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25Jul2016 Market Update: US Markets Opened Flat, DOW Slid Triple Digits, Investors Hoping For Improving Corporate Earnings

Written by Gary

US stocks have slipped (SPY -0.4%) from their record levels yesterday as oil weighed on energy shares, (SPNY) fell 2 percent, and as investors awaited this week's Federal Reserve monetary policy meeting. Oil prices fell to two-and-a-half month lows amid worries that a global glut of crude and refined products would be a drag on markets for some time.


Here is the current market situation from CNN Money

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 76%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 84%
Investors Intelligence sets the breath Above 50 bullish 65%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. +17.01
StockChart.com NYSE % of stocks above 200 DMA Index ($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 $OEXA200R rises above 65%
Secondary Bullish Indicators:
a) RSI is POSITIVE (above 50)
b) Slow STO is POSITIVE (black line above red line)
c) MACD is POSITIVE (black line above red line)
84%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 69%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 74%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 15.73
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 81.68
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors

What Is Moving the Markets

Here are the headlines moving the markets.

Weak oil pulls Wall Street off record highs; Fed meet eyed

(Reuters) - U.S. stocks slipped from their record levels on Monday as oil weighed on energy shares and as investors awaited this week's Federal Reserve monetary policy meeting.

Verizon to buy Yahoo's core business for $4.8 billion in digital ad push

NEW YORK (Reuters) - Verizon Communications Inc said on Monday it would buy Yahoo Inc's core internet properties for $4.83 billion in cash, marking the end of the line for a storied Web pioneer and setting the stage for a big new internet push by the telecom giant.

Nintendo shares dive as company plays down Pokemon GO's earnings impact

TOKYO (Reuters) - Shares in Nintendo Co tumbled as much as 18 percent on Monday after the company said Pokemon GO would have a limited impact on its earnings - their biggest setback so far after a huge run-up on the smash-hit game.

EU working with consumer groups to pressure Volkswagen for compensation

BRUSSELS/BERLIN (Reuters) - Europe's Commissioner for Justice is working with EU consumer groups to pressure Volkswagen to compensate clients in Europe as it has in the United States over the diesel emissions scandal.

Buyout funds eye alliances for SABMiller's Pilsner, east Europe brands

LONDON/PRAGUE (Reuters) - U.S. and European buyout funds are gearing up for SABMiller's sale of its central and eastern European beer brands, with some seeking to join forces to snap up assets worth up to 7 billion euros ($7.7 billion), sources familiar with the matter said.

Fiat Chrysler review shows U.S. sales figures were inflated: report

DETROIT (Reuters) - An internal review begun at Fiat Chrysler Automobiles in 2015 found its U.S. sales figures were inflated, partly due to pressure to keep a year-over-year monthly sales streak alive, the Automotive News reported on Monday, citing two sources at the automaker.

Sprint says to be cash-flow positive next year, shares soar

(Reuters) - Sprint Corp reported better-than-expected first-quarter revenue as big discounts attracted more postpaid subscribers, and the No. 4 U.S. wireless carrier said it expected to be cash flow positive next fiscal year after breaking even this year.

Deutsche Bank must face U.S. lawsuit over subprime disclosures

NEW YORK (Reuters) - A U.S. judge on Monday said Deutsche Bank AG must face part of a lawsuit claiming it defrauded investors who bought $5.4 billion of preferred securities by concealing its exposure to the fast-deteriorating subprime mortgage market.

SunEdison unit TerraForm Power adopts poison pill

(Reuters) - SunEdison Inc's unit TerraForm Power Inc said it had adopted a shareholders rights plan to prevent any sale of a significant number of Class A shares in the company.

Subprime Snaps: Largest US Subprime Auto Lender Delays Earnings Due To "Accounting Matters"

We first introduced readers to Skopos Financial, a company which we dubbed "The new king of deep subprime" which we have long expected to become ground zero for the upcoming subprime auto crisis, and which is run by Santander Consumer USA veterans, last April.

