Interesting session. Volume was almost anemic, trading was mostly below the SP500 resistance (2020) and oil became range bound in the low $36's. Most of today's action was aimed at short sellers which apparently there are a bunch of them. Markets closed up nicely except for $RUT, the US dollar melted up all day and gold remained stable above its support.
HOUSTON (Reuters) - The once-deep discount for benchmark U.S. crude oil prices versus global rates is about to disappear for the first time since the rise of the shale oil boom, a sudden reversal that highlights the market's ongoing flux.
(Reuters) - U.S. luxury fashion retailer Neiman Marcus Group Ltd LLC [NMRCUS.UL] swung to a quarterly loss from a profit a year ago and reported its first drop in same-store sales in six years, the latest blip in the company's roadmap to going public again.
NEW YORK (Reuters) - U.S. crude rose nearly 2 percent Monday, recovering slightly after moving within a hair of 11-year lows, but analysts and traders said it is still too early to declare the market has reached its bottom.
BERLIN (Reuters) - German authorities will review emissions and fuel usage of Volkswagen diesel vehicles in a second testing round once the company has installed fixes in cars caught up in a cheating scandal, a German newspaper reported on Monday.
MUMBAI/TURIN (Reuters) - India's Mahindra group, with interests from tractors to IT outsourcing, has agreed to buy Italy's Pininfarina SpA in an all-cash deal valuing the Turin-based car designer at just a quarter of its closing price on Friday.
NEW YORK/SAN FRANCISCO (Reuters) - Once the Federal Reserve lifts interest rates from near zero, likely this week, the focus will turn to the other legacy of the crisis-era policies: the Fed's swollen balance sheet.
NEW YORK (Reuters) - Global equity markets were subjected to volatile trading on Monday as oil prices bounced from multi-year lows while weakness in credit markets weighed on sentiment, with investors bracing for an expected U.S. interest rate hike later this week.
In yesterday's (Dec 12) technical charts I outlined some key follow up charts. If you haven't seen them I highly encourage you to check them out as the context is important. As outlined 75% $NYSE stocks are now below the 200MA. After reviewing dozens of charts this weekend one message permeates the landscape: Markets need new highs or else.
Why? Because every structural chart points to a repeat of previous major tops. The key ingredients on the monthly basis: Declining RSIs, lower highs, and a marked decrease in participation. At the moment price is following a dangerous path into year end and basically requires a massive rally to prevent major technical damage.
Why? Because December not only marks month end, but also quarter and year end. And the close of the end of the year will leave a mark on charts.
Let me highlight a few facts that probably nobody has told as I have not seen these facts posted anywhere else:
#1: On an annual basis the $SPX has now not tagged its annual 5EMA for 2 years in a row. Such a disconnect is extremely rare. In most years this 5EMA is regularly tagged at least once. The last time $SPX was disconnected for 2 years in a row was at the 2000 top. At the 2007 top the $SPX was also disconnected from its 5 EMA for an entire year. Where's the annual 5EMA now? 1782 as of Friday's close.
#2: Both the 2000 and 2007 tops not only saw annual 5EMA disconnects but were accompanied by a severe decline in participation as measured by the $BPSPX and stocks below their 200MA.
Central Banks and the political elite will fight tooth and nail to maintain the status quo, even if this means breaking the law (freezing bank accounts or funds to stop withdrawals) or closing down the markets (the Dow was closed for four and a half months during World War 1).
There will be Crashes and sharp drops in asset prices (20%-30%) here and there. However, history has shown us that when a financial system goes down, the overall process takes take several years, if not longer.
By way of example let us consider the details surrounding the Tech Bubble: the single largest stock market bubble of the last 100 years. In this case, the Bubble pertained to just one asset class (stocks). In fact, the bubble was relatively isolated to one specific sector, Tech Stocks.
And to top if off, it was absolutely obvious to anyone that it was a Bubble: note that the Cyclical Adjusted Price to Earnings or CAPE ratio for the Tech Bubble dwarfed all other bubbles dating back to 1890.
Stocks were so obviously overvalued that it was truly absurd.
And yet, despite the fact that this bubble was absolutely obvious and involved only one asset class, it still took investors well over six months after the initial 20% crash to realize that the top was in and the bubble had burst.
For the first time since August 2008, high-yield bond 'VIX' is greater than US equity 'VIX'. The 1-month implied vol of HYG has surged over 21 - its highest since October 2011. The last time credit's volatility surged above stocks like this, VIX quickly accelerated well beyond 40, pricing in the increased business risk. Furthemore, just as we saw in July/August, the cost of protecting equity markets is beginning to accelerate up to the surging cost of protecting credit markets. Both credit levels and risk suggest VIX is going notably higher.
Deja vu all over again from August (note this is High yield bond option-adjusted spread as opposed to CDX as to avoid the roll dislocation). Equity markets ignored credit's risk just as they did in July and August... until they snapped...
Furthermore,For the first time since 2008, credit volatility is above equity vol.
The last time this happened, VIX rapidly exploded as credit market volatility increased business risk.
Dow Transports have been weak all year. Down 18.3% year-to-date, Trannies are set to close lower for a 4th straight quarter for the first time since 1994. Today's plunge broke below the August crash lows and pushed the index into bear market territory...
Just something else to ignore of course... keep buying FANGs
Many small businesses that pay minimum wage -- convenience stores and other independent retailers, little restaurants and fast food outlets, etc. -- can't afford to raise the wages they pay. These businesses are competing in an actual free market so they can't just raise their prices to cover the higher labor costs. If they all raise their prices, customers will just stop coming, because their customers are not rich either. Many stores operate at break even or small money losses most months. Rent and utilities and wages consume all of the sales earnings, and more. The owner may be working for nothing, and the minimum wage employee is earning more than the owner.
The Federal Reserve is set to lift interest rates for the first time in over nine years on Wednesday at 2 p.m. Eastern. The announcement, scheduled to come out of what's called the Federal Open Market Committee, will be followed by a press conference with Federal Reserve Chairwoman Janet Yellen, who will speak at 2:30 p.m.
Econintersect wants your comments,
data and opinion on the articles posted. As the internet is a
"war zone" of trolls, hackers and spammers - Econintersect must balance its
defences against ease of commenting. We have joined with Livefyre
to manage our comment streams.
To comment, using Livefyre just click the "Sign In" button at the top-left corner of
the comment box below. You can create a commenting account using your
favorite social network such as Twitter, Facebook, Google+, LinkedIn or
Open ID - or open a Livefyre account using your email address.
You can also comment using Facebook directly using he comment block below.
Econintersect Live Market
Print this page or create a PDF file of this page
The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.
Take a look at what is going on inside of Econintersect.com