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03Feb2016 Pre-Market Commentary: US Futures Trending Up, Short-Term Indicators Bearish, Session Direction Unsure Complementing Investors Feelings

Written by Gary

Asian and European markets are down, but the US stock future indexes are showing some life in the pre-market arena. This one of those sessions where volatility and uncertainty could move the averages in either direction. The markets are expected to open fractionally higher.


Here is the current market situation from CNN Money

What Is Moving the Markets

Here are the headlines moving the markets.

European lawmakers back limited reduction in car emissions

BRUSSELS (Reuters) - European lawmakers on Wednesday backed a compromise deal to reduce car emissions that will still allow vehicles to exceed official pollution limits, defying calls for more radical reform following Volkswagen's emissions-test cheating scandal.

GM posts record profit in 2015, driven by North American sales

DETROIT (Reuters) - General Motors Co rode sales of SUVs and pickup trucks in North America to a record profit in 2015, and reaffirmed its forecast to do better this year despite signs that vehicle sales are hitting a peak.

Kia plans first sports sedan next year as it seeks younger, more hip image

SEOUL (Reuters) - Kia Motors plans to launch its first sports sedan next year, people familiar with the matter told Reuters, seeking to burnish a sporty, younger image as larger sibling Hyundai Motor builds up its premium offerings.

Merck's revenue misses on lower drug sales, strong dollar

(Reuters) - Merck & Co Inc reported lower-than-expected quarterly revenue, hurt by a drop in sales of its diabetes and arthritis drugs, and a strong dollar.

China seeks food security with $43 billion bid for Syngenta

BASEL, Switzerland (Reuters) - China made its boldest overseas takeover move when state-owned ChemChina agreed a $43 billion bid for Swiss seeds and pesticides group Syngenta on Wednesday, aiming to improve domestic food production.

Futures higher as oil shows glimmers of recovery

(Reuters) - U.S. stock index futures were higher on Wednesday as oil prices recovered slightly and investors awaited a fresh batch of U.S. economic data, including a report on job growth in the private sector.

Oil lifts stocks off lows, yen and low-risk debt in favor

LONDON (Reuters) - Glimmers of recovery in oil prices on Wednesday lifted European stock markets off their lows and dimmed the allure of the Japanese yen, gold and ultra-low-risk government debt.

Comcast revenue beats Street as NBCUniversal, Internet units grow

NEW YORK (Reuters) - Comcast Corp posted better-than-expected fourth-quarter revenue on Wednesday, driven by growth in its media and entertainment unit NBCUniversal in addition to its high-speed Internet and business services divisions.

Oil gains after Russia says open to talking with OPEC

LONDON (Reuters) - Oil rose on Wednesday, paring earlier losses after Russia reiterated its openness to talking with OPEC about output cuts, which helped revive hope among investors that the world's largest producers could act to boost prices.

JPM: "The Backdrop Remains The Same: Sell Rallies Toward 1950"

Yesterday we reported that following a spike in calls by the sellside to "sell the rally", hedge funds did just that and according to BofA client data, hedge funds dumped the most shares in the past week in two years. Today, JPM's Adam Crisafulli repeats the firm's now default call for 2016, noting that "the bigger picture backdrop for the market remains the same."

Here are the three key backdrops:


  1. 16x and $120 create a firm ceiling at ~1950 and thus moves toward that level should be faded;

    the macro environment isn't nearly as horrible as the mid-Jan narrative suggested but there are still plenty of headwinds;

    the biggest risks for the tape right now are misplaced hopes around crude (a œgrand bargain production deal isn't imminent) and central banks (incremental easing actions going forward won't be nearly as positive for stocks as ones in the past and actually could be counterproductive if they weigh meaningfully on banks).

As for imminent catalysts, this is what JPM sees:

Catalyst bottom line " the big ones to watch: 1) US jobs for Jan Fri 2/5; 2) Yellen testimony before the House on Feb 10 and Senate Feb 11; 3) EU Leaders Summit 2/18-19 (deal on retaining the UK in the EU is expected at this event); 4) G20 fin min/central bank meeting (2/26-27 Shanghai).

JPM is not the only one: moments ago famed technician Louise Yamada doubled down on the call, saying the primary trend for stocks is now lower as bear market unfolds; monthly momentum indicator still giving sell signal and declining; œrally may fade as fast as it appeared, Bloom ...

