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09Aug2016 Market Update: SP 500 Sets New High, Crude Prices Slip, Investor Volume In Equities Remains At Anemic Levels

Written by Gary

Wall Street set new highs again today, somewhat of a surprise considering the low to anemic volume. It would suggest market manipulation by the HFT algo computers and severe market reversals are not uncommon. Crude prices have slipped as well as the US dollar. Gold on the other hand is melting upwards.


Here is the current market situation from CNN Money

North and South American markets are higher today with shares in Mexico leading the region. The IPC is up 0.65% while U.S.'s S&P 500 is up 0.12% and Brazil's Bovespa is up 0.09%.

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 66%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -2.56
StockChart.com NYSE % of stocks above 200 DMA Index ($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. 70%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 76%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 15.83
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 81.30
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,788

What Is Moving the Markets

Here are the headlines moving the markets.

U.S. productivity falls for third consecutive quarter

WASHINGTON (Reuters) - U.S. nonfarm productivity unexpectedly fell in the second quarter, pointing to sustained weakness that could raise concerns about corporate profits and companies' ability to maintain their recent robust pace of hiring.

S&P, Nasdaq off record highs as oil weighs

(Reuters) - The S&P 500 and the Nasdaq came off their record highs on Tuesday as weak oil prices partially offset the gains in healthcare and technology stocks.

U.S. wholesale inventories rise more than expected in June

WASHINGTON (Reuters) - U.S. wholesale inventories unexpectedly rose in June on gains in stocks of farm products and other nondurable goods, suggesting an upward revision to the second-quarter economic growth estimate.

Delta Air Lines to cancel nearly 300 flights on Tuesday

(Reuters) - Delta Air Lines Inc said it was canceling some 300 flights on Tuesday morning, higher than an earlier estimate of 250, as the carrier worked to restore operations after a power outage hit its computer systems on Monday.

Valeant CEO receives unsolicited buyer interest for core assets

(Reuters) - Valeant Pharmaceuticals International Inc has received unsolicited interest for its core assets, although the company is not actively shopping them, Chief Executive Officer Joe Papa said on Tuesday.

Shareholders press Yum for stricter antibiotics policy

LOS ANGELES (Reuters) - Yum Brands Inc investors on Tuesday filed a shareholder proposal requesting that it quickly phase out harmful antibiotic use in its meat supply, taking aim at the practices of the company's KFC fried chicken chain.

Valeant outlines asset sale plan to cut debt, stock jumps

(Reuters) - Valeant Pharmaceuticals International Inc will sell billions of dollars in assets to pay down debt and focus on businesses like dermatology and Bausch & Lomb eyecare, the Canadian drug maker said on Tuesday, driving its shares up 13 percent.

Gap shares slump as July sales disappoint, but analysts upbeat

(Reuters) - Shares of apparel retailer Gap Inc fell more than 7 percent in early trading on Tuesday, a day after the company reported a drop in sales for July, but analysts were largely positive about the company's prospects.

China's slowing wholesale deflation takes pressure off central bank

BEIJING (Reuters) - China's factory price deflation moderated further in July, with prices falling at their slowest pace in two years, taking pressure off the central bank to cut rates as policymakers turn their focus to structural reforms and ballooning credit.

Why GAAP Matters: Real Profit Margins Tumble To 10 Year Lows

Over the past several months, the topic of GAAP vs non-GAAP number (and specifically the near-crisis gap that has formed between the time series) has gotten increasingly prominent attention by both regulators and the mainstream media. But while attention has focused on the difference between GAAP and non-GAAP earnings, and EPS, few have paid attention to intermediate financial data, such as profit margins. Perhaps this is a substantial oversight, because as the following charts from Deutsche Bank show, on a GAAP basis, trailing 12 month GAAP margins have now tumbled to the lowest level since before the global financial crisis; in fact the last time GAAP net margins were here was some time in 2006, when the S&P was trading about 700 points lower.

In other words, profit margins are not only sliding on a non-GAAP basis, they are crashing if observed on an unadjusted, "unaddbacked", un-proforma GAAP basis. This is important because as we first wrote last Octobe ...

Brexit Bonanza: International Visitors To The UK Jump Thanks To Weaker Pound

So far the failure of any single Brexit doomsday prediction to materialize has led to even more embarrassment for all the "experts" which forecast doom and gloom should the UK dear to divorce from Europe. Last week even Mark Carney had to admit his dire warnings were wrong, when the BOE toned down its immediate "technical recession" forecasts, now seeing "only" a 0.7% growth rate in 2017, a far cry from the outright contraction it had warned about (that did not stop it however, from cutting rates to a record low and launching the latest corporate bond monetization program). And now, thanks to the ongoing drop in the sterling, another fringe benefit of Brexit has emerged.

As Sky News reports, the slump in the pound since the Brexit vote has produced an immediate boost for UK tourism with flight bookings into the country up on last year, according to a new report.

As closely documented, the sterling has fallen by about 10% against both the US dollar and the euro in the wake of the poll, making trips to Britain cheaper for international visitors. As a result International net bookings rose 4.3% in the 28 days to 21 July according to travel information firm ForwardKeys.

It reverses a trend in the month before the referendum when bookings were 2.8% lower.

ForwardKeys chief executive Olivier Jager said: "Brexit had an immediate, positive impact on inbound tourism to the UK, which is converting into better than anticipated arrivals."

A rise in UK visitors attracted by the cheaper pound could translate to a better summer for tourist attractions, restau ...

James Grant: Negative Interest Rates Will End... Badly

Submitted by Matthew Borin via CFA Institute blog,

Negative interest rates are unsustainable and once investors decide to stop paying for the privilege of holding government debt, a banking crisis could result, says James Grant.

The founder of Grant's Interest Rate Observer was one of several speakers at the New York Society of Security Analysts (NYSSA)' Annual Benjamin Graham Conference to remark on the ramifications of unprecedented loose monetary policy.

Historic Lows

Central banks are treading in uncharted waters. Sidney Homer and Richard Sylla, the authors of A History of Interest Rates, found no instance of negative rates in 5,000 years. Now there are $11.7 trillion invested in negative-yield sovereign debt, including $7.9 trillion in Japanese government bonds and over $1 trillion in both French and German sovereign debt.

Grant posed a tongue-in-cheek question: "If these are the first sub-zero interest rates in 5,000 years, is this not the worst economy since 3,000 BC?"

This is not a bad economy by most measures. Household wealth in the United States has grown steadily since the Great Recession. If these gains were the result of greater productivity, interest rates would not need to stay at historic lows. Grant says they are "a sign of someone's thumb on the currenc ...

Still No Fix for LendingClub's Deepest Flaw

Online lender LendingClub needs to change its funding model to become more resilient.

Some Hope, butNo Cure, for Valeant

A healthier outlook for Valeant investors may not leave a lasting impression.

Cost-Cutting Versus Cord-Cutting at Cablevision-Owner Altice

The deal-hungry cable operator has proven its talent for finding savings. Now it needs to foster growth.

Companies defy logic with record bond issuance and tighter spreads: What gives?

Companies have sold $70 billion of debt in the first six days of August, a typically sleepy month for issuance.

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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