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24Feb2016 Market Update: Crude Rebounds After Additional Inventories Reported, Expect Temporary Volatility As The 'Oil Word' Wars Continues

Written by Gary

US markets opened lower as expected and dropped further, but fractionally. The averages have melted back up above the S2 (Spooz @1905) but is expected to drop again before the closing bell. New single-family homes fell 9.2% last month to an annualized rate of 494,000 units. WTI crude has climbed again, but stopped short of the 32.20 minor resistance.


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 2.07% while Mexico's IPC is off 1.26% and U.S.'s S&P 500 is lower by 0.78%.

Oil futures continued to trade lower on Wednesday after a U.S. government report showed that last week's crude supplies rose a bit more than some expected and market hopes for a production cut faded. Full Story

The major U.S. benchmarks are firmly lower to start Wednesday, punctuating a failed test of significant technical resistance. Full Story

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 58%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 42%
Investors Intelligence sets the breath Above 50 bullish 36.8%
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.

47.51

StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 24.46%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 39.86%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 49.40%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value

16.93

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 73.21
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 9,394

What Is Moving the Markets

Here are the headlines moving the markets.

The great European telecoms M&A scramble is losing momentum

BARCELONA (Reuters) - The merger and acquisition activity that has characterized the European telecoms market in recent years could soon grind to a halt, even as Orange looks to seal a potential 10 billion euro ($11 billion) deal for French rival Bouyges .

Lowe's higher sales overshadowed by Home Depot hangover

(Reuters) - Home improvement chain Lowe's Cos Inc reported an increase in quarterly comparable sales that paled in comparison to those of rival Home Depot Inc , despite beating Wall Street expectations.

Oil continues fall after Saudi production comments

LONDON (Reuters) - Oil fell below $33 a barrel on Wednesday after Saudi Arabia ruled out production cuts and U.S. crude inventories rose, though a decline in U.S. gasoline stocks limited losses.

Wall Street slips as financials drag

(Reuters) - U.S. stocks dropped more than 1 percent on Wednesday, dragged down by financial stocks, a day after JPMorgan signaled a rough first quarter and oil prices continued to fall.

France seeks 1.6 billion euros in back taxes from Google: source

PARIS (Reuters) - France is seeking 1.6 billion euros ($1.76 billion) in back taxes from U.S. Internet giant Google , criticized for its use of aggressive tax optimization techniques, a source at the finance ministry said on Wednesday.

Shell closes U.S. shale resources unit and says U.S. head to leave

LONDON (Reuters) - Oil major Royal Dutch Shell is closing a business dedicated to so-called unconventional resources, a term used by the industry to describe shale reserves, and said on Wednesday the unit's director and U.S. head Marvin Odum would leave.

Solid support for Apple in iPhone encryption fight: poll

BOSTON (Reuters) - Nearly half of Americans support Apple Inc's decision to oppose a federal court order demanding that it unlock a smartphone used by San Bernardino shooter Rizwan Farook, according to a national online Reuters/Ipsos poll.

Instagram has attracted more than 200,000 advertisers, company says

NEW YORK (Reuters) - Five months ago, Facebook Inc began trying to transform its picture-sharing app, Instagram, into a money-making business. Since then, Instagram has attracted more than 200,000 advertisers, the company announced Wednesday, a clear sign of its potential for significantly contributing to Facebook's revenue.

U.S. new home sales tumble; services sector weakens

WASHINGTON (Reuters) - New U.S. single-family home sales tumbled in January from a 10-month high as sales in the West region plunged, but the overall housing market recovery remains intact.

Is The Stock Rally Glass Half Full Or Half Empty?

Via Dana Lyons' Tumblr,

The February stock market bounce has reached a crossroads - will there be another leg higher or has the rally run its course?

The rally in stocks has reached an key juncture it would seem in many of the major indices. That includes our favorite index: the Value Line Geometric Composite (VLG). Once again, the VLG is an unweighted average of approximately 1700 stocks. The calculation of the index amounts to essentially the median stock performance among that universe. Thus, in our view, it is probably the best gauge of the true health of the broad stock market. If that is the case, the market's health is truly up in the air at this point.

Consider first where the VLG is coming from. On January 6, the VLG broke down from what we determined to be a pass/fail line of support around 436, based on key Fibonacci Retracement levels of the post-2009 bull market. Indeed, the index plunged immediately and severely upon breaking that level. The next support we earmarked below stood at 382, or about 12% lower. It took the VLG just 2 weeks to hit that level, which we noted on January 20.

The index held that 382 level on January 20, as well as on a subsequent re-test on February 11. Since then, the VLG has bounced solidly, moving as high as 415 yesterday before encountering multiple resistance layers. Today, the VLG, settled at 409.85. As quant-oriented managers, this is an interesting juncture to us. To wit: a move from 409 back up to 436 would mark a rise of +6.6015%. Meanwhile, a drop back down to 382 from 409 would signify a loss of -6.6015%. ...

