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29Jun2016 Market Update: Wall Street Remains In Rally Mode, WTI Crude Continues To Climb, Watch Out For SP500 Reaching 2100 - Reversal?

Written by Gary

US markets melting higher, volume falling off, WTI crude falls short of $50 as it continues to climb and the USD remains down in the high 95's. U.S. consumer spending rose for a second straight month in May, but there are fears Britain's vote to leave the EU could hurt confidence and prompt households to cut back on consumption.

Here is the current market situation from CNN Money

North and South American markets are sharply higher today with shares in Brazil leading the region. The Bovespa is up 2.13% while Mexico's IPC is up 1.75% and U.S.'s S&P 500 is up 1.56%.

Traders Corner - Health of the Market

Index Description Current Value Members Sentiment: % Bullish (the balance is Bearish) 47%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 47%
Investors Intelligence sets the breath Above 50 bullish 51.7% Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -13.58 NYSE % of stocks above 200 DMA Index ($OEXA200R) $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%. Following a major market correction, the conditions for safe re-entry are when:
a) Daily $OEXA200R rises above 65%
Secondary Bullish Indicators:
a) RSI is POSITIVE (above 50)
b) Slow STO is POSITIVE (black line above red line)
c) MACD is POSITIVE (black line above red line)
56.00% NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 55.43% S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 50.00% 10 Year Treasury Note Yield Index ($TNX) ten year note index value

14.61 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 76.26 NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,161

What Is Moving the Markets

Here are the headlines moving the markets.

Wall Street cuts some Brexit losses as jitters ease

(Reuters) - Wall Street was sharply higher on Wednesday, with the three major indexes recovering about half the losses suffered in the aftermath of Britain's shock vote to leave the European Union.

U.S. consumer spending rises, Brexit casts shadow on outlook

WASHINGTON (Reuters) - U.S. consumer spending rose for a second straight month in May on increased demand for automobiles and other goods, but there are fears Britain's vote to leave the European Union could hurt confidence and prompt households to cut back on consumption.

Toyota recalls 3.37 million cars over airbag, emissions control issues

WASHINGTON/TOKYO (Reuters) - Toyota Motor Corp has recalled 3.37 million cars worldwide over possible defects involving airbags and emissions control units.

EU commissioner urges Volkswagen to compensate drivers for diesel scandal

BRUSSELS/BERLIN (Reuters) - Europe's Industry Commissioner Elzbieta Bienkowska has called on Volkswagen to also compensate European drivers after the company agreed to pay out up to $15.3 billion in the United States to settle claims over the diesel emissions scandal.

GE's finance unit sheds its 'too big to fail' designation

(Reuters) - General Electric Co.'s slimmed down financing arm shed its "too big to fail" designation on Wednesday, no longer deemed by the U.S. government "systemically important" and so liable to wreck the economy in the event it runs into distress.

North American leaders vow to boost trade despite threats

OTTAWA (Reuters) - Canada, the United States and Mexico on Wednesday vowed to deepen their economic ties, pushing back against anti-free-trade sentiment that has shifted political debate in the United States and Europe.

IKEA recalls 36 million chests and dressers after six deaths

WASHINGTON (Reuters) - Swedish furniture company IKEA Group [IKEA.UL] is recalling almost 36 million chests and dressers in the United States and Canada but said the products linked to the deaths of six children are safe when anchored to walls as instructed.

Investors use Viacom battle to campaign against special voting stock

NEW YORK (Reuters) - Investor groups are using the high-profile battle for control of Viacom Inc to rally support for their campaigns against dual-class share structures which give founders and insiders outsized voting rights.

Monsanto in talks with Bayer, others about 'strategic options'

CHICAGO (Reuters) - Monsanto Co is in talks with Bayer AG and other companies regarding "alternative strategic options," a month after it rejected the German company's $62-billion takeover offer, the U.S. seed producer said on Wednesday.

The Algos Are Winning Again (In Trading The Brexit Chaos)

As we warned heading into the Brexit vote, it appeared that many human investors had quite a bit of misplaced confidence in the Remain vote, and it ultimately turned out that we were right. It also turns out that the algos have traded the event better than humans as well.

Despite the polls indicating a Remain vote heading into Brexit, which led many investors to bet on what could perhaps be considered a preferred outcome, algos weren't reflecting that "projection bias" and continued to signal buy in more risk-off assets such as the yen, gold and government bonds the WSJ reports.

Yves Balcer, co-founder of Fort LP, a model-driven investment firm with about $2 billion in AUM, expected Britain to vote for remaining in the EU, however Balcer's trading model was just focused on the global economic environment, and thus the firm continued to buy assets such as the yen and government bonds which ultimately benefited from the Brexit vote. "We didn't change anything ahead of Brexit" Balcer said. As a result, both of the firm's portfolios were up more than 3% on Friday.

Equity hedge funds fell 2.1% on Friday alone according to data from Chicago-based Hedge Fund Research, and the losers generally appear to be funds too heavily weighted toward cyclical stocks such as airlines or financials.

