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12Feb2016 Market Update: US Markets Up, DOW Up 200 Points, WTI Oil Still Melting Upwards, Market Trending Down For Now

Written by Gary

Afternoon markets have been trading mostly sideways with a very recent melting down and volatility to confuse investors. WTI crude rebounded from a 13-year low as the Saudi's again raised the possibility of a coordinated cut in output. January Import Prices fell 1.1x%, export Prices fell by 0.8% and retail sales rose 0.2%.


Here is the current market situation from CNN Money

North and South American markets are broadly higher today with shares in U.S. leading the region. The S&P 500 is up 1.20% while Brazil's Bovespa is up 1.07% and Mexico's IPC is up 0.23%.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 44%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 20%
Investors Intelligence sets the breath Above 50 bullish 23.4%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -43.51
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 17.08%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 26.75%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 29.40%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value

17.28

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 69.40
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 9,173

What Is Moving the Markets

Here are the headlines moving the markets.

Fed's Dudley dismisses negative US rates, sees economic momentum

NEW YORK (Reuters) - While recently tighter U.S. financial conditions will factor into the Federal Reserve's upcoming policy decisions, it is "extraordinarily premature" to even talk about using negative interest rates to stimulate the economy, a top Fed official said on Friday.

Energy, banks lead Wall St. recovery after punishing week

(Reuters) - Wall Street staged a comeback on Friday, led by a rebound in beaten-down financial and energy stocks after five straight days of a grueling rout on fears over the health of the global economy and the banking sector.

Syngenta deal could pave way for biotech acceptance from China users

SINGAPORE (Reuters) - ChemChina's purchase of Syngenta could remove some of the suspicion around genetically modified crops and ultimately lead to more rapid user acceptance of biotechnology in food production in China, Syngenta's Chief Operating Officer Davor Pisk told Reuters.

Consumer companies' outperformance no longer guaranteed by cheap oil

LONDON (Reuters) - Consumer companies are offering investors a small degree of relief from the turmoil in banking and resources in a results season dominated by fears about slowing economic growth.

U.S. consumers flex muscle; import prices signal weak inflation

WASHINGTON (Reuters) - U.S. consumer spending regained momentum in January as households ramped up purchases of a variety of goods, in a hopeful sign that economic growth was picking up after slowing to a crawl at the end of 2015.

Desperately seeking signs of inflation

(Reuters) - Now markets have delivered their verdict on inflation - it's not picking up any time soon - economic data due next week will show whether price pressures are rising meaningfully or falling back in some of the world's major economies.

Hedge fund divorce battle cost charity $2 million in legal fees

LONDON (Reuters) - Hedge fund manager Chris Hohn's divorce from ex-wife Jamie Cooper cost a charitable foundation they jointly set up more than $2 million in legal fees, its annual report showed.

Volkswagen group sales return to growth in January

FRANKFURT (Reuters) - Volkswagen group sales returned to growth in January thanks to demand in China, where core brand VW posted its best month ever despite the furor over the German carmaker's cheating of U.S. diesel emissions tests.

Airbus A320neo's engine problems to be solved by April: Pratt CEO

HAMBURG (Reuters) - Any technical problems with the engines of Airbus's A320neo jetliner should be solved in the coming weeks, the head of engine manufacturer Pratt & Whitney said.

How ‚¬3.5 Trillion In NIRP Debt Made Europe's Credit Market "Most Vulnerable Since Lehman"

Earlier today, we discussed how after 8 long years spent wandering punch drunk through a dream-like Keynesian wonderland where all financial assets rise inexorably, the world finally woke up last month with a terrible hangover only to discover that after 637 rate cuts and $12.3 trillion in asset purchases, œquantitative easing has been a œquantitative failure.

