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25Aug2016 Market Update: US Markets Mixed And Flat, Crude Prices Have Regained 75% Of Morning Losses, US Dollar Melting Upward

Written by Gary

US markets going into the afternoon session have been trading in a sideways trend, but have remained mixed and flat on low volume. Texas Tea and Brent rebounded moderately today after a surprise build in U.S. inventories in the prior session drove prices down 2.8% and 1.8%, respectively. Short-term indicators neutral.


Here is the current market situation from CNN Money

North and South American markets are higher today with shares in Brazil leading the region. The Bovespa is up 0.33% while Mexico's IPC is up 0.04% and U.S.'s S&P 500 is up 0.02%.

New orders for U.S. manufactured capital goods rose for a second straight month in July as demand for machinery and a range of other products picked up, offering a tentative sign that a business spending downturn was starting to ease.

The economic outlook also was boosted by another report on Thursday showing an unexpected drop in the number of Americans filing for unemployment benefits last week, indicating sustained labor market strength.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 74%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 66%
Investors Intelligence sets the breath Above 50 bullish 67%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -28.89
StockChart.com NYSE % of stocks above 200 DMA Index ($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 $OEXA200R rises above 65%
Secondary Bullish Indicators:
a) RSI is POSITIVE (above 50)
b) Slow STO is POSITIVE (black line above red line)
c) MACD is POSITIVE (black line above red line)
89%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 71%
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 15.73
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 81.21
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,804

What Is Moving the Markets

Here are the headlines moving the markets.

Exclusive: Companies made deals that could run afoul of U.S. whistleblower rules

WASHINGTON (Reuters) - Wells Fargo , Advanced Micro Devices and Fifth Third Bank have in recent years agreed to settlement deals that seek to muzzle former employees in ways that some lawyers said could violate U.S. whistleblower protection laws.

As central bankers gather, some at Fed make rate-hike case

JACKSON HOLE, Wyo. (Reuters) - As central bankers converge on this mountain resort Thursday for an annual conference on monetary policy, a couple of top Federal Reserve officials took the chance to renew a push for interest-rate hikes, citing improvement in employment and inflation.

Upbeat U.S. factory data suggests business spending stabilizing

WASHINGTON (Reuters) - New orders for U.S. manufactured capital goods rose for a second straight month in July as demand for machinery and a range of other products picked up, offering a tentative sign that a business spending downturn was starting to ease.

Financials lift Wall Street as rate hike optimism grows

(Reuters) - Wall Street reversed course to eke out small gains on late on Thursday morning as financial stocks gained after two more Federal Reserve officials said the case for an interest rate hike was strengthening.

Mylan offers discounts on EpiPen amid wave of criticism

(Reuters) - Mylan NV said on Thursday it would reduce the out-of-pocