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02Mar2016 Market Close: WTI Crude Closed Up In High 34's, Market Averages Up 0.3%, $RUT Up 1.6%, Overbought McClellan Oscillator At 90

Written by Gary

US averages remained little changed after yesterday's Wall Street 'Super Tuesday' and today is 'Which Way Wednesday', pausing after major indexes a day ago posted their biggest one-day advance since January. With GAAP valuations topping 22x, macro data weakening everywhere, and US equities at their most overbought since 2004, what could possibly go wrong? The McClellan Oscillator has reached over 90 which represents a highly overbought level.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Wall St. edges higher as energy and bank shares gain

(Reuters) - Stocks were slightly higher on Wall Street on Wednesday as gains in energy and banks buoyed the S&P 500.

Energy CEO McClendon dies in Oklahoma car crash, a day after indictment

OKLAHOMA CITY (Reuters) - Aubrey McClendon, the co-founder of Chesapeake Energy Corp who led it to become one of the world's biggest natural gas producers before he was tarred by federal anti-trust charges, died on Wednesday in a car accident in Oklahoma City, police said. He was 56.

Volkswagen says did not breach market disclosure rules

FRANKFURT/BERLIN (Reuters) - Volkswagen said on Wednesday its top management did not violate market disclosure rules and is taking legal action to fend off lawsuits claiming it had been too slow to inform investors about its rigging of diesel emissions tests.

U.S. economic activity expanded, but conditions mixed: Fed

WASHINGTON (Reuters) - U.S. economic activity continued to expand in most districts from early January to late February but conditions varied considerably across regions and within sectors, the Federal Reserve said on Wednesday.

Toyota adds 331,200 vehicles to Takata air bag recalls

DETROIT (Reuters) - Toyota Motor Corp said on Wednesday it is expanding by 331,200 cars worldwide its recall involving potentially defective Takata Corp air bag parts.

Abercrombie's turnaround effort boosts holiday sales, hits forecast

(Reuters) - Abercrombie & Fitch Co posted a surprise rise in sales at established stores in the holiday-shopping quarter, ending a streak of more than three years of declines, a sign that its efforts to revive sales growth is paying off.

Adidas nominates major investors to board

NUREMBERG, Germany (Reuters) - Adidas is proposing that Egyptian tycoon Nassef Sawiris and a representative of Belgium's richest man Albert Frere join its supervisory board after both took significant stakes in the German sportswear group.

Fed's Williams: View on right number of rate hikes little changed

SAN RAMON, Calif. (Reuters) - San Francisco Federal Reserve President John Williams said on Wednesday there has been no substantial change in his outlook on the U.S. economy or his opinion on the number of times the Fed should raise interest rates this year and next.

Exclusive: Texas fund EMG halts new deals with indicted McClendon

HOUSTON (Reuters) - Private equity fund Energy & Minerals Group told investors on Wednesday it will stop entering new deals with Aubrey McClendon, the former chief executive officer of Chesapeake Energy Corp , a day after the U.S. government charged him with breaking antitrust laws.

US Stocks Are The Most Overbought In 12 Years

With GAAP valuations topping 22x, macro data weakening everywhere, and US equities at their most overbought since 2004, what could possibly go wrong?

The McClellan Oscillator has reached over 90 which represents a highly overbought level. However, more amazingly, if you look at it through the lens of a monthly chart there is no evidence of any correction ever having taken place in 2016. No red whatsoever

Source: NorthmanTrader.com

And further, an over 10% rally off the lows and still Nasdaq has not managed to have a single day with more new highs than new lows in 2016...

Source: NorthmanTrader.com

We are sure this is nothing to worry about, just buy stocks.

Sheep Line Up For Slaughter: Investors Buy Most Junk Bonds Ever

HYG - the high yield bond ETF - is trading at its richest to NAV in over 4 years after 7 straight days of inflows. This flowgasm seemed to crescendo yesterday where Credit Suisse estimated a very sizeable HY retail fund inflows (total amount hitting ~$1.9bn) which they note beat 5-Nov-2014 as being the largest inflow day ever.

With the ETF at such an extreme in valuation and given the historical performance of the fund after 7 straight days of inflows...

(green shaded regions show 7 straight days of inflows.. and the red arrow the subsequent performance)

It appears the sheep are heading for slaughter once more...

Can Americans Handle Four More Years Of This?

Some folks were peddling fiction... for everyone else, there's this reality!

No child (or student, or poor person, or grandchild, or debtholder, or healthy person, or retiree, or African American, or family, or homeowner, or renter) left behind untouched...

Now that is a legacy.


Oil Options Traders Ain't Buying It - Bearish Bets Biggest In A Year

Despite Andy Hall's wish hope forecast guess statement that "the bottom is in," for crude (and oil analysts unicorn-like forecast of $47 by year-end), it seems oil options traders disagree significantly.

The cost of protect against downside risk is the highest it has been in a year, despite underlying oil prices being at 8-week highs

(chart shows implied vol spread between Dec 2016 Crude Puts vs Calls +/-1.5 Sigma)

Today has seen Put vols jump from 51.33 to 56..2 as Call vols fell from 49.63 to 47.6, leaving options traders paying the most since Feb 2015 to protect against lower prices by the end of the year, compared with the cost of hedging the risk of more expensive crude.

As Bloomberg notes, as U.S. production shows continued resilience to low prices, Iran returns to global markets and Saudi Arabia keeps pumping, options markets show the threat of "lower for longer" prices hasn't disappeared.

Indicted Ex-CEO Aubrey McClendon Dies in Car Crash

Aubrey McClendon, a pioneer in the U.S. shale boom, died in a fiery single-vehicle crash, a day after he was indicted on charges of conspiracy.

U.S. Stocks Little Changed

Prices of U.S. stocks were little changed on Wednesday, pausing after major indexes a day ago posted their biggest one-day advance since January.

Is Worst Over for Stocks? The Problem With Being Contrarian

While the AAII's sentiment survey is commonly used as a contrarian tool, investors shouldn't assume the market is in the clear based on the poll's findings alone.

Aubrey McClendon, shale pioneer and former Chesapeake CEO, dead after car crash

Speed was a factor in the car crash that killed the former chief executive of Chesapeake Energy.

Commodities Corner: Natural-gas futures sink to 17-year low

Warmer-than-normal weather dulls demand for natural gas, pulling futures prices down to their lowest level in 17 years.

Currencies: Dollar weakens as risk-off sentiment returns

The dollar edged lower against its main rivals Wednesday afternoon as a slight risk-averse bias drifted back into the market.

Summary of Economic Releases this Week

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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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