One macro fund run by H20 Asset Management was hammered on Friday, losing 14.4% according to Bloomberg.

As a reminder of what happened following Brexit to those who were positi ...

Brexit, A Step In The Right Direction: The Optimistic View

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Brexit can be constructively viewed as a systemic step towards solving existing scarcities.

In the conventional narrative, Brexit is about immigration, escaping the EU's bureaucrats of Brussels, class war or political theater. It may be about all of these, but beneath these surface issues lies a deeper dynamic: a recognition that the entire system is broken and a new arrangement of power, responsibility and risk is required.

In this view, Brexit is a positive step in the right direction, away from centralization and central planning and towards decentralized arrangements that enable more dynamic, localized solutions.

Longtime readers know that I focus on scarcity as the source of value creation: what's scarce generates value, profits and high wages, and what's abundant declines in value due to supply and demand.

Correspondent Ron G. views Brexit as a systemic step towards solving existing scarcities. Scarcity is not limited to goods and services; agency and autonomy can be scarce; responsibility that connects risk and return can be scarce; level playing fields can be scarce; rule of law can be scarce; opportunity can be scarce; entrepreneurial drive can be scarce; self-reliance can be scarce; social innovation can be scarce; social capital can be scarce, and the willingness to accept losses and the risks required to change the power structure can be scarce.

Political expediency can be over-abundant, as can protected privilege.

Ron submitted this photo and commentary on Brexit and scarcity:

Here are Ron's comme ...

Brexit Portfolio Strategy Analysis & Why ETFs Suck (Video)

By EconMatters

We delve into Portfolio Strategy and the lesson of not panicking right after an event that wasn`t priced into financial markets. Unfortunately, Karen Finerman of New York-based hedge fund Metropolitan Capital Advisors panicked in my opinion after the initial first blush reaction to the Brexit event.

It may very well work out for her in the long term, but it was definitely a portfolio mistake that cost her fund money in the short term. She could always rebalance her portfolio once the dust settled a bit, but she sold her assets at a bad price just on a weekly basis, and the market was more than happy to take advantage of her selling at the bottom on a weekly basis. In summation, make sure you don`t out think yourself, or get "Fancy Play Syndrome" which is a poker analogy of trying to get too cute with a strategic play.

Furthermore, the ETF industry takes advantage of market incompetence by fund managers who lack the ability to properly stock pick assets in this portfolio class. All ETFs are complete garbage in my opinion, and Fund Mangers need to stop relying on ...

Another Attempt To Explain The Volumeless Rally, Now From JPM: "A Function Of Disbelief And Skepticism"

While the bulk of JPM's intraday commentary is largely an attempt to explain today's latest low volume ramp...

... whose lack of participation JPM believes is "a function of disbelief/skepticism", Adam Crisafulli does bring up an interesting point: with earnings around the corner, and Wall Street once again overly optimistic about the Q2 to Q3 earnings improvement, will Brexit be the catalyst used by corporations to blame the earnings recession extending from 5 quarters (through the second quarter), into Q3 or further.

First, here is Crisafulli on today's sector trends:

Trading trends are pretty slow and that is a function of disbelief/skepticism in the recent rebound (there is a lot of doubt that the SPX will wind up getting off this easy from the referendum and thus people are reluctant to chase). The underlying price action is a pretty-standard risk-on move but a few items are standing out. Banks are outperforming but would prob. be doing a lot better if yields were higher. Tech, health care, industrials, and materials are all up ~1.5-1.7%+ (outpacing by a mild amount). Nothing is dramatically outperforming w/the exception of larger money center banks, internets, energy and transports (up ~2% each). Note that safe-haven assets aren't weak - gold is up, TSYs are flat-to-up, and the safe haven groups are doing OK (staples, REITs, utilities, and telecoms are all lagging but not by that much).

And here is part about the how Brexit is about to be scapegoated to justify another round of "small misses"

Who's Risky Now? A Brexit Boost for Emerging Markets

Political risk only gets paid lip-service in developed markets. Emerging markets have an advantage here.

Volkswagen: From Dieselgate to Brexit

Investors desperate for financial clarity now have to factor in the impact of Britain's vote on the European car market

Micron's Recovery? It's in the Cards

Micron is poised for a comeback, but that won't happen in a flash.

May 2016 Pending Home Sales Index Declines

Written by Steven Hansen

The National Association of Realtors (NAR) seasonally adjusted pending home sales index declined. Our analysis of pending home sales is more positive than the NAR's, but we are forecasting relatively poor June home sales. The quote of the day from this NAR release:

... even if rates rise soon, sales have legs for further expansion this summer if housing supply increases enough to give buyers an adequate number of affordable choices during their search ...

The Tell: 5 keys to a trader's survival, in one handwritten note

While some surely made a killing in on the swings, others are undoubtedly wondering where it all went wrong. This is where Steve Burns comes in.

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