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02Feb2016 Market Update: Wall Street In Negative Territory, Crude Slipped Below $30, Markets Generally At A Strong Support

Written by Gary

Wall Street is having a terrible day with the DOW down almost 300 points and slipping. WTI crude has fallen below $30 again and appears to also heading further south. The good news is that many analysts, including myself, believe we are going to see a bullish bounce before we see more downside.


Here is the current market situation from CNN Money

North and South American markets are broadly lower today with shares in Brazil off the most. The Bovespa is down 3.82% while U.S.'s S&P 500 is off 1.65% and Mexico's IPC is lower by 0.72%.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 49%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 25%
Investors Intelligence sets the breath Above 50 bullish 27.1%
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.

52.88

StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 23.34%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 30.98%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 36.60%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value

18.79

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 73.32
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors

9,417

What Is Moving the Markets

Here are the headlines moving the markets.

Dow Chemical CEO Liveris to step down by mid-2017

(Reuters) - Dow Chemical Co Chief Executive Andrew Liveris said he would leave the company by mid-2017 after it merges with fellow chemical and seeds producer DuPont .

Exxon's profit tumbles 58 percent, slashes capex by one-quarter

(Reuters) - Exxon Mobil Corp on Tuesday reported its smallest quarterly profit in more than a decade and said it will cut 2016 spending by one-quarter and suspend share repurchases as it copes with a prolonged downturn in crude prices.

Wall St. dips as oil extends selloff

(Reuters) - Wall Street was sharply lower on Tuesday as falling oil prices heightened concerns regarding the health of the global economy and investors sought safer investments.

BP reports biggest ever annual loss

LONDON (Reuters) - BP slumped to its biggest annual loss last year and announced thousands more job cuts on Tuesday, showing that even one of the nimblest oil producers is struggling in the worst market downturn in over a decade.

ChemChina close to striking deal for Syngenta: sources

(Reuters) - China's state-owned ChemChina is nearing a deal to buy Swiss seeds and pesticides group Syngenta for around 43 billion Swiss francs ($42.2 billion), two people familiar with the matter said on Tuesday.

GM January U.S. sales up slightly, Ford's down

DETROIT (Reuters) - U.S. auto sales appeared to fare better than expected in January, early returns showed on Tuesday, as the industry benefited from low gasoline prices, easy credit and moderate economic growth.

No decision yet on OPEC, non-OPEC meeting, some in OPEC skeptical: delegates

LONDON (Reuters) - OPEC has not yet scheduled any talks with Russia and other non-OPEC countries aimed at supporting oil prices, two OPEC delegates said on Tuesday after Russian officials talked up potential cooperation with the exporter group.

Russia's crisis produces a paradox: surging luxury car sales

MOSCOW (Reuters) - As Russia wrestles with an economic crisis, more and more Porsches and Rolls-Royces are appearing on its roads.

Alphabet overtakes Apple in market value - for now

(Reuters) - Alphabet Inc might win the market cap battle against Apple Inc , but will it win the war?

Rewardless Risk

Submitted by Ben Hunt via Salient Partners' Epsilon Theory blog,

I'm going full-nerd with the "Lord of the Rings" introduction to today's Epsilon Theory note, but I think this scene -- where Denethor, the mad Steward of Gondor, orders his son Faramir to take on a suicide mission against Sauron's overwhelming forces -- is the perfect way to describe what the Bank of Japan did last Thursday with their announcement of negative interest rates. The BOJ (and the ECB, and ... trust me ... the Fed soon enough) is the insane Denethor. The banks are Faramir. The suicide mission is making loans into a corporate sector levered to global trade as the forces of global deflation rage uncontrollably.

Negative rates are an intentional effort to weaken your own country's banks. Negative rates are a punitive command: go out there and make more bad loans where risk is entirely uncompensated, or we will, in effect, fine you. The more bad loans you don't make, the bigger the fine. Negative rates are only a bit worrying in today's sputtering economies of Europe, Japan, and the US because the credit cycle has yet to completely roll over. But it is rolling over (read anything by Jeff Gundlach if you don't believe me), it is rolling over everywhere, and when it really starts rolling over, any country with negative rates will find it to be significantly destabilizing for their banking sector.

...

The Last Time These Five Outlier Events Coincided Was In February 2009

When it comes to Wall Street permabulls, no one name sticks out more than that of FundStrat's (formerly JPM's) Tom Lee. Which is why, when even the traditional CNBC host during market up days, turns modestly bearish as he has in recent weeks and admits the investing community is gripped by a "growth scare" it is a notable event. As he writes, "the S&P 500 has been struggling since the start of the year and markets remain extremely on edge given the multitude of risks facing the market."

In a curious departure from his traditional happy go lucky style, Tom Lee then proceeds to list all the things that can go even more wrong from here on out:

There are many issues potential becoming so significant that the economy and markets succumb to the risks:

China: China is navigating an extremely challenging balance of slowing credit growth/expansion while transitioning growth from an investment-oriented to consumption oriented model. The structural changes over the past decade have resulted in China and its EM neighbors increasingly operating as an ecosystem, with the US less affected by œshocks in China.

Commodity producers: Commodity producers are seeing increasing financial stress, stemming from falling volumes and prices, currency weakening and diminished confidence by capital markets.

Deflation: Falling inflation and the pernicious effects of deflation weigh on markets "particularly since, debt burdens become very difficult to manage in a falling pricing environment.

Credit cycle: Default expectations have risen in 2016, stemming concerns about falling commodity prices and reduced market liquidity. Investors have pulled nearly $80 billion from high-yield mutual funds over the past 18 months.

Policy divergence:

Retail Apocalypse: 2016 Brings Empty Shelves And Store Closings All Across America

Submitted by Michael Snyder via The End of The American Dream blog,

Major retailers in the United States are shutting down hundreds of stores, and shoppers are reporting alarmingly bare shelves in many retail locations that are still open all over the country. It appears that the retail apocalypse that made so many headlines in 2015 has gone to an entirely new level as we enter 2016.

As economic activity slows down and Internet retailers capture more of the market, brick and mortar retailers are cutting their losses. This is especially true in areas that are on the lower portion of the income scale. In impoverished urban centers all over the nation, it is not uncommon to find entire malls that have now been completely abandoned. It has been estimated that there is about a billion square feet of retail space sitting empty in this country, and this crisis is only going to get worse as the retail apocalypse accelerates.

We always get a wave of store closings after the holiday shopping season, but this year has been particularly active. The following are just a few of the big retailers that have already made major announcements...

-Wal-Mart is closing 269 stores, including 154 inside the United States.

-K-Mart is closing down

Stocks Fall as Sliding Oil Prices Hit Energy Shares

Stocks around the world fell Tuesday as sliding oil prices added to concerns about the health of the global economy.

Oil Falls Back to $30 a Barrel

Crude prices cracked below $30 a barrel again as traders continue erasing a recent surge from speculation that the world's major exporters will cooperate on output cuts.

Bank of Japan's Kuroda Is Smarter Than a Robot

Bank of Japan Gov. Haruhiko Kuroda stunned economists, investors and even a pair of artificial-intelligence programs when he set negative interest rates.

London Markets: FTSE 100 dragged down as BP slides by the most since 2010

Losses in shares of BP and BHP Billiton hurt the FTSE 100 on Tuesday.

Europe Markets: European stocks end lower; stumble for 2nd day as oil slides

European stocks are hit hard, with Swiss bank UBS losing ground after a downbeat financial report, while commodity shares suffer as BP reports a steep financial loss.

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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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