will cut investments in oil exploration and production by a record 20 percent this year.) USD weakness is also helping drive algos to run stops in crude.

Global oil demand will increase by 1.5 million barrels a day this year, El-Badri said in the statement to the IMF’s International Monetary and Financial Committee. There is a supply overhang of about 200 million barrels in the market, El-Badri said at a conference in London on Oct. 6.

And as goes Crude, so goes the S&P 500...

Charts: Bloomberg

This Is How The IMF "Predicted" China's Slowdown

Over the past 5 years, the one forecast that was clear to anyone with even an introductory grasp of economics and finance, is that a Chinese economic collapse due to a gargantuan debt load and a surge in non-performing loans, is inevitable and just a matter of time. Apparently, in retrospect, this was also clear to the head of the IMF, Christine Lagarde, who during a press conference in Lima, said the following:


LAGARDE SAYS CHINA'S SLOWDOWN WAS PREDICTABLE, IS A "GOOD MOVE"

There is just one problem with that: of all market participants, the IMF is perhaps the only one who did not predict China's slowdown. Quite the opposite.

As the following chart compiling the IMF's various quarterly economic forecasts over the past 5 years clearly shows, what the IMF had actually forecast, was a constant hockeystick rebound in China growth starting in 2011... until 2014 when the monetary fund finally gave up.

To be "fair", the IMF's forecast of China's growth "after the fact" is now so negative, it is well below the consensus projections, as the IMF is all too happy to boast:

As for China's ...

deFANGed: Market Darlings Fail To Rise In Choppy Tape

US equity markets have shrugged off China's disappointing open and surged back to the highs of the day (with Trannies leading). However, a few of the "gurus" favorite stocks are not buying the dip... as the so-called FANG names are notably weaker over the last 3 days...

FANG FUBAR

Weighing down Nasdaq as the rest rally... as Trannies rise 0.75% on the day...

Charts: Bloomberg

Bill Gross Sues Pimco for Breach of Contract

Bill Gross sued Pimco for breach of contract, alleging that managing directors plotted to drive the famed bond investor out of the firm because of “power, greed, and a desire to improve their own financial position.â€

Global Stocks Edge Lower as Investors Await Fed Minutes

U.S. stocks eased Thursday as investors await further clues about the timing of a potential interest-rate increase and the start to the third-quarter earnings season.

WSJ Survey: Economists See Fed Rate Rise in December

About 64% of respondents to The Wall Street Journal’s monthly survey of economists now say the Federal Reserve’s Dec. 15-16 meeting will culminate with the first rate rise in nearly a decade.

The Wall Street Journal: House Majority Leader Kevin McCarthy exits race for Speaker

House Majority Leader Kevin McCarthy (R., Calif.) has dropped out of the race to become House speaker, lawmakers said, throwing the election into turmoil.

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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