Google's "SkyNet" Robots Are All Grown Up, And Terrifying

The last time we looked at the fascinating robotic products of Boston Dynamics, a company which Google prudently acquired quietly in 2013, it was a cute petting zoo of clumsy robotic "animals" including a "big dog", a "wild cat", and a "cheetah." They could barely walk for a few minutes without collapsing or suffering some terminal failure.

Barely over two years later Google's robots, no longer cute little animals, are not only all grown up but judging by the progress revealed in the company's latest progress video, are a few months from being full 5'9", 180 lbs humanoid automatons who can not only walk, pick themselves up, open doors, and carry heavy loads, but are this close from replacing millions of workers in menial, repetitive occupations as well as forming an army of robots best seen until recently in the science fiction section of your favorite streaming movie provider.

Worse, they are downright terrifying because after watching the clip below we can't decide which flashbacks are stronger: to SkyNet or RoboCop.

This is how Boston Dynamics intros the following disturbing video:

A new version of Atlas, designed to operate outdoors and inside buildings. It is specialized for mobile manipulation. It is electrically powered and hydraulically actuated. It uses sensors in its body and legs to balance and LIDAR and stereo sensors in its head to avoid obstacles, assess the terrain, help with navigation and manipulate objects. This version of Atlas is about 5' 9" tall (about a head shorter than the DRC Atlas) and weighs 180 lbs.

In other words the " ...

NIRP Was a Dud, Are Central Banks Out of Options?

A growing number of investors are beginning to realize that Central Banks are effectively out of ammo (for now).

Last week I noted that the Bank of Japan's implementation of NIRP only generated a brief rally in Japanese stocks. That rally has since been obliterated as Japanese stocks collapsed 10%.

This collapse has finally prompted the mainstream financial media to question NIRP. It's a shame no one bothered to question NIRP, ZIRP, and QE when the markets were still rallying!

HSBC: Sweden's Experience Shows Negative Rates Haven't Worked

The 'Monetary Madness' That's Pushing Japanese Bonds Negative

Negative Interest Rates Can Hurt Global Stocks

COLUMN-Banks drink from NIRP's poisoned well: James Saft

H/T Bill King for noting the change in media tone.

I point this out because it indicates that we are at a critical turning point. Between 2009 and last week, the financial media rarely questioned Central Bank policy, if ever.

The fact that we are now seeing numerous articles criticizing NIRP and Central Banks, tells us that psychologically a significant shift has taken place. That shift will see growing criticism of Central Banks along with an increase in bearish sentiment amongst investors.

This shift was also evident in today's Q&A session between Fed Chair Janet Yellen and Congress. For the first time in recent memory, a Fed Chair was grilled on the legality and legit ...

The New "Big Short"? - Australia's Housing Bubble Is "In the Grip Of Insanity"

Submitted by Pater Tenebrarum via Acting-Man.com,

Perverse Incentives

We haven't written about Australia's residential real estate bubble for some time (readers may want to check out last year's post "Australia's Bubble Trouble", which contains numerous relevant charts and data).

Property Auction in Sidney-3

Property auction in Sydney

Our friend Jonathan Tepper of Variant Perception has recently visited Australia for a fact-finding tour (more on this further below), so we felt we might as well take the opportunity to write an update on the topic.

1-Sydney House Prices Interest Rates

House prices in Sidney vs. the administered interest rate of the Reserve Bank of Australia. As you will see below, interest rates aren't the only driver of the bubble - click to enlarge.

Our reader D.S., who has moved to Australia five years ago, has provided us with a number of very interesting observations on the Australian housing market late last year, which we are sharing below. As D.S. notes, there are a number of interesting wrinkles specific to Australia's real estate market, which outsiders are generally not ...

Stocks Fall as Financials Tumble

U.S. stocks declined for a second consecutive session Wednesday as all 10 sectors in the S&P 500 traded lower and investors dumped shares of banks.

British Pound Sinks to Seven-Year Low on 'Brexit' Fears

The British pound sank to a fresh seven-year low, as the prospect of the U.K. leaving the European Union continued to drag down the currency.

Market Extra: Surprisingly weak economic reading sends stocks, yields diving

Stocks and Treasury yields plunged Wednesday after an early indicator suggested the services sector had a surprisingly weak February.

The Tell: Why U.S. investors should fear a 'Brexit'

U.S. companies could see their bottom lines slashed if the U.K. votes to leave the European Union in a so-called Brexit referendum this summer, according to Bank of America.

London Markets: FTSE 100 slides as oil, mining shares drop

Crude and Brent prices continue to slide, putting pressure on energy stocks and helping to drive the benchmark FTSE 100 to its fourth loss in five days.

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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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