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01Feb2016 Market Update: U.S. Averages In The Red, WTI Oil Trending Down, Indicators Fractionally Bearish

Written by Gary

US markets remain in the red, down a half percentage point, but up from this morning low point. The session trend has been upward, but is NOT expected to come close being in the green at the closing bell. WTI crude is trending down and trading in the mid 31's and may have hit a minor support.


Here is the current market situation from CNN Money

North and South American markets are mixed. The IPC is higher by 2.92%, while the Bovespa is leading the S&P 500 lower. They are down 0.71% and 0.34% respectively.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 50%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 26%
Investors Intelligence sets the breath Above 50 bullish 26.1%
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.

58.60

StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 23.07%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 30.67%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 35.20%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value

19.45

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 74.23
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 9,571

What Is Moving the Markets

Here are the headlines moving the markets.

Fed's Fischer says persistent volatility could harm U.S.

NEW YORK (Reuters) - If recent market volatility persists it could signal a slowdown in the global economy that hurts U.S. growth and inflation, the Federal Reserve's second-in-command said on Monday.

Yahoo to cut 15 percent jobs, close several units: WSJ

(Reuters) - Yahoo Inc Chief Executive Marissa Mayer is set to reveal cost-cutting plans that include a reduction of 15 percent of the internet company's workforce and the closure of several business units, the Wall Street Journal reported.

Wall Street lower on weak China data, fall in oil prices

(Reuters) - U.S. stocks were lower on Monday as weak Chinese economic data exacerbated concerns about a global slowdown and oil prices resumed their slide.

Oil drops 6 percent on China data, slim chances of OPEC deal

NEW YORK (Reuters) - U.S. crude oil prices fell 6 percent on Monday as weak economic data from China, the world's largest energy consumer, reversed a four-day rally from last week and an OPEC source undermined chances of an emergency meeting to stem the decline.

Alphabet to give first peek at cost of 'moonshot' bets

(Reuters) - How much is Google-parent Alphabet Inc spending on "moonshots" " self-driving cars, glucose-monitoring contact lenses, Internet balloons and other ambitious projects?

Global factories parched for demand, need stimulus

LONDON/SYDNEY (Reuters) - January surveys of global factory activity released on Monday showed the new year began much as the old one ended, with too much capacity chasing too little demand.

U.S. factory activity edges up; momentum remains weak

WASHINGTON (Reuters) - U.S. manufacturing activity appeared to stabilize a bit in January, but a recovery is unlikely in the near term as factories grapple with a strong dollar and lower oil prices force energy firms to further cut spending.

Stocks retreat after grim China data, oil plummets

NEW YORK (Reuters) - Global markets got February off to a cautious start on Monday following a rocky January, with stocks and oil falling in the wake of weak manufacturing reports around the world.

Meet China's Latest $1.8 Trillion "Problem"

Last summer we outlined how Chinese banks obscure trillions in credit risk.

The powers that be in Beijing aren't particularly keen on allowing the banking sector to report œreal data on souring loans - especially given the fragile state of the country's economy. In some cases, the Politburo will pressure banks to simply roll over bad debt, effectively kicking the can.

In addition, banks carry around 40% of their credit risk outside of œofficial loans. Here's what Fitch had to say last year:

œOff-balance-sheet financing (I.e. trust loans, entrusted loans, acceptances and bills) accounted for 18% of official TSF stock at end-2014, up from less than 2% just over a decade ago, Fitch wrote. œOf the off-balance-sheet exposure reported at individual banks, this is equivalent to 15% of total assets for state commercial banks and 25% for mid-tier commercial banks, on a weighted average basis. These ratios would be even higher if we included entrusted loans (see Figure 2), although this information is not disclosed at all banks. Fitch estimates that around 38% of credit is outside bank loans."

In many cases, channel loans (so credit extended by banks via non-bank intermediaries) are carried a ...

