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06Jul2016 Market Update: US Markets Up Fractionally, Session Highs Not Expected To Hold, Crude Prices Climbing, Short-Term Indicators Neutral

Written by Gary

The S&P 500 and the Dow climbed up from session lows in late morning trade today as robust economic data and recovering oil prices helped alleviate investor concerns about a global economic slowdown. Britain's pound sank below $1.30 for the first time in more than three decades and U.S. Treasury yields again hit historic lows.


Here is the current market situation from CNN Money

North and South American markets are mixed. The S&P 500 is higher by 0.20%, while the IPC is leading the Bovespa lower. They are down 1.28% and 0.78% respectively.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 65%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 68%
Investors Intelligence sets the breath Above 50 bullish 53.9%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. +12.39
StockChart.com NYSE % of stocks above 200 DMA Index ($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 $OEXA200R rises above 65%
Secondary Bullish Indicators:
a) RSI is POSITIVE (above 50)
b) Slow STO is POSITIVE (black line above red line)
c) MACD is POSITIVE (black line above red line)
65%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 57.31%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 53.60%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value

13.87

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 78.66
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,408

What Is Moving the Markets

Here are the headlines moving the markets.

Wall Street pares losses on strong data, oil recovery

(Reuters) - The S&P 500 and the Dow pared losses in late morning trade on Wednesday as robust economic data and recovering oil prices helped alleviate investor concerns about a global economic slowdown.

Global stocks slump, safe-haven assets soar as Brexit risk weighs

NEW YORK (Reuters) - Fears of instability in the European Union and prolonged global stagnation sent stock markets sharply lower on Wednesday as Britain's pound sank below $1.30 for the first time in more than three decades and U.S. Treasury yields again hit historic lows.

U.S. services sector data underscores strong economic fundamentals

WASHINGTON (Reuters) - U.S. services industry activity hit a seven-month high in June as new orders surged and companies hired more workers, suggesting the economy regained speed in the second quarter.

Gross says $10 tln of zero, negative-yield bonds drag global GDP

NEW YORK (Reuters) - Noted bond investor Bill Gross of Janus Capital Group Inc said Wednesday that with yields at near zero and negative on $10 trillion of global government credit, the contribution of money velocity to GDP growth is coming to an end and may even be creating negative growth.

Tesla told regulators about Autopilot crash nine days after accident

SAN FRANCISCO/DETROIT (Reuters) - Tesla Motors alerted regulators to a fatality in one of its electric cars in partial self-driving Autopilot mode nine days after it crashed, the company said on Tuesday, defending its decision not to make the accident public before a federal investigation was announced.

France overtakes Britain as world's No. 5 economy after pound drops

PARIS (Reuters) - France and Britain were vying for fifth place on the list of the world's biggest economies on Wednesday, with France nudging ahead after a renewed slump in the pound in the wake of the Brexit vote, Reuters calculations showed.

Amazon UK says no Brexit hit to sales so far

LONDON (Reuters) - Online retailer Amazon has not seen a dip in sales at its British business in the days after the country voted to leave the European Union, its UK boss said on Wednesday.

EU finance ministers to oppose U.S.-led reform of global bank rules: document

BRUSSELS (Reuters) - European Union finance ministers will issue a statement at their meeting next week urging bank regulators to avoid imposing a disproportionate increase of costs on European banks, draft conclusions of the meeting said.

In up-to-$10 billion IPO, China's PSBC eyes ticket to online financial services boom

HONG KONG (Reuters) - As part of plans for an up-to-$10 billion initial public offering, Postal Savings Bank of China (PSBC) aims to transform itself from a brick-and-mortar lender into a digital player, helped by its investors Ant Financial and Tencent Holdings.

Italy Bans Short-Selling In Monte Paschi For Three Months, Forgets To Ban Buying Of CDS

Yesterday we got the first sure sign that Italy's banking system is near collapse when in a flashback to the Greek financial crisis days of 2010-2011, Italy's bank regulator banned short selling in Monte Paschi shares for the day. Today, we can conclude that the Italian bank crisis is set to get far worse, because moments ago, Italy's banking regulator just announced that what was supposed to be just a temporary measure has been extended for the next three months and shorting in BMPS shares is now prohibited until October 5.

Consob bans for three months net short positions on Banca MPS shares - The prohibition shall apply from tomorrow 7 July 2016 until 5 October 2016 - It affects derivatives and market makers as well

Consob, with Resolution 19655 of 6 July 2016, decided to temporary prohibit net short positions on Banca Monte dei Paschi di Sienashares - BMPS (ISIN code IT0005092165).