Frontrunning: February 3



Oil lifts stocks off lows, yen and low-risk debt in favor (Reuters)

Yes, this agaim: Oil gains after Russia says open to talking with OPEC (Reuters)

More forecasts: Oil Prices Could Jump 50% by the End of 2016 (BBG)

New Risks for Trump After Iowa Loss (WSJ)

Yuan Gap Widens Again as Depreciation Bets Swamp PBOC Fightback (BBG)

Germany Struggles to Assess Security Threats Ahead of Carnival Season (WSJ)

Marco Rubio becomes early hope for mainstream U.S. Republicans (Reuters)

Dollar Bears Awaken Before Jobs Report as BOJ-Stoked Rally Fades (BBG)

Yahoo to Cut 15% of Workforce, Explore Strategic Options (WSJ)

Merck's Top-Selling Diabetes Drugs Fall Short of Sales Estimates (BBG)

Euro-Area Price Cuts Intensify Pressure on Draghi to Act (BBG< ...

Europe Falls, U.S. Futures Rise As Oil Halts Two-Day Plunge

While the biggest news of the night had nothing to do with either oil or China, all that mattered to US equity futures trading also was oil and China, and since WTI managed to rebound modestly from their biggest 2-day drop in years, continuing the trend of unprecedented, HFT-driven volatility which has far surpassed that of equities and is shown in the chart below...

... despite the API reporting a jump in oil inventories, rising back over $30, and with China falling only 0.4% overnight after the National Team made a rare, for 2016, appearance and pushed stocks to close at the day's high, US E-minis were able to rebound from overnight lows in the mid-1880s, and levitate above 1900. Whether they sustain this level remains to be seen.

However, as noted above, the biggest news was neither oil nor China whose rigged volatility is now watercooler humor talk across trading floors, but the BOJ's Kuroda, who as reported previously, made many headlines overnight during a speech on NIRP such as the follolwing:


KURODA: POSSIBLE TO CUT NEGATIVE RATE FURTHER IF NEEDED

KURODA: BOJ NEEDS TO DEVISE NEW TOOLS IF MEASURES INSUFFICIENT

KURODA: BOJ WILL DO WHATEVER IT CAN TO REACH PRICE TARGET

What was disturbing about these is that not only was the BOJ unable to push the USDJPY, or Nikkei (which plunged 3.2%) higher, but the Japanese currency surged overnight wiping out almost all post-NIRP losses, and suggesting that central bank credibility is virtually gone. A few more "emergency actions" like the BOJ's and not all the HFT algos igniting upward momentum will ...

Wells Fargo to Pay $1.2 Billion Over Faulty Mortgages

Wells Fargo said it has agreed to pay $1.2 billion to settle a long-running suit that accused the company of œreckless lending and leaving a federal insurance program to pick up the tab.

Global Shares Steady After Steep Selloff

Stocks in Europe and the U.S. showed signs of steadying following a steep selloff, while markets in Asia caught up with Tuesday's declines.

Fed vs. the Dollar: Why Yellen Can't Win

A vicious cycle that is sending the dollar higher and intensifying global strains will make it hard for the Federal Reserve to raise rates this year.

What Is The Composition Of Central Bank Balance Sheets In Normal Times? - Part Three Of Four

from Liberty Street Economics

There has been unusually high activity on central banks' balance sheets in recent years. This activity, which has expanded beyond the core operations and collateral of the central bank, has been called "unconventional," "nonstandard," "nontraditional," and "active." But what constitutes a normal central bank balance sheet? How does central bank asset and liability composition vary across countries and how did the crisis change this composition? In this post, we focus on the main characteristics of central bank balance sheets before the crisis. In our next piece, we describe how this composition has changed in response to the crisis.

How Technology Might Reshape China's Future

from STRATFOR

-- this post authored by Rebecca Keller

Three years ago, most of the world thought "CRISPR" was the name of a refrigerator drawer. Now,the revolutionary gene-editing technique is not only used by researchers the world over but is also widely discussed by the mainstream media.

Brett Arends's ROI: How I came to respect the 'death-cross strategy in stocks

The stock market indicator can save you money in the worst of times, writes Brett Arends.

London Markets: FTSE 100 faces third straight loss; pound pushes higher

U.K. stocks declined Wednesday and headed toward a third consecutive decline, following a dreary day in Asian markets.

Earnings Summary for Today

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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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