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23Oct2015 Market Update: Markets Higher After Rate Cut In China, WTI Crude Backs Off Support, U.S. Dollar Still Melting Up, Increased Volatility Expected

Written by Gary

U.S. averages opened higher and the spent the morning session melting down, but still very much in the green. The DOW has remained in the tripe digits as the small caps are almost two percentage point higher after an unexpected rate cut in China amplified a rally driven by strong results from Microsoft, Alphabet and Amazon.

Here is the current market situation from CNN Money

North and South American markets are higher today with shares in U.S. leading the region. The S&P 500 is up 0.84% while Brazil's Bovespa is up 0.68% and Mexico's IPC is up 0.57%.

Traders Corner - Health of the Market

Index Description Current Value Members Sentiment: % Bullish (the balance is Bearish) 73%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 57%
Investors Intelligence sets the breath Above 50 bullish 43.2% Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. 38.07 NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 34.61% NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 49.82% S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 61.40% 10 Year Treasury Note Yield Index ($TNX) ten year note index value 20.80 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 79.28 NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,478

What Is Moving the Markets

Here are the headlines moving the markets.

P&G sees organic sales growth from current quarter

(Reuters) - Procter & Gamble Co reported a higher-than-expected quarterly profit and said it expected organic sales to grow from the current quarter as it moves through a "portfolio cleanup."

Valeant rebounds ahead of Monday call to address allegations

(Reuters) - Valeant Pharmaceuticals Inc shares rebounded on Friday from four days of steep losses over allegations it used specialty pharmacies to inflate revenue, which the company plans to refute in detail on Monday.

United Air reaches tentative deal with wage hike for maintenance workers

(Reuters) - United Airlines said on Friday it reached a tentative deal with the union representing its maintenance workers, paving the way for a wage hike and the first contract to cover technicians from both United and Continental since the airlines merged in 2010.

Wall St. rallies as China rate cut adds to tech gains

(Reuters) - All three major U.S. indexes rose to two-month highs on Friday, after an unexpected rate cut in China amplified a rally driven by strong results from Microsoft, Alphabet and Amazon.

Alphabet, Microsoft, Amazon give Wall Street reason to cheer

(Reuters) - Google parent Alphabet Inc , Microsoft Corp and Inc made headway in the latest quarter in the areas that will be their main engines of growth for years to come, driving up shares across the tech sector on Friday.

American Air third-quarter profit tops estimates; buying back more shares

(Reuters) - American Airlines Group Inc , the world's largest carrier, said on Friday its third-quarter profit jumped, beating analysts' expectations.

Valeant's looming M&A hiatus deals blow to investment banks

NEW YORK (Reuters) - The controversy surrounding Valeant Pharmaceuticals' strategy and its market slide this week are bad news for Wall Street investment banks that stand to lose one of their best clients.

Kellogg in talks to buy Diamond Foods for $1.5 billion: NY Post

(Reuters) - Kellogg Co , which makes Corn Flakes and Rice Krispies, is in late-stage talks to buy snack foods company Diamond Foods Inc for more than $1.5 billion, the New York Post reported on Friday, citing unnamed sources.

GM to cut 500 jobs, eliminate shift at small-car plant near Detroit

DETROIT (Reuters) - General Motors Co will cut 500 jobs as a shift is eliminated at a plant near Detroit that makes weak-selling small cars, the company said on Friday.

U.S. Shale Drillers Running Out Of Options, Fast

Submitted by James Stafford via,

Much has been made about the impressive gains in efficiency and productivity in the shale patch, as new drilling techniques squeeze ever more oil and gas out of new wells. But the limits to such an approach are becoming increasingly visible. The U.S. shale revolution is running out of steam.

The collapse of oil prices has forced drillers to become more efficient, adding more wells per well pad, drilling longer laterals, adding more sand per frac job, etc. That allowed companies to continue to post gains in output despite using fewer and fewer rigs.

However, the efficiency gains may have been illusory, or at best, incremental progress instead of revolutionary change. Rather than huge innovations in drilling performance, companies were likely just trimming down on staff, squeezing suppliers, and drilling in the best spots - perhaps all sensible stuff for companies dealing with shrinking revenues, but nothing to suggest that drilling has leaped to a new level of efficiency. Reuters outlined this phenomenon in detail in a great October 21 article.

