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