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05Apr2016 Market Update: Rally Appears To Be Ending, US Trade Deficit Widened, WTI Crude Actively Testing $35 Support, US Dollar Volatile In Afternoon Trading

Written by Gary

US markets opened lower this morning and have sea-sawed in a downward trend after a brief rise around 10 am as investors fretted over renewed uncertainties about the Federal Reserve's plan to raise interest rates this year.

The U.S. trade deficit widened in February as a rebound in exports was offset by an increase in imports, the latest indication that economic growth weakened further.


Here is the current market situation from CNN Money

North and South American markets are mixed. The Bovespa is higher by 1.55%, while the S&P 500 is leading the IPC lower. They are down 0.76% and 0.55% respectively.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 75%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 69%
Investors Intelligence sets the breath Above 50 bullish 57.2%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -17.81
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 52.17%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 64.29%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 78.00%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value

17.22

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 78.23
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,069

What Is Moving the Markets

Here are the headlines moving the markets.

Icelandic leader resigns over Panama Papers revelations on wife's holdings

LONDON/REYKJAVIK (Reuters) - Iceland's Prime Minister Sigmundur David Gunnlaugsson is to step down after leaked documents from a Panamanian law firm showed his wife owned an offshore company with big claims on collapsed Icelandic banks, his party said.

France's Royal offers nuclear plant site for Tesla factory

PARIS (Reuters) - French Energy Minister Segolene Royal has suggested to Tesla founder Elon Musk that he builds an electric car factory on the site of France's oldest nuclear reactor after it closes at the end of the year, AFP reported on Tuesday.

U.S., Volkswagen may not reach emissions deal by April 21: gov't official

WASHINGTON (Reuters) - The top U.S. environmental official expressed uncertainty on Tuesday about whether the Obama administration and Volkswagen AG will meet an April 21 court deadline to come up with a plan to address excess emissions from 580,000 diesel vehicles sold in the country.

Wall Street lower as rate-hike outlook remains hazy

(Reuters) - Wall Street was lower on Tuesday as investors fretted over renewed uncertainties about the Federal Reserve's plan to raise interest rates this year.

Twitter to stream Thursday night NFL games in 2016 season

(Reuters) - The National Football League said it had chosen Twitter as its exclusive global partner for streaming its Thursday night games during the 2016 regular season.

U.S. Treasury rules put Pfizer-Allergan deal in question

NEW YORK (Reuters) - The U.S. Treasury Department's proposed new tax regulations threw a series of proposed mergers into question, including Pfizer Inc's $160 billion agreement to buy Allergan Plc, pushing shares of Allergan and other targets lower.

U.S. trade data points to weak first-quarter growth

WASHINGTON (Reuters) - The U.S. trade deficit widened more than expected in February as a rebound in exports was offset by an increase in imports, the latest indication that economic growth weakened further in the first quarter.

Oil glut up close: How Cushing copes with full crude tanks

CUSHING, OK (Reuters) - From the air above this small Oklahoma town, the 300 steel oil storage tanks that dot the landscape appear filled to the brim, their floating lids bobbing atop more than 65 millions of barrels of oil.

Starboard's Jeff Smith resigns as Darden chairman

(Reuters) - Olive Garden owner Darden Restaurants Inc's chairman, Jeffrey Smith, head of Starboard Value LP, has resigned 18 months after engineering the ouster of the company's board.

Remember, the Sharpest Rallies Occur During BEAR Markets.

Looks like this rally has ended.

The S&P 500 has run into the downward sloping trnedline set by the 2015 top. It has since rolled over. We're likely heading down in a big way.

Investors forget, the sharpest, most aggressive rallies occur during bear markets. This is because bear market rallies are driven by short-covering: those investors who went short are forced to "cover" or buy back shares they have sold previously.

Consider the Tech Bubble.

Once the top was in, stocks stage SIX separate rallies ranging in size from 15% to 27%. And ALL of these massive moves took place in roughly than one year's time.

That's six double-digit rallies, some of which lasted as long as two months... but all of which ended in stocks making new lows.

Virtually the same thing happened after the 2007 top, with stocks staging four significant rallies ranging from 7% to 12.5% as they ground their way lower going into the Crash.

Even after the Crash hit, we had a monster 25% rally that lasted two months!

My point with all of this is that sharp rallies occur during bear markets after major market peaks are formed. I suspect this latest rally will prove to be yet another example as stocks roll over and head to new lows.

Is Market Breadth Beginning To Sour?

Via Dana Lyons' Tumblr,

Despite positive action in the major averages, market breadth has very recently begun to lag.

One of the hallmarks of the post-February stock market rally has been the superb breadth. That stood in stark contrast to the internal deterioration that had been in effect since about a year ago. This recent strong breadth dynamic has finally shown signs of potentially waning, however. One of the first signs we noticed was the new 7-year low in the ratio of micro-caps to large caps about a week ago. And we saw another piece of evidence pointing to breadth potentially starting to lag again last Friday, April 1.

The major averages scored new rally highs yet again on Friday as the Dow Jones Industrial Average gained 100 points, the Nasdaq 100 was up 1% and the S&P 500 was higher by almost 2/3 of a percent. Despite that appearance of strength, in what was seemingly an April Fool's joke, NYSE breadth was actually negative on the day (i.e., there were more declining issues than advancing issues). Now it is only one day so we wouldn't make too much of it unless it becomes a larger trend. Furthermore, it was the first day of the month and quarter so there may have been some seasonal structural forces at work as well. However, it was unusual to see negative breadth on such a seemingly positive day in the market.

For example, in the past 50 years, it was only the 24th day that the S&P 500 gained at least 0.6% when within 3% of a 52-week high - and yet NYSE breadth was negative.

image

&n ...

Allergan's Inversion Problem: There Is a Plan B

New tax rules have Allergan shares reeling, but investors don't have to be permanently disappointed.

The New HP Way: How Thin, Pricey Laptops Compute

Stylish premium laptops are a bright spot in sluggish PC market.

February 2016 JOLTS Job Openings Year-over-Year Growth Rate Declined

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 declined from last month. The growth rate trends marginally decelerated in the 3 month averages.

Deep Dive: 10 companies bucking the depressing profit-margin trend

There are some alarming signs for corporate profits, but these companies are improving their margins while growing sales.

Deep Dive: 10 U.S. companies that have thrown away money on buybacks

Investors need to understand why companies are repurchasing shares, writes Phil van Doorn.

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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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