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17Mar2016 Market Update: WTI Crude Reaches $40, Gold Steady At 1264, Possible Fractional Afternoon Market Decline

Written by Gary

Markets opened in the red as expected and have melted upwards where the DOW is in triple digits as a rally in the energy, materials and industrials sectors lifted the S&P 500 and Dow industrials. WTI crude eased above $40 for the first time since December, 2015. Concerns about global growth still remain and our forecast of the Spooze reaching 2044 remains intact.


Here is the current market situation from CNN Money

North and South American markets are broadly higher today with shares in Brazil leading the region. The Bovespa is up 6.04% while Mexico's IPC is up 1.53% and U.S.'s S&P 500 is up 0.47%.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 77%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 78%
Investors Intelligence sets the breath Above 50 bullish 55.6%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. 42.36
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 45.61%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 60.80%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 74.60%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 19.05
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 78.35
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,175

What Is Moving the Markets

Here are the headlines moving the markets.

Oil rallies to 2016 highs, U.S. crude hits $40 on producer meeting

NEW YORK (Reuters) - Oil prices hit 2016 highs on Thursday, with U.S. crude piercing the $40 psychological barrier, on optimism that major producers will strike an output freeze deal next month amid soaring gasoline demand in the United States.

Wall St. gains as FedEx, GE boost industrials

(Reuters) - Wall Street edged up on Thursday as FedEx and GE shares lifted the industrials sector, a day after the Federal Reserve's lowered projection of two interest rate hikes in 2016 pushed the S&P 500 to its highest close this year.

Embraer consultant says believes CEO knew of bribery: WSJ

(Reuters) - A sales consultant told Brazilian prosecutors he believes planemaker Embraer SA's top officials, including Chief Executive Frederico Curado, knew of illicit payments related to the sale of military aircraft to the Dominican Republic, the Wall Street Journal reported.

Transocean defeats U.S. shareholder appeal over Gulf spill

NEW YORK (Reuters) - Transocean Ltd on Thursday won the dismissal of an appeal by shareholders accusing the owner of the doomed Deepwater Horizon drilling rig of deceiving them about its safety practices prior to the 2010 Gulf of Mexico oil spill.

Long-haul budget airline French Blue sets two-year deadline to break even

PARIS (Reuters) - Airline French Blue plans to give itself two years to break even from low-cost services between Europe and North America, its chairman told Reuters on Thursday.

Goldman's European business cuts pay after IPO activity slows

LONDON (Reuters) - Average pay at Goldman Sachs' European arm fell 15 percent year-on-year as turbulent markets discouraged companies from listing on stock markets, hitting the bank's underwriting business hard.

GSK break-up? Don't bank on it, says drugmaker's outgoing boss

LONDON (Reuters) - News that GlaxoSmithKline will have a new chief executive in 12 months has fueled speculation about a break-up of Britain's biggest drugmaker but outgoing boss Andrew Witty says this is wide of the mark.

Dividend alert: Investors have bid up income stocks to risky levels

NEW YORK (Reuters) - Spooked by the early 2016 stock market selloff and sick of low interest rates, income investors have been bidding up dividend stocks at a feverish pace - so much so that these shares now are priced at levels high enough to worry some money managers.

VW seeks comprehensive deal on emissions with U.S. regulators: source

HAMBURG (Reuters) - Volkswagen aims to agree a deal with U.S. authorities that resolves as many issues related to its emissions cheating scandal as possible at once, a senior manager at the German carmaker told Reuters.

Stockman Slams "Simple Janet"'s Incoherent Babble

Submitted by David Stockman via Contra Corner blog,

Listening to even a small portion of Simple Janet's incoherent babble makes very clear that the nation's central bank is well and truly impaled on its own petard. According to the dictionary, the latter term refers to...

...a small bomb used for blowing up gates and walls when breaching fortifications. It is of French origin and dates back to the 16th century. A typical petard was a conical or rectangular metal device containing 2-3 kg (5 or 6 pounds) of gunpowder, with a slow match for a fuse.

Maybe that's what they have been doing all along—-that is, waiting for their slow match monetary fuse to finally ignite the next financial conflagration.

After all, the Fed is now 87 months into its grand experiment with the lunacy of zero interest rates. If our monetary central planners still can't see their way clear to more than 38 bps of normalization, then, apparently, they intend to keep the casino gamblers in free carry trade money until they finally blow themselves up——just like they have already done twice this century.

In fact, by Yellen's own bumbling admission the inhabitants of the Keynesian puzzle palace—-into which the Eccles Building has long since morphed—-can't see their way to much of anything. They couldn't even decide if the risks to the outlook are balanced to the upside or downside. And that roundhouse kind of judg ...

