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27Oct2015 Market Update: Averages Down On Low Volume, Oil Breaks Below 43, Session Indicators Moderately Bearish

Written by Gary

Averages are turning in numbers that are down on low volume. The US dollar has move up into the low 97's and WTI oil has cracked the 43 level and that is particularly worrisome for any oil bull. Short-term session indicators are moderately bearish and further market declines remains a possibility.


Here is the current market situation from CNN Money

North and South American markets are lower today with shares in Mexico off the most. The IPC is down 0.78% while Brazil's Bovespa is off 0.76% and U.S.'s S&P 500 is lower by 0.52%.

27/10/2015 11:13 Crude clips 43, but trying to make a comeback

Crude broke support, but we need to wait until day's end to determine if it was a 'fake-out' or not...lots of times support or resistance will get taken out on an intra-day basis for the first time only to be held by the end of the session.

Those 'fake-outs' can trap 'johnny-come-latelys' (those who shorted late), leading to a reaction in the opposite direction. Given the recent slide, if it is to stay under support a bounce following a confirmed break is a more ideal scenario to join in for lower prices versus chasing it lower.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 69%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 61%
Investors Intelligence sets the breath Above 50 bullish 44.5%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. 20.38
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 35.76%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 50.26%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 63.40%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 20.21
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 79.65
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,388

What Is Moving the Markets

Here are the headlines moving the markets.

PayPal says makes $1 billion in small-business loans in first two years

LAS VEGAS (Reuters) - PayPal Holdings Inc , the online payment processor, said on Tuesday its small-business lending program has processed $1 billion in loans in the first two years of its launch and more than doubled loan growth in that span.

Top U.S. drugmakers ride new products to strong results

NEW YORK (Reuters) - Growing sales of expensive new cancer drugs and other newer medicines propelled top U.S. drugmakers Pfizer Inc , Merck & Co and Bristol-Myers Squibb Co to stronger-than-expected third-quarter profits.

Weak U.S. business spending plans point to slower economic growth

WASHINGTON (Reuters) - A gauge of U.S. business investment plans fell for a second straight month in September, pointing to a sharp slowdown in economic growth and casting more doubts on whether the Federal Reserve will raise interest rates this year.

Wall St. drifts lower as weak earnings, crude weigh

(Reuters) - Wall Street was lower on Tuesday after mixed earnings reports from major U.S. companies, weaker-than-expected data and further declines in crude oil prices.

Exclusive: VW shelves overhaul of U.S. business until scandal abates - sources

BERLIN/HAMBURG (Reuters) - Volkswagen has shelved plans to reorganize the management of its North American business and will not address its future strategy there until it has reached legal agreements over its rigging of emissions tests, two sources familiar with the matter said.

Alibaba gets more bang for its buck as revenue growth tops forecasts

(Reuters) - China's Alibaba Group Holding Ltd is squeezing more money from online shopping than expected, beating analyst forecasts for revenue growth and putting its shares on track for their biggest daily rise since the firm's blockbuster flotation.

DuPont in M&A talks with rivals for farm unit: interim CEO

(Reuters) - DuPont is in M&A talks with rivals for its agriculture business, interim Chief Executive Edward Breen said on Tuesday, less than a week after Dow Chemical Co announced a review of its farm chemicals and seeds unit.

Ford Motor reports third-quarter higher profit, but misses estimate

DETROIT (Reuters) - Ford Motor Co reported sharply higher quarterly profit on Tuesday, driven by its record quarterly performance in North America, but missed Wall Street estimates because of higher taxes.

GM recalls 1.3 million older cars for fire hazard

(Reuters) - General Motors Co said it is recalling about 1.3 million older sedans and coupes in the United States to fix oil leakages that pose a fire hazard.

The Worse Things Get For You, The Better They Get For Wall Street

Submitted by Jim Quinn via The Burning Platform blog,

On October 2 the BLS reported absolutely atrocious employment data, with virtually no job growth other than the phantom jobs added by the fantastically wrong Birth/Death adjustment for all those new businesses springing up around the country. The MSM couldn't even spin it in a positive manner, as the previous two months of lies were adjusted significantly downward. What a shocker. At the beginning of that day the Dow stood at 16,250 and had been in a downward trend for a couple months as the global economy has been clearly weakening. The immediate rational reaction to the horrible news was a 250 point plunge down to the 16,000 level. But by the end of the day the market had finished up over 200 points, as this terrible news was immediately interpreted as good news for the market, because the Federal Reserve will never ever increase interest rates again.

Over the next three weeks, the economic data has continued to deteriorate, corporate earnings have been crashing, and both Europe and China are experiencing continuing and deepening economic declines. The big swinging dicks on Wall Street have programmed their HFT computers to buy, buy, buy. The worse the data, the bigger the gains. The market has soared by 1,600 points since the low on October 2. A 10% surge based upon lousy economic info, as the economy is either in recession or headed into recession, is irrational, ridiculous, and warped, just like our financial system. This is what happens when crony capitalism takes root like a foul weed and is bankrolled by a central bank that cares only for Wall Street, while throwing Main Street under the bus.

