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06Nov2015 Market Update: Markets Down And Trading Sideways, WTI Oil Remains At Mid 44's, US Dollar Melting Up Again

Written by Gary

US averages moved lower on moderate volume and traded sideways in an exaggerated sea-saw fashion for most of the morning on very low investor participation. WTI oil is trading sideways in the mid 44's and the US dollar is testing mid 99 levels.


Here is the current market situation from CNN Money

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 70%
71 Above 50 = greed, below 50 = fear 71%
Investors Intelligence sets the breath Above 50 bullish 51.2%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. +11.06
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 39.46%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 55.58%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 71.80%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value

23.31

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 81.11
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,464

What Is Moving the Markets

Here are the headlines moving the markets.

Exclusive: Verizon weighing $10 billion sale of enterprise assets - sources

NEW YORK (Reuters) - Verizon Communications Inc is exploring a sale of its enterprise assets which could be worth as much as $10 billion, according to people familiar with the matter, as the largest U.S. wireless carrier seeks to focus on its core business.

Obama rejects Keystone XL pipeline in win for greens

WASHINGTON (Reuters) - U.S. President Barack Obama on Friday rejected the proposed Keystone XL oil pipeline from Canada in a victory for environmentalists who have campaigned against the project for more than seven years.

Wall St. dips as jobs data boosts odds of December rate hike

(Reuters) - U.S. stock indexes were slightly lower in afternoon trading on Friday after a stronger-than-anticipated jobs report hardened the chance that the Federal Reserve would finally raise interest rates in December.

Robust U.S. jobs report bolsters case for December rate hike

WASHINGTON (Reuters) - U.S. job growth surged in October and the unemployment rate hit a 7-1/2-year low of 5.0 percent in a show of economic strength that makes it much more likely the Federal Reserve will raise interest rates in December.

U.S. companies drawn to Cuba, unsure if profits will follow

HAVANA (Reuters) - About 50 American businesses came to Havana this week for a trade expo, many of them intrigued but still unclear how to make money in a Communist-ruled country of 11 million people who have little purchasing power.

Oil slides as dollar jumps; down 4 percent on the week

NEW YORK (Reuters) - Oil prices were down for a third straight day on Friday, on track to their third weekly decline in four, as the dollar rallied on expectations of a rate hike before the year-end after strong U.S. jobs growth for October.

What Do They Know? Primary Dealers Are Liquidating Corporate Bonds At An Unprecedented Pace

By now it is common knowledge that over the past two years the primary source of stock buying have been corporations themselves (recall Goldman's admission that "buybacks have been the largest source of overall US equity demand in recent years") with two consecutive years of near record stock repurchases. However, now that a December rate hike appears practically certain following the "pristine" October jobs report, suddenly the question is whether the recent strong flows into bond funds will continue, and generously fund ongoing repurchase activity.

The latest fund flow report from BofA puts this into perspective

The increase in interest rates is starting to impact US mutual fund and ETF flows. Hence, the inflow into the all fixed income category declined to +$0.96bn this past week (ending on October 4th) from a +$2.80bn inflow the week before... Outflows from government funds accelerated further to -$2.43bn this past week from -$1.73bn and -$1.00bn in the prior two weeks, respectively.

But more concerning for corporations than even fund flows, which will surely see even bigger outflows now that both yields are spreads are set to blow out making debt issuance far less attractive to corporations whose cash flows continue to deteriorate, is what the NY Fed reported as activity by Primary Dealer, i.e., the most connected, "smartest people in the room" who indirectly execute the Fed's actions in the public markets, in the most recent week.

As the charts below show, the Primary Dealers aren't waiting for the December announcement to express how they feel about their holdings of both Investment Grade and Junk Bond (mostly in the longer, 5-10Y, 10Y+ maturity buckets where duration risk is highest).

Indeed, as o ...

U.S. Stocks Lower As Utilities Lag

Utilities shares dragged down the broader stock market after a stronger-than-expected jobs report bolstered the case that the Federal Reserve will raise short-term interest rates next month.

Dollar Rallies on Strong U.S. Jobs Data

The dollar surged against its peers Friday, after a report showed that the U.S. economy created more jobs than expected last month, paving the way for the Federal Reserve to raise interest rates in December.

Valeant CEO Forced to Sell Company Stock in Margin Call

Valeant Chief Executive Michael Pearson was forced to sell a big chunk of his company stock Thursday after a lender called in a loan backed by the shares, in the latest twist for the company’s battered stock and embattled leader.

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

ECRI's WLI Growth Index which forecasts economic growth six months forward - again 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 12th week in negative territory. ECRI also updated their inflation gauge and is discussed below.

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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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