US markets closed down SPY -0.9%, DOW down 217 points (-1.2%) and the decline may extend into tomorrow's trading as short-term indicators have turned bearish. WTI crude trading pit settled at 46.06 and indicators suggest crude may rise at least another point with Brent up more than 4 percent for a second day in a row.
(Reuters) - Macy's Inc reported a much bigger-than-expected drop in quarterly sales and slashed its full-year forecast, underscoring U.S. department stores' uphill struggle against slumping demand for apparel.
BRUSSELS (Reuters) - The European Union's competition regulator blocked on Wednesday CK Hutchison Holdings' plan to become Britain's biggest mobile telecoms network operator, in a decision which also cast doubts on whether it can still win approval for another deal in Italy.
WASHINGTON (Reuters) - Public sector corruption siphons $1.5 trillion to $2 trillion annually from the global economy in bribes and costs far more in stunted economic growth, lost tax revenues and sustained poverty, the International Monetary Fund said on Wednesday.
NEW YORK (Reuters) - Oil jumped on Wednesday, with Brent up more than 4 percent for a second day in a row, after the U.S. government unexpectedly said crude inventories fell the first time since March, adding to concerns over supply outages in Canada and Nigeria.
Oil stocks are at a seemingly "must-hold" level within their long-term reversal attempt.
If there is one sector that best symbolizes the prospects of the post-February stock market rally, it is energy. It isn't that energy stocks have been the only area performing well in this rally. To the contrary, we have pointed out on numerous occasions the evidence of strong breadth within the rally. As such, many segments of the market have been working, from longer-term relative strength leaders that continue to score new all-time highs to those beaten up sectors exhibiting momentous mean-reversion bounces. Oil stocks would fall into that latter category, of course. The question now is, will the bounce in oil stocks only be a mean-reverting move - or the start of a longer-term, more meaningful rally? One key index may be undergoing a test right now that could go a long way toward answering that question.
The index is the NYSE Oil & Gas Index, or XOI. We have mentioned the XOI several times in recent months as oil stocks have indeed been in the spotlight. Our main focus in those posts, including this April 13 piece most recently, has been on the lifetime (post-1986) Up trendline in the XOI, and its significance in delineating bullish prospects from bearish ones among oil stocks. This trendline is our "line in the sand", as we called it, in determining the well-being of the XOI. And after dropping below the trendline in January for the first time in 30 years, the index was able to reclaim the line as we mentioned in the April post.
In the past 2 weeks, oil stocks have been hit hard, though. And over t ...
Over the past two weeks we observed two curious, vol-related phenomena.
First, it was Tom DeMark cautioning that even as stocks have surged, the amount of VXX shares outstanding has soared to record highs, a seemingly contradictory confluence of events because it suggested that investors, traditionally "going with the market flow", are betting on a major vol reversal and furthermore the move contradicts historical shifts in VXX holdings at times of extreme market upside.
Second, just days later, Goldman confirmed as much when looking at overall market volatility, admitted that "our view that the VIX may remain low in the near term is at odds with the VIX ETP market, as investors seem to be pouring money into levered long VIX ETPs." Goldman's derivatives team also wrote that "while long ETP exposure has been growing, the appetite for inverse VIX ETPs, which benefit from declines in volatility such as the XIV and SVXY, has been muted, with vega exposure remaining range-bound in recent weeks. That's surprising, since the benchmark index which these underliers track (SPVXSPI) is up 73% since the market low on February 11 and investors often follow performance!"
Goldman's punchline: "Vega exposure on longs has tripled since February 11: The total amount of vega exposure across four popular long VIX ETPs (VXX, VIXY, UVXY, TVIX) has tripled since February 11 and recently stood at ~290 million, a record high."
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