Perhaps it was the harrowing volatility that tipped investors off to the fact that central bankers were failing. Or perhaps it was the realization that the persistent disinflationary impulse that hangs over developed markets isn't exactly compatible with the notion that central banks are œsucceeding. Or maybe it was the BoJ's move into NIRP which was quickly followed by a canceled JGB auction, a soaring JPY, and crashing Japanese equities. Of course it could have been tumbling yields on the US 10Y. Take your pick, but whatever the catalyst, everyone suddenly began to talk about central banker impotence as opposed to central banker omnipotence, and at that point, the narrative was lost.

Of course it's too late to turn back now. There's no telling what markets would do if central banks were to suddenly admit that this has all been one giant mistake and so, the monetary powers that be stick to the script. For instance, Haruhiko Kuroda - who is known for saying things so at odds with reality that one can only laugh - said last night that œnegative rates are clearly having an effect - just as Japanese stocks were collapsing on themselves (again).

And central bankers aren't just doubling down on the rhetoric. They're doubling down on the easing. Earlier this week, Stefan Ingves and the Riksbank cut Sweden's repo rate by 15 more bps to -0.50% and Mario Draghi and co. are almost sure to follow suit next month. Meanwhile, Janet Yellen admitted that NIRP has been studied for the US.

In a note out Friday, Bo ...

Here Is The ETF Liquidation That Sent Shockwaves Through The Crude Oil Market

A week ago we exposed the real reason for the "crazy volatility" in crude oil markets, and specifically the driver of the immense rally (despite weak data) in crude - a massive liquidation of the triple-inverse ETF DWTI. Today we have another mysterious, even larger spike in crude oil prices (for no good reason other than 'old' misunderstood rumors about OPEC production cuts). The driver, it would appear, is another liquidation as the ETF trades at a huge discount to NAV. The last time this happened, it didn't last.

We saw the same actin last week (and the delayed data exposed the liquidtaion)... it's happening again...

And DWTI is trading at a dramatic discount to NAV - which suggests - given the day lag (There is a day's lag between when redemptions and creations are ordered and when they show up in share figures) that buying pressure hits today...

On Wednesday, oil prices surged more than 8 percent to $32.28 a barrel, despite a seemingly bearish report from the U.S. Energy Information Administration showing nationwide crude inventories rose by 7.8 million barrels last week.

The evidence is ...

637 Rate Cuts And $12.3 Trillion In Global QE Later, World Shocked To Find "Quantitative Failure"

2016 is shaping up to be the year that everyone finally comes to terms with the fact that the monetary emperors truly have no clothes.

To be sure, it's been a long time coming. For nearly 8 years, market participants and economists convinced themselves that the answer was always œmore Keynes. Global trade still stagnant? Cut rates. Economic growth still stuck in neutral? Buy more assets.

It was almost as if everyone lost sight of the fact that if printing fiat scrip and tinkering with the cost of money were the answers, there would never be any problems. That is, policy makers can always hit ctrl+P and/or move rates around. But in order to resuscitate anemic aggregate demand and revive inflation, you need to tackle the core problems facing the global economy - not paper over them (and we mean œpaper over them in the most literal sense of the term).

Well late last month, central banks officially lost control of the narrative. Kuroda's move into negative territory reeked of desperation and given the surging JPY and tumbling Japanese stocks, it's pretty clear that the half-life on central bank easing has fallen dramatically.

And so, as the market wakes up from the punchbowl party with a massive hangover, everyone is suddenly left to contemplate œquantitative failure. Below, courtesy of BofA's Michael Hartnett is a bullet point summary of 8 years spent chasing the dragon... and a list of the disappointing results.

* * *

From BofA

Oil Soars on Production Cut Hopes

Oil prices rallied, rebounding from a 13-year low reached the previous day, on speculation of production cuts among some of the world's biggest suppliers.

U.S. Stocks Extend Gains as Oil, Banks Rally

A rally in recently battered commodities and banking shares lifted U.S. and European stocks on Friday, even as Japan's main index fell to its lowest level in more than a year.

Deutsche Bank to Buy Back $5.4 Billion in Debt

The move is designed to bolster investor confidence in the German lender's finances and in the value of its securities.

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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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