This is what we said about the company that has become increasingly more prominent: "Skopos Financial, a four-year-old auto finance company based in Irving, Tex., sold a $149 million bond deal consisting of car loans made to borrowers considered so subprime you might call them—we dunno—sub-subprime?"

As Bloomberg noted at the time, the details from the prospectus showed a whopping 20 percent of the loans bundled into the bond deal were made to borrowers with a credit score ranging from 351 to 500—the bottom 6 percent of U.S. borrowers, according to FICO. As a reminder, the cut-off for "prime" borrowers is generally considered to be a credit score of around 620. More than 14 percent of the loans in the Skopos deal were made to borrowers with no score at all. That means the Skopos deal has a slightly higher percentage of no-score borrowers than the recent subprime auto securitization recently sold by Santander Consumer, which garnered plenty of attention for its dive into "deep subprime" territory."

In its own words, Skopos said that it was "leveraging our sophisticated, patented iLender technology and visionary management team, Skopos provides a streamlined pr ...

Yen Tumbles On Spurious Nikkei Headline, Stocks Shrug

When you asbolutely, positively need to get stocks higher, unleash a spurious Nikkei headline (at 220am local time)... "Japan to Double Planned Spending in Stimulus Package: Nikkei" and sure enough USDJPY spikes back above 106.00... but S&P futures algos are ignoring it for now...

Goldman earlier said that 3 trillion was too small...

On the fiscal side, Prime Minister Abe has promised a "bold" package, and numbers as high as 20 trillion yen (4% of GDP) have made the rounds in the media. But the funds will be spread over more than one year, and the reports have suggested that the headline numbers may be padded by large loan or guarantee programs, with perhaps 3 trillion yen of direct fiscal outlays--which could disappoint market participants, based on our impressions from recent client meetings. A larger fiscal impulse would be needed to have a major impact on growth and market expectations.

And so minutes later, Japan responds...

Net fiscal spending will be 6t yen, double initial 3t yen plan, the newspaper reports..

But it's not enough to juice stocks...

Probably Putin's fault!

Foreign Central Banks Flee From Ugly, Tailing 2Y Treasury Auction, Lowest Bid To Cover Since 2008

We classified last month's 2Y auction as "lacklustre." This month, the best word to describe today's sale of $26 billion in 2Y paper is "dreadful."

While the yield on the auction was almost unchanged from last month, coming at 0.760%, it tailed by 1.2bps to the 0.748% When Issued, compared to last month which came on the screws at 0.745%. This was the biggest tail for this maturity going back over a year.

But if the pricing print was troubling, it was the internals that were ghastly, with a Bid to Cover sliding to 2.520, and lowest since December 2008. Worst, foreign central banks, aka Indirect Bidders, took down just 28.8%, the lowest since the summer of 2014, and with Directs taking down a modest 10.33%, this meant that Primary Dealers were left with 59.8% of the auction: the highest since May of 2013.

In short, while stocks continue to ignore the risk of a hawkish Fed this Wednesday, the bond market - and especially the short end - is bracing if not for impact, then certainly for a surprise in two days, when Yellen may hint at even higher short-end rates.

As a result of the poor auction, there has been a modest selling across the curve, with an emphasis on near maturities.

Watch the Dollar, Not Rates, as Fed Meets

A Federal Reserve rate increase could do more to strengthen the greenback than raise Treasury yields.

Videogames: Knowing What Really Sells

Revenue recognition rules make tracking videogame sales activity a challenge.

How Asia's Rich Are Hurting the Big Banks of Switzerland and Beyond

A big drop in trading activity has hit results at Julius Baer and U.S. banks like Goldman Sachs in a bad sign for Credit Suisse.

The Fed: Wage growth may be about to reach seven-year high

Some measures of wage growth could hit the highest level in seven years when the employment cost index is released on Friday.

In One Chart: How home construction is reverting to the mean, in one chart

Apartment construction has surged post-recession but single-family home building is staging a comeback.

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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