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09Nov2015 Market Update: Averages Down One Percentage Point, Oil Holding At Support, Investors Concerned About Fed Rate Increase And Global Growth Fears

Written by Gary

US markets are most likely to close down today as the odds of a Fed rate hike in December looms large after a surprisingly strong jobs report last week turns investors cautious. Session short-term indicators are only modestly bearish in light of the over one percentage point market decline this morning.

Here is the current market situation from CNN Money

North and South American markets are sharply lower today with shares in Mexico off the most. The IPC is down 1.89% while Brazil's Bovespa is off 1.41% and U.S.'s S&P 500 is lower by 1.31%.

Crude oil is holding at the high 43's support and the US dollar has slipped back to the low 99's. So far all market supports have held and the HFT computers will probably trim more losses before the closing bell.

09/11/2015 11:20 S&P coming up on 2070 pivot

Admittedly, the break of trend support and the H&S neckline has not played out as smoothly as we had hoped since initially pointing out 2070 as a target on a breakdown. The lack of continuity in price action has kept us at bay. We continue to search for the best possible risk/reward set-up in US indices.

The bearish potential of overbought conditions coupled with poor market breadth makes us want to reside in the bear camp, but the end-of-year bullish seasonality factors in to be a bit of a positive tailwind.

The Fed's intentions to raise rates next month is working against the market right now, but it is unclear to what extent actually. Stocks have oscillated in their reactions to the possibility of higher rates. On one hand, higher rates indicates the confidence the Fed has in economic conditions (although we don't view them as that strong), but on the other hand higher rates equals higher cost of capital.

We'll continue to monitor price action and see what turns up. (Click on chart for larger view)

Traders Corner - Health of the Market

Index Description Current Value Members Sentiment: % Bullish (the balance is Bearish) 70%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 67%
Investors Intelligence sets the breath Above 50 bullish 51.2% Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -4.77 NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 37.04% NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 55.58% S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 71.60% 10 Year Treasury Note Yield Index ($TNX) ten year note index value 23.55 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 80.10 NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,420

What Is Moving the Markets

Here are the headlines moving the markets.

Spain's Mango to shut 450 U.S. sales outlets

MADRID (Reuters) - Spanish fashion chain Mango will close 450 sales outlets in the United States early next year after ending a five-year deal to display its clothing lines at department store J.C. Penney , a spokesman said.

Volkswagen offers U.S. diesel owners $1,000 in credit cards

DETROIT (Reuters) - Volkswagen AG will offer credit cards worth $1,000, of which half is to be spent at VW and Audi dealerships, to U.S. owners of certain diesel models that do not comply with government emissions standards, VW's U.S. subsidiary said on Monday.

Boeing eyes defense services business as key for growth

DUBAI (Reuters) - A senior Boeing Co. executive on Monday described the loss of an $80 billion U.S. bomber contract last month as a "minor setback" and said the company remained determined to expand its defense business.

Valeant to update investors on operations on Tuesday

(Reuters) - Valeant Pharmaceuticals International Inc , under scrutiny for drug pricing and inflating revenue, will hold its second conference call in two weeks to allay investor concerns over its operations.

Dish misses revenue estimates as more subscribers ditch pay-TV

(Reuters) - Dish Network Corp reported quarterly revenue that fell short of market estimates as more subscribers dropped its pay-TV service and growth in its online streaming service Sling TV showed signs of faltering.

Wall St. falls more than 1 percent on global growth fears

(Reuters) - U.S. stock indexes fell 1 percent in late morning trading on Monday, their biggest fall in six weeks, as weak Chinese trade data and a cut in the OECD's global growth forecast sparked fears about a global economic slowdown.

The US Dollar Bull Market Could Trigger a $9 Trillion Debt Implosion

The US Dollar rally, combined with the ECB's policies and the Fed's hint at raising rates in December, is at risk of blowing up a $9 trillion carry trade.

When the Fed cut interest rates to zero in 2008, it flooded the system with US Dollars. The US Dollar is the reserve currency of the world. NO matter what country you're in (with few exceptions) you can borrow in US Dollars.

And if you can borrow in US Dollars at 0.25%... and put that money into anything yielding more... you could make a killing.