The ban will be enforce for the next three months, from tomorrow 7 July 2016 (start of day) until 5 October 2016 (end of day).

The prohibition on net short positions strengthens and extends the ban to short selling adopted yesterday, as the new prohibition bans both short selling on BMPS shares and short positions taken though single stock derivatives on BMPS shares.

The ban applies to all transactions, irrespective of where they have been carried out (on an Italian or foreign trading venue or over-the-counter) and it affects market makers as well.

The ban does not apply to transactions in index-related instruments (e.g. FTSEMIB), taking into account the marginal weight of BMPS shares in financial indices.

The prohibition has been ado ...

And The Biggest Loser From The UK's "Falling Dominoes" Is...

Now that not just 3 (as of last night) but 5 UK property funds, with Henderson and Columbia Threadneedle became the latest two entrants to this exclusive club of clueless asset managers who have no idea how to factor in liquidity mismatch during market stress, have "frozen" their assets and gated investors from accessing assets, concerned traders are wondering how far the downstream effects of this domino chain will go. Luckily, overnight analysts at Morgan Stanley, JPM and SocGen did the math and found what they believe is (are) the most impacted bank(s) from UK's commercial real estate troubles.

Here is the verdict, first from SocGen:


RBS exposure to CRE is GBP26b, most of U.K.'s major banks, and equivalent to 63% of tangible equity

Lloyds 2nd most exposed at 46% of tangible equity, Santander 3rd at 24%, Barclays 4th at 23% and HSBC 5th at 17%

U.K. banks debt financing of CRE is down 34% since 2008 to GBP168b, according to De Montfort University

Says watch out for other banks, challenger banks have relatively high proportion of more highly leveraged CREs on books

Lloyds is most preferred, will be able to absorb Brexit bumps; RBS is least preferred

Next, from JPM:


RBS, Lloyds and Bank of Ireland are more exposed to risks from U.K. commercial property prices than Barclays, HSBC and Standard Chartered

RBS, Lloyds TNAV sensitivity in stress scenario may be up to 5.5% with CT1 sensitivity at 90bps-100bps

Major U.K. banks' exposure is GBP69b

Is "cautious" on U.K. domestic-exposed banks

U.K. lenders exposure is GBP86b down from GBP150b in 2011

Flags BOE remarks that U.K. challenger banks have high proportion of more highly leveraged commercial real estate loans

Says BOE research shows 10% drop in U.K. CRE prices leads to 1% drop in economy-wi ...

Bonds Are Telling You That There Is Too Much Cheap Money Sloshing Around Markets (Video)

By EconMatters

Focus on Bond Prices, and forget about Bond Yields, nobody is trading or investing in the Bond Market since Helicopter Money by Central Banks hit financial markets in 2008 because they are searching for Yield. It is all about Price Appreciation at the Zero Bound of Monetary Policy.

EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest |

A Trigger to Revisit Bigger Global Worries

After the Brexit vote, the pound has dropped below $1.30, bond markets are going ballistic and risk appetite is taking a drubbing. But apart from the pound, is this really about the U.K.'s exit from the European Union?

Low-Yield Blues? Corporate Bonds Are the Last Ones Paying

With bond yields around the world falling further in the wake of Brexit, U.S. corporate bonds are the only game left in town.

A Mobile Merger Without Market Consolidation

CK Hutchison and VimpelCom have resorted to a pact with French price warrior Iliad to secure regulatory support for their Italian mobile merger

Futures Movers: Oil turns higher as traders bet on a decline in crude supplies

Oil futures turn higher as support from some weakness in the U.S. dollar and expectations for a seventh-straight weekly decline in U.S. crude inventories offset pressure from a potential slowdown in fuel demand.

The Fed: Kashkari too-big-to-fail push seen as sideline chat by leading Fed regulator

Fed Gov. Daniel Tarullo said Wednesday that he welcomed a review of whether too-big-to-fail has ended being conducted by Minneapolis Fed President Neel Kashkari.

Capitol Report: Gingrich, Kaine seen by betting markets as likely vice-presidential picks

Former House Speaker Newt Gingrich and Virginia Sen. Tim Kaine are seen by betting markets as the likely vice-presidential nominees for Donald Trump and Hillary Clinton, respectively.

Earnings Summary for Today

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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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