China's Most Innovative Capital Outflow Yet: Bizarro M&A

In early February we observed a a new, troubling trend among Chinese corporations: soaring corporate debt as a result of a surge in cross-border M&A.

As we said then "Chinese corporate leverage, represented by the traditional debt/EBITDA ratio is, in some cases, absolutely ludicrous, especially among companies which in recent weeks have tried to mask their balance sheet devastation through global M&A activity, such as ChemChina's recent record for a Chinese company $44 billion purchase of Syngenta, or Zoomlion's $3.3 bid for US rival Terex last month."

As the FT noted at the time, "so high are the debt levels at ChemChina and several other companies behind some of the country's biggest overseas investments that financing for the deals would have been difficult or prohibitively expensive were it not for the backing of the Chinese state, analysts said."

Looking specifically at ChemChina, FT wrote that ChemChina, which bid $43.8bn for Syngenta, a Swiss company, is in poor financial shape. "It made a net loss of Rmb889m in the third quarter of last year and carried a total debt of Rmb156.5bn ($24bn). The debt load was equivalent to 9.5 times its earnings before interest, tax, depreciation and amortisation at the end of 2014, well above the international standard for excessive leverage of 8 times Ebitda.

But what is most disturbing is that ChemChina's 9.5x debt/EBITDA is downright conservative among Chinese corporations.

Take Zoomlion, a lossmaking Chinese machinery company that is partially state-owned: its total debt stands at 83 times its EBITDA. "Zoomlion's bid is a desperate attempt to remain relevant, said Mr Pillay.

Or how about Fosun, a serial Chinese acquirer that spent $6.5bn on stakes in 18 oversea ...

How To Escape The Purgatory Of Minimum Wage/Part-Time Jobs

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

In the age of automation, what's scarce are problem-solving skills.

Readers responded positively to my recent essay on the emerging economy and jobs: A Teachable Moment: to the Young Person Who Complained About Her Job/Pay at Yelp and Was Promptly Fired

Many young people are stuck in the purgatory of minimum wage and/or part-time jobs: that raises the question: how do you get out of minimum-wage purgatory?

The conventional answer is, "get another college degree." Perhaps this once had some value, but this now yields rapidly diminishing returns due to supply and demand: everyone else seeking an escape from low-wage/part-time purgatory is pursuing the same strategy, so there is an oversupply of over-credentialed job seekers.

As I point out in my book on jobs and careers in the new economy, Get a Job, Build a Real Career and Defy a Bewildering Economy, issuing 500,000 MBAs does not automatically create jobs for all those graduates: credentials don't create jobs.

What creates jobs are opportunities to earn high profits via developing profitable skills. Not all businesses are highly profitable; low-margin businesses don't make enough profit to pay high wages.

Take a high-skill person and put them in a low-margin setting such as fast-food prep (very fast-paced and hard work), and their labor can only generate a limited value for the employer.

Value and ...

Dow Turns Positive for 2016

The Dow Jones Industrial Average turned positive for the year and U.S. crude oil hit $40 a barrel Thursday, rebounding after a rough start to 2016.

U.S. Oil Prices Climb Above $40 a Barrel

U.S. oil prices climbed above $40 a barrel Thursday, as the dollar weakened after the Federal Reserve dialed down expectations for interest rate increases, and major oil producers signaled growing willingness to freeze output.

Dollar Falls Broadly After Fed's Caution Surprises

The dollar extended its retreat against both major peers and emerging-market currencies on Thursday, a day after the Federal Reserve took a surprisingly dim stance on the economy.

January 2016 JOLTS Job Openings Year-over-Year Growth Rate Improved

Written by Steven Hansen

The BLS Job Openings and Labor Turnover Survey (JOLTS) can be used as a predictor of future jobs growth, and the predictive elements show that the year-over-year growth rate of unadjusted private non-farm job openings improved from last month. The growth rate trends marginally improved in the 3 month averages, but the 2015 year-to-date averages continue to decline.

Europe Markets: European stocks close lower as jump in euro hits exporters

European stocks lose ground Thursday, with German shares hit by a jump in the euro against the U.S. dollar after the Federal Reserve's adopts a more dovish stance on monetary policy.

Market Snapshot: Dow turns positive for the year as oil climbs back above $40 a barrel

U.S. stocks turn higher as a rally in energy, materials and industrials sectors lifts the S&P 500 and Dow industrials.

London Markets: FTSE 100 ends higher as miners score post-Fed gains

U.K. equities close higher Thursday, helped by a Federal Reserve-fueled drop for the dollar that boosted commodities-related stocks.

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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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