A hedge fund in Hong Kong could borrow $100 million, pay just $250,000 in interest and plow that money into Brazilian Reals which yielded 11%... locking in a $9.75 million return.

This was the strictly financial side of things. On the economics side, Governments both sovereign and local borrowed in US Dollars around the globe to fund various infrastructure and municipal projects.

Simply put, the US Government was practically giving money away and the world took notice, borrowing Dollars at a record pace. Today, the global carry trade (meaning money borrowed in US Dollars and invested in other assets) stands at over $9 TRILLION (larger than the economy of France and Brazil combined).

This worked while the US Dollar was holding steady. But in the summer of last year (2014), the US Dollar began to breakout of a multi-year wedge pattern:

Why does this matter?

Because the minute the US Dollar began to rally aggressively, the global US Dollar carry trade began to blow up. It is not coincidental that oil commodities, and emerging market stocks took a dive almost immediately after this process began.

China's Central Bank Buys Another 14 Tons of Gold: Bullion Falls To 3 Month Low

China's Central Bank Buys Another 14 Tons of Gold: Bullion Falls To 3 Month Low

- PBOC declared gold reserves now about 55.38 million troy ounces or 1,722.5 metric tonnes

- Central bank gold rose to $63.26 billion by end-month - less than 2% of $3.53 trillion FX reserves

- China disclosed on July 17th that its gold holdings had surged 57% since 2009

- China officially owns around 1,720 tonnes of gold â€" true total figure likely much larger

- China’s total gold holdings likely higher as also owns gold in CIC

China's central bank likely added another 14 tonnes of gold to its reserves in October as the People's Bank of China (PBOC) continues to allocate to gold bullion as part of a plan to diversify its massive $3.53 trillion in foreign-exchange reserves and position the yuan as a global trading and reserve currency.

Demand 'Stimulus' Has Not Worked - It's Time To Tell The Truth About Debt


Telling The Truth About Debt

Last month I referred to the recent opinion of George Bompas QC that IFRS accounting criteria do not meet the statutory obligation for UK and EU financial statements to give a true and fair view. I also noted that IFRS 9, the latest attempt of standard-setters to endow loan-loss provisioning with a requisite degree of prudence and objectivity, hardly improves matters because it allows management to assess, subjectively, the probable loss on impaired loans over the following 12 months.

And not just banks: sub-prime lender Cattles Plc was pushed into administration with huge irrecoverable losses in its loan portfolio that were not reflected in its accounts under IFRS accounting rules. Its claim on behalf of unpaid creditors against auditor PwC has now been settled on confidential terms.

A multi-million pound compensation claim has been brought against former directors of Lloyds TSB (now Lloyds Banking Group) by more than 6,000 former shareholders, alleging that the HBOS loan book was vastly overvalued when Lloyds took it over in 2009 - again due to flawed accounting that failed to provide for losses. This issue will not go away until the rules require lifetime provisioning at a loan's inception.

A case study in economic disintegration

Debt management is the order of the day at all levels. Bankers have to lend money in order to make money - even in Greece, where most self-employed business people live on cred ...

Big Banks Could Be Forced to Raise Up to $1.19 Trillion

Global financial regulators published new rules to stop banks from becoming “too big to fail,†which could force the world’s largest lenders to raise as much as $1.19 trillion by 2022 in debt or other securities that can be written off when winding down failing banks.

Stocks Slip as Investors Brace for Rate Increase

U.S. stocks stumbled Monday as investors sold some of the year’s biggest gainers and losers alike as expectations rose that the U.S. Federal Reserve would raise interest rates this year.

Tinder Parent Company Match Group Sets IPO Terms

Match Group on Monday defined the terms of its relationship with Wall Street, saying it plans to raise up to $536.7 million in its long-awaited IPO, valuing Match at up to $3.4 billion.

October 2015 Conference Board Employment Index Suggests No Significant Slowdown in Job Growth Expected through 1Q2016

Written by Steven Hansen

The Conference Board's Employment Trends Index - which forecasts employment for the next 6 months - improved, but the rate of growth declined relative to last month. Consider that this projected growth is six months from now.

Europe Markets: European stocks end lower as M&A hopes fade

European stocks finished lower Monday, hurt in part by disappointment over potential merger developments for InterContinental Hotels Group PLC and auto maker Renault SA.

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