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17May2016 Pre-Market Commentary: US Futures Sliding Further Into Negative Territory, Crude Prices Rising, Soros Buying More Gold, Short-Term Indicators Neutral

Written by Gary

US stock future indexes are down fractionally in what looks to be a consolidation period. WTI crude peaked at 48.40 earlier this morning with the spread between prices for near-term delivery and future delivery narrowing, suggesting the worst of the supply glut may be over. The markets are expected to open lower, but may not remain in the red for long.

Here is the current market situation from CNN Money

European markets are mixed. The FTSE 100 is higher by 0.29%, while the DAX is leading the CAC 40 lower. They are down 0.43% and 0.03% respectively.


The June NASDAQ 100 was higher overnight but struggling for direction due to a faded rally in oil prices as investors await key inflation data. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices are possible near-term. Closes above the 20-day moving average crossing at 4384.77 are needed to confirm that a short-term low has been posted.

If June renews the decline off April's high, the 50% retracement level of the February-April-rally crossing at 4227.72 is the next downside target. First resistance is the 20-day moving average crossing at 4384.77. Second resistance is the reaction high crossing at 4489.75. First support is the reaction low crossing at 4271.00. Second support is the 50% retracement level of the February-April-rally crossing at 4227.72.

The June S&P 500 was slightly higher overnight as it extends the trading range of the past two-weeks. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices are possible near-term. Closes above last Tuesday's high crossing at 2079.80 are needed to confirm that a low has been posted.

If June renews the decline off April's high, the reaction low crossing at 2027.00 is the next downside target. First resistance is last Tuesday's high crossing at 2079.80. Second resistance is April's high crossing at 2105.00. First support is the reaction low crossing at 2027.00. Second support is the 38% retracement level of the February-April-rally crossing at 1993.13.

What Is Moving the Markets

Here are the headlines moving the markets.

Oil rally suggests supply worries wane, but for how long?

(Reuters) - A rally in U.S. crude oil prices recently has put the market on its firmest footing since the rout started in 2014, with the spread between prices for near-term delivery and future delivery narrowing, suggesting the worst of the supply glut may be over.

Futures slightly lower after oil rally takes a breather

(Reuters) - U.S. stock index futures were slightly lower on Tuesday as oil prices steadied after touching a six-month high.

Sumner Redstone has power to remove Viacom CEO from his trust

(Reuters) - Sumner Redstone has the power to remove Viacom Inc Chief Executive Philippe Dauman, but not his daughter Shari, from the trust that will control his $40 billion media empire after his incapacitation or death, according to two sources familiar with the matter.

Oil near six-month high as outages support

LONDON (Reuters) - Oil traded at around $49 a barrel on Tuesday within sight of a six-month high, supported by supply outages in Nigeria, Canada and other producers that are eroding a persistent glut.

Sucked into deflation again - Japan's $2 cup noodle binge is sign of the times

TOKYO (Reuters) - Japanese consumers can't get enough of cup noodles, with spending on them surging by more than a quarter over the past year. That sounds like good news, but for a country still struggling to escape deflation it's a worrying signal.

As Brexit vote looms, U.S. banks review their European commitments

LONDON (Reuters) - If Britain votes to leave the European Union in June, some U.S. banks could give up parts of their business in the bloc altogether.

China's Geely cars think big with Volvo makeover

GOTHENBURG, Sweden (Reuters) - The Briton who smoothed out Volvo's boxy lines and put signature radiator grilles on Lincolns for Ford is aiming to give China's Geely range global appeal by ditching its utilitarian image.

Saudi Arabia aims to salvage white elephant financial district

RIYADH (Reuters) - The plan to build a financial district from scratch was viewed by Saudi Arabia's neighbors as among the glossiest excesses of the kingdom's oil boom profligacy: a white elephant in the making, unlikely to attract tenants and possibly never even to be completed.

British bank competition plan falls short of challenger hopes

LONDON (Reuters) - Long-awaited measures to break the market dominance of Britain's biggest banks, including a cap on fees for unauthorized overdrafts, were criticized on Tuesday by consumer groups as insufficient to boost competition.

Why The Gold And Silver Futures Market Is Like A Rigged Casino

Submitted by Clint Siegner via Money Metals Exchange,

A respectable number of Americans hold investments in gold and silver in one form or another. Some hold physical bullion, while others opt for indirect ownership via ETFs or other instruments. A very small minority speculate via the futures markets. But we frequently report on the futures markets - why exactly is that?

Because that is where prices are set. The mint certificates, the ETFs, and the coins in an investor's safe - all of them - are valued, at least in large part, based on the most recent trade in the nearest delivery month on a futures exchange such as the COMEX. These "spot" prices are the ones scrolling across the bottom of your CNBC screen.

That makes the futures markets a tiny tail wagging a much larger dog.

Too bad. A more corruptible and lopsided mechanism for price discovery has never been devised. The price reported on TV has less to do with physical supply and demand fundamentals and more to do with lining the pockets of the bullion banks, including JPMorgan Chase.

Craig Hemke of explained in a recent post how the bullion banks fleece futures traders. He contrasted buying a futures contract with something more investors will be more familiar with - buying a stock. The number of shares is limited. When an investor buys shares in Coca-Cola company, they must be paired with another investor who owns actual shares and wants to sell at the prevailing price. That's straight forward price discovery.

Not so in a futures market such as the COMEX. If an investor buys contracts for gold, they won't be paired with anyone de ...