Rent-A-Center Stock Plummets For A Very Surprising Reason

Rent-A-Center is best known among the lower/middle class segment of the U.S. population as the place one goes to if one can't afford (or doesn't want to) buy furniture or the latest, and not so latest, electronic gadget and would rather rent it out. This morning it is also known as one of the worst performing stocks on the Nasdaq, plunging over 27% to a price not seen since early 2010.

What happened?

First, there was the usual flurry of negative business considerations which accompany every economy that slides into a recession, such as Q4 forecasts below analysts' estimates while cutting its full-year profit forecast as Q3 sales in United States fell due to higher sales of low-margin merchandise and company closed about 100 underperforming stores.

The CFO added some much needed color adding "we are challenged by (sales of) computers which are down double digits, similar to the industry at large, and we have seen some headwinds in oil industry affected markets, such as parts of Texas," CFO Guy Constant says on conference call.

This was just the latest confirmation that the US consumer is struggling, not only with regular purchases, but even discretionary rentals.

But the biggest surprise was the following announcement in the press release:

Smartphone Write-Down:

During the third quarter, we determined that it was necessary to adjust our smartphone inventory primaril ...

"No Brainer" AAPL Investors Anxious Amid iPhone Momentum Concerns, JPM Expects "Cautious" Guidance

Yesterday's tumble on the read-through from component-maker Dialog Semi added to fears, noted by Berenberg Bank the previous week, that iPhone sales momentum was not as rosy as Tim Cook told Jim Cramer after all, is not seeing many BTFDers this morning. As we previously noted, the China channel checks painted an ugly picture, and now JPMorgan (while maintaining their 'overweight' rating on AAPL) is warning that it expects "cautious guidance" amid a weakening global macro picture.

Are iPhone 6s volumes tracking at a lower level than the iPhone 6 a year ago?

There are signs. In its earnings report on Monday, Dialog Semiconductor, who supplies custom power management chips to Apple for the iPhone, said it was expecting only around 2% growth for 4Q. According to a research note from Killik & Co, volume growth for iPhones in 4Q will be negative.

This dovetails with another research note last week, this time from Berenberg Bank, which said momentum and fast money funds are exiting Apple stock as speculation around declining iPhone volumes heightens. This means that Apple, which the bank said has kept the tech complex alive, is probably going to be the trigger to bring that tech complex down.

&nb ...

Who's Really Isolated? Iran Set To Join BRICS Bank, Strengthen Ties With Brazil

As US hegemony wanes in the face of dysfunctional domestic politics, foreign policy confusion, and a “lead from behind†mentality, the world has begun to transition towards a kind of new world order both politically and economically.

On the geopolitical front, we’ve seen a resurgent Russia take charge in Syria after the situation spiraled out of control, leaving hundreds of thousands dead and creating the worst migrant crisis in Europe’s history.

On the economic front, the BRICS nations have embarked on a series of projects designed to supplant the US-led multinational institutions that have dominated the post-war world.

In what has become one of the bigger stories of the year, China has established its own development bank (the AIIB) and after the UK broke with Washington to support the new venture back in March, the floodgates opened with US ally after US ally jumping on the bandwagon. Although Beijing has promised it doesn’t intend to use the bank as an instrument of foreign policy or as a means of promoting yuan hegemony, the renminbi is set to play a prominent role in loans issued by the bank and there’s little question that development lending will bolster China’s attempt to establish a kind of Sino-Monroe Doctrine. Beijing has similar ambitions with the Silk Road Fund (see our full breakdown here), although part of the story there looks to revolve around an effort to provide a kind of pressure valve for the country's excess industrial capacity.

And then there is of course the BRICS bank, which officially launched along with a reserve currency pool ...

Stocks Edge Lower as Oil Prices Fall

A drop in oil prices weighed on energy shares, though moves in major indexes were muted as investors waited for hints from the Federal Reserve.

Fed Strives for a Clear Signal on Interest Rates

As 2016 approaches, pressure is on the central bank and Janet Yellen to better manage expectations for rates and the U.S. economy.

Morgan Stanley Makes a Comeback in Real Estate

Amid an otherwise dismal third quarter, Morgan Stanley enjoyed a bit of good news from its real-estate unit, which wrapped up fundraising for its first high-risk real-estate fund since 2007.

September 2015 Chemical Activity Barometer Continues to Decline

from the American Chemistry Council

The Chemical Activity Barometer (CAB) dropped 0.3 percent in October, following a upwardly revised 0.3 percent decline in September and 0.1 percent decline in August.

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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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