For evidence that the productivity gains have run their course, take a look at the latest Drilling Productivity Report from the EIA. Production gains from new rigs - which have increased steadily over the past three years - have run into a wall in the major U.S. shale basins. Drillers are starting to run out of ways to squeeze more oil out of wells from their rigs. Take a look at the below charts, which show drilling productivity flat lining in the Bakken, the Eagle Ford, an ...

Draghi's Verbal Intervention Perfection

Never, in the history of man, has so much 'wealth' been created, by so few, for so few, by doing so little...

It appears the art of the jawbone has been perfected by Mario Draghi...

2012's "whatever it takes" speech 'saved' The Euro and sent it surging over 160 pips... all with no actual action!

In 2015, on the basis of a chat among dovish doves about maybe possibly doing more dovish things, Draghi moves EURUSD by 300 pips...

The age of Central Banker omnipotence is going exponential... except if you're Chinese...

Charts: Bloomberg

It's Absurd - Do Not Fool Yourself

Excerpted from Artemis Capital Management letter to investors,

Risk cannot be destroyed, it can only be shifted through time and redistributed in form.

Vibrant life and rebirth comes from the acceptance of change and death in many complex systems:

The forest service has long understood that controlled burns are a more effective tool for fighting forest fires than total suppression. The act of subduing forest fires results in a dangerous build up in dry foliage that counterintuitively causes larger and larger fires. Mother Nature will initiate controlled burns naturally via lightning strikes and this is essential to the rebirth of the forest. The trees of the great sequoia forests will not release seeds without first sensing heat from a wildfire.

The art of avalanche prevention in backcountry snow terrain is based on a similar philosophy. Rangers use controlled blasts to reduce snow pressure rather than risk massive uncontrollable slides.

Marriage therapists observe that couples that do not fight are at the greatest risk of a divorce. The couples that fight actively bring core issues to the forefront instead of suppressing their problems. Apathy is worse than anger.

Treatment of cancer requires extensive chemotherapy to kill the cancerous agents from the body and allow healthy cells to multiply.

Treatment of addiction requires brutal recognition of the reality of the problem, personal responsibility, and immediate withdrawal from the source despite painful short-term effects.

The act of pruning a garden requires forcefully removing sick leaves to promote ...

Peak Intervention? China Rate-Cut Stock Gains Erased In Under 4 Hours

Did the age of central bank omnipotence just come to an end?

After 3 USDJPY driven rescues, the China Cut gains are gone for the S&P 500...

Of course, from the close yesterday, markets are still holding gains...

Even as VXX surges back into the green

Maybe stock traders glanced at the un-exuberance in credit markets...

Charts: Bloomberg

China Cuts Rates in Bid to Spur Growth

China’s central bank late Friday cut both interest rates and the reserve-requirement ratio for banks, in a bid to revive slowing economic growth.

Tech-Sector Rally Helps Propel S&P 500 Into Positive Territory for 2015

A rally in the technology sector, spurred by upbeat earnings, propelled U.S. stocks Friday and helped push the S&P back into positive territory for the year.

The 'Short' Who Sank Valeant Stock

Andrew Left has long targeted firms that he thinks are overvalued or engaged in fraud.

16 October 2015: ECRI's WLI Growth Index Declines Again and Remains In Contraction

ECRI's WLI Growth Index which forecasts economic growth six months forward - declined and remains in negative territory. This index had spent 28 weeks in negative territory, then 15 weeks in positive territory - and now is in its tenth week in negative territory. Also discussed below is the coincident and lagging index which is in decline.

Market Snapshot: U.S. stocks eye fourth straight weekly gain

U.S. stocks pulled back from early-morning highs Friday but were still firmly in positive territory, extending gains from Thursday’s big gains.

Capitol Report: New shakeup for Jeb Bush campaign as staff salaries cut

Here’s the latest sign Jeb Bush’s campaign for president is struggling: it’s cutting staff salaries and downsizing its Miami headquarters to save money.

Metals Stocks: Gold futures set for biggest weekly loss since August

Gold futures edge lower as further strength in the U.S. dollar positions prices for the largest weekly loss since August.

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