What The Biggest Hedge Funds Did In Q1: The Full 13-F Summary

While far less attention is being paid to hedge fund 13F filings, which show a stale representation of equity long stakes among the hedge fund community as of 45 days prior, than in years gone by as a result of increasingly poor performance by the 2 and 20 crowd, they still remain closely watched source of investment ideas but mostly to find out what the new cluster ideas and hedge fund hotel stocks are at any given moment so they can be faded.

Courtesy of a Bloombert compilation, here are some highlights from the latest round of 13F filings.


What used to be one of the industry's most popular holdings has fallen out of favor with just about every major hedge fund holder save Pershing Square Capital Management's William Ackman. Brahman Capital, which had invested in Valeant for at least 2010, exited the 8.12 million shares it held at the end of 2015 during the first quarter. The New York firm was joined by a who's who of hedge fund giants: Andreas Halvorsen's Viking Global Investors, Stephen Mandel's Lone Pine Capital, Philippe Laffont's Coatue Management and Barry Rosenstein's Jana Partners all sold off the former high-flier, which has plunged about 90 percent from its peak last August.


The merger-arb blow up of the year has claimed its set of scalps, however the company's failed acquisition by Pfizer took place after the end of Q1, which is why all those who loaded up in the first quarter are now nursing big losses on their failed M&A bets. Among them are Lone Pine and Seth Klarman's Baupost Group who bought into Allergan Plc during the first quarter, establishing stakes shortly before Pfizer Inc. decided in April to terminate a $160 billion deal to combine with the Dublin-domiciled company as the U.S. cracks down on corporate inversions. Pentwater Capital Management, Arrowgrass Capital Partners and Eton Park Capital Management also ...

Frontrunning: May 17

As Brexit vote looms, U.S. banks review their European commitments (Reuters)

Oil's Strength Continues to Boost Global Stocks (WSJ)

Trump closing gap with Clinton, poll shows (Hill)

In Adjacent Pennsylvania Counties, Republicans Are Split on Donald Trump (WSJ)

Make America Gold Again: Calls for Everyone's Favorite Standard Are Back (BBG)

SEC, Treasury Push for Centralized Reporting of Treasurys Trades (WSJ)

Venezuela protesters fear Maduro will cling on at all costs (FT)

Alphabet Unveils Program for Carpooling Via App Waze, Fraying Ties With Uber (WSJ)

EU's Tusk calls Brexit advocate Boris Johnson's Hitler comments 'absurd' (Reuters)

Placid VIX Tells Little of Volatility Story as Futures Take Off (BBG)

Greece wants Eurogroup to focus on short-term, medium term debt relief on May 24 (

Soros Makes Gold His Largest Holding As He Cuts Equity Exposure To Lowest Since 2013, Doubles S&P Puts

One of the more closely watched 13F reports yesterday in addition to that of Warren Buffett was that of Soros Fund Management, the family office of George Soros, which revealed that while the 85 year old billionaire was not quite as bearish as his former chief strategist Stanley Druckenmiller, or Carl Icahn for that matter, had turned decidedly sour on overall equity exposure.

As shown in his 13F, Soros slashed his overall long equity holdings by over 25% to just $4.5 billion as of March 31, which was the lowest such position since 2013.

As previously discussed, Soros has warned of risks stemming from China's economy, arguing its debt-fueled economy resembles the U.S. in 2007-08, before credit markets seized up and spurred a global recession. In January, the former hedge fund manager said a hard landing in China was œpractically unavoidable, adding that such a slump would worsen global deflationary pressures, drag down stocks and boost U.S. government bonds.

Perhaps that is also why in addition to slashing his bullish bets, Soros also more than doubled his SPY puts to 2.1 million shares, or a value of $431MM, up from $205MM the previous quarter.

But more notably was Soros' significant return to gold, after he acquired 1.7% of Barrick, making it the firm's biggest U.S.-listed holding. This marks a prominent return to gold for Soros, who dissolving his stake in Barrick in the third quarter of last year.

Soros also disclosed owning call options on 1.05 million shares in the SPDR Gold Trust, an exchange-traded fund that tracks the price of gold. It was unclear if Soros has been influenced by Druckenmiller who earlier this month at the ...

Biotech M&A: Pfizer Bets on Growth

Pfizer's purchase of Anacor shows the biotech M&A window is still open.

Credit Suisse Takes Out Insurance on Itself

The Swiss bank has come up with a novel bond to protect itself against its own failings, but equity still looks cheaper.

The Bond Boom: Don't Buy Everything Companies Are Selling

Borrowers have the upper hand in Europe's corporate bond market; investors should take care.

April 2016 CPI: Inflation Little Changed

by Doug Short and Steven Hansen

According to the BLS, the Consumer Price Index (CPI-U) year-over-year inflation rate was 1.1 % - an increase from last month's 0.9 %. The year-over-year core inflation (excludes energy and food) rate declined 0.1% to 2.1 %, and remains slightly above the target set by the Federal Reserve.

Economic Report: U.S. consumer prices jump 0.4% in April

The price Americans pay for goods and services jump 0.4% in April - the biggest gain in more than three years - on the higher cost of gas, food, rent and medical care, the government said Tuesday.

U.S. housing starts climb 6.6% in April

Construction on new houses rebounded in April after a sharp dip in March, as housing starts climbed 6.6% to a 1.17 million annual pace.

Jeff Reeves's Strength in Numbers: The revolution investors have been fighting for is here

Low-cost mutual funds and ETFs give you the best shot at stock-market outperformance, writes Jeff Reeves.

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