"The February Air Pocket": Buybacks Are Back But No Central Banks To Hold Traders' Hands

There will be two key themes for investors seeking to shake off the abysmal "as goes January" blues:


The first is that as earnings season comes to a close, companies will gradually emerge from their quiet periods and resume buybacks, even if the investment grade market is now far less conducive to making equity stakeholders richer through incremental leverage. As such it will be interesting to see how single stocks react to new buyback announcements over the coming weeks;

The second, and even more important theme, will be that after a turbulent on the central bank news front month, February will unveil an eerie quiet emerging from the world's central planners. As Bloomberg notes, "February lacks a single scheduled opportunity for the Federal Reserve, European Central Bank or Bank of Japan to reset monetary policy, in part because some policy makers decided last year to meet less frequently." Kazuhiko Ogata, chief Japan economist at Credit Agricole SA in Tokyo said that "February is like an air pocket as no major central bank is scheduled to hold a meeting"

First, here is Goldman's David Kostin explaining that it is only a matter of days before corporations take controls of their own stock price using the method we all know so well: stock buybacks:

Corporates appear on track to resume buyback activity in early February, providing an important source of demand for US equities. Just 4% of repurchases happen in January, making it the slowest month of the year for buyback executions (see Exhibit 4). This lack of demand has contributed to recent market weakness and volatility, in our view, particularly with investor positioning at extremely low levels. After registering a 3 on a scale of 0-100 last week, this week our Sentiment Indicator came in at a 6. By February 5, more than 75% ...

Is This China & USA's "Thelma & Louise" Moment?

Submitted by James Howard Kunstler via Kunstler.com,

Why would anybody suppose that the Peoples Bank of China might want to tell the truth about anything that was within their power to lie about? Especially the soundness of any loan portfolio vested unto the grasp of its tentacles? Of course, most of what China has done in speeding toward the wall of financial crack-up, it learned from watching US bankers slime their way into Too Big To Fail nirvana — most particularly the array of swindles, dodges, and frauds constructed in the half-light of shadow banking to hedge the sudden, catastrophic appearance of reality-based price discovery.

When so many loans end up networked as collateral in some kind of bet against previous bets against other previous bets, you can be sure that cascading contagion will follow. And so that is exactly what's happening as China's rocket ride into Modernity falls back to earth. Like most historical fiascos, it seemed like a good idea at the time: take a nation of about a billion people living in the equivalent of the Twelfth Century, introduce the magic of money printing, spend a gazillion of it on CAT and Kubota earth-moving machines, build the biggest cement industry the world has ever seen, purchase whole factory set-ups, and flood the rest of the world with stuff. Then the trouble starts when you try to defeat the business cycles associated with over-production and saturated markets.

Poor China and poor us. Escape velocity has failed. Which raises the question: escape from what, exactly? Answer: the implacable limits of life on earth. The metaphor for all this, of course, is the old journey-into-space idea, which ...

Oil Is Crashing After Hedge Fund Bulls Pile In At Fastest Pace Since 2010

Amid denied rumors of production cuts (and Goldman's dismissal), crude oil prices have jumped "August 2015 Andy Hall squeeze style" to 3-week highs. This 'change' in trend has hedge funds calling the bottom once again adding to bullish oil bets at the fastest pace since 2010 in the last week. However, most ironically, it appears the weak longs are being squeezed today as WTI crashes 6%.

Still, it seems many are looking for a short-squeeze initiated bottom here... (as Bloomberg reports)

"A lot of the shorts got scared out," said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. "We could be forming a bottom here."

"There's still a good amount of short-covering taking place after we fell to our lows," said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy.

Speculators' net-long position in WTI increased 35 percent in the week ended Jan. 26 to 110,432 contracts of futures and options, the biggest percentage gain since October 2010, data from the U.S. Commodity Futures Trading Commission show. Longs, or wagers on rising prices, increased ...

U.S. Stocks Slip as Oil Prices Slide, China Data Disappoints

U.S. stocks fell Monday along with oil prices, pulling back after major indexes notched their biggest-one day rally since the fall. Fresh signs of weakness in China's manufacturing sector added to concerns.

U.S. Hedge Funds Mount New Attacks on China's Yuan

Some of the biggest names in the hedge-fund industry are piling up bets against China's currency, setting up a showdown between Wall Street and the leaders of the world's second-largest economy.

IPO Market Comes to a Standstill

A frigid January for initial public offerings "there were no U.S. IPOs for the month "is pointing to a hard winter for fledgling biotech firms and other private companies.

December 2015 Construction Spending Growth Rate Improved???

Written by Steven Hansen

The headlines say construction spending improved - but under expectations. The backward revisions make this series very wacky - and there was a significant decline in the rolling averages.

Fed's Fischer says markets might be right after all

Fed Vice Chairman Stanley Fischer said Monday the global market selloff could hurt the U.S. economy, suggesting the market's expectations of a small amount of interest rate hikes this year could turn out to be right.

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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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