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14Mar2016 Market Update: US Markets Melting Up, Crude Prices Fall In Failed Atempt To Freeze, Investors Pause Ahead Of Fed's Meeting This Week

Written by Gary

US markets opened lower and sea-sawed between green and red for the morning session. The afternoon session is climbing steadily from flat to a respectable station in the green. Global oil prices fell as much as 4 percent as U.S. crude stockpiles continue to mount and Iran maintains little interest in a global production freeze.


Here is the current market situation from CNN Money

North and South American markets are mixed. The S&P 500 is higher by 2.45%, while the Bovespa is leading the IPC lower. They are down 0.35% and 0.22% respectively.

The crash of October 1987 sensitized investors to the potential for stock market crashes and forever changed their view of S&P 500® returns. Investors now realize that S&P 500 tail risk - the risk of outlier returns two or more standard deviations below the mean - is significantly greater than under a lognormal

The CBOE SKEW Index ("SKEW") is an index derived from the price of S&P 500 tail risk. Similar to VIX®, the price of S&P 500 tail risk is calculated from the prices of S&P 500 out-of-the-money options. SKEW typically ranges from 100 to 150. A SKEW value of 100 means that the perceived distribution of S&P 500 log-returns is normal, and the probability of outlier returns is therefore negligible.

As SKEW rises above 100, the left tail of the S&P 500 distribution acquires more weight, and the probabilities of outlier returns become more significant. One can estimate these probabilities from the value of SKEW.

Since an increase in perceived tail risk increases the relative demand for low strike puts, increases in SKEW also correspond to an overall steepening of the curve of implied volatilities, familiar to option traders as the "skew".

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 72%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 73%
Investors Intelligence sets the breath Above 50 bullish 54.9%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. 72.86
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 44.62%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 59.56%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 74.20%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 19.50
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 77.54
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,062

What Is Moving the Markets

Here are the headlines moving the markets.

Viacom shareholders re-elect directors, reject voting rights proposal

MIAMI (Reuters) - Viacom Inc investors re-elected the media company's directors and rejected a move to extend voting rights to all shareholders despite recommendations by the leading proxy advisory firm to withhold support for some directors and approve the proposal.

Russia eyes global deal on oil output in April, Iran seen exempt

TEHRAN (Reuters) - A global deal to freeze oil production could be signed in April and exclude Iran, which has the right to boost output after years of sanctions, Russian energy minister Alexander Novak said on Monday after talks in Tehran.

Oil tumbles as stockpile worry overshadows rally

NEW YORK (Reuters) - Global oil prices fell as much as 4 percent on Monday on concerns a six-week market recovery has gone beyond fundamentals, as U.S. crude stockpiles continue to mount and Iran maintains little interest in a global production freeze.

In a relief for Fed, U.S. inflation survey rebounds

NEW YORK (Reuters) - An increasingly important gauge of U.S. inflation rebounded last month from record low levels, adding to other firming price measures that could help pave the way for Federal Reserve interest rate hikes in the months ahead.

China-led group targets Starwood; tops Marriott offer

(Reuters) - U.S. hotel operator Starwood Hotels & Resorts Worldwide Inc received a buyout offer from a consortium led by China's Anbang Insurance Group, possibly derailing the company's planned takeover by rival Marriott International Inc .

SEC approves budget of independent accounting board

WASHINGTON (Reuters) - The Securities and Exchange Commission on Monday approved the budget for the auditing watchdog that oversees the work of leading U.S. accounting firms.

Wall St. flat as energy drags, consumer gains

(Reuters) - Wall Street was little changed on Monday as losses in energy shares were offset by gains in consumer discretionary stocks and investors paused ahead of the U.S. Federal Reserve's meeting on monetary policy this week.

Goldman revamps electronic stock trading to catch rival

NEW YORK (Reuters) - Raj Mahajan achieved a rare feat when he rejoined Goldman Sachs Group Inc last year with the coveted title of partner, the Wall Street bank's highest rank. Then he got to work on fixing the pipes.

Ex-Anglo Irish CEO charged with fraud and forgery on return home

DUBLIN (Reuters) - The former head of Anglo Irish Bank was formally charged on Monday on 33 counts relating to the collapse of the failed lender, appearing in an Irish court for the first time since his extradition from the United States.

After Chaotic Weekend, Trump Holds Rally In North Carolina - Live Webcast

After a weekend full of chaos for Trump rallies in Ohio, where violence broke out during several rallies and Trump was even rushed by an protester, moments ago the GOP presidential frontrunner started his daily rally in Hickory, North Carolina with Chris Christie by his side ahead of the all important primaries in Ohio and Florida.

Some of the highlights:

"We're going to take care of our vets." - #DonaldTrump pic.twitter.com/mEw6dADs0z

" Fox News (@FoxNews) March 14, 2016

"We have incompetent people running our country." - #DonaldTrump pic.twitter.com/7bdrc1vfzU

" Fox News (@FoxNews) March 14, 2016

"I have friends from China...from Mexico...from Japan. They can't believe what they get away with." - #DonaldTrump pic.twitter.com/6pZwAbY8nO

" Fox News (@FoxNews) March 14, 2016

WATCH: #DonaldTrump joins people at NC rally chanting, "USA, USA, USA."https://t.co/gRAYTG53 ...

How To "Pre-Trade" FOMC Days

The biggest movers on FOMC days are the Dollar Index, Investment-grade credit, Homebuilders and Real Estate, according to Goldman Sachs' options strategists.

We analyze the median 1-day moves on FOMC release days across broad based US equity indices, sectors, and country ETFs over the last year, and also back to January 2010, to rank the assets by their sensitivity to Fed's announcements. To this end, we take absolute values of 1-day returns on the day of FOMC announcements, and scale them by average 1-day absolute returns over the preceding 3-month period in order to control for a prevailing level of market volatility. Next, we look for a median move within a period of interest - last year, or since January of 2010 - to identify assets that, on average, have moved the most (in either direction, due to the use of absolute returns), and thus are likely to be the assets that have been the most sensitive to Fed's announcements over the period of interest (see Exhibit 7).

UUP, LQD move the most on FOMC days. Among broad-based US indices, the largest relative moves were registered by UUP (PowerShares DB US Dollar Index Bullish Fund) and LQD (IShares Iboxx Investment Grade Corporate Bond ETF), both over the last year and over the longer time period. In particular, the Dollar index's median return over the last year was 70% higher than average (in absolute terms) following FOMC announcements.

Homebuilders, Real Estate the most sensitive sectors on FOMC days. Among sectors, the homebuilders and real estate sectors have been the leading Fed watcher ...

U.S. Stocks Slip, Along With Oil Prices

U.S. stocks fell Monday, at the start of a week that will offer key clues to the course of monetary policy this year.

Oil Output Negotiations Hit Obstacles

Big oil producers have been negotiating for weeks on a deal that would limit crude output. Now, talks are hitting obstacles including disagreements over the timing and length of an accord, which countries would be bound by it, and whether such a cap would even be effective.

Judge Gives Green Light To Bill Gross Lawsuit

A tentative ruling by a California state judge could clear a path for Bill Gross's lawsuit against Pacific Investment Management Co.

February 2016 Sea Container Counts High For Imports

Written by Steven Hansen

I know there was a port strike last year at this time so year-over-year analysis will likely be worthless in the periods January thru March this year. However, if one simply looks at the previous Januarys and Februarys since 2006 - imports indeed are at very high levels whilst exports are soft.

The Tell: What could break the chummy bond linking oil and stocks

A market strategist thinks oil and stocks will stop moving in lockstep if oil stabilizes at around $36-$45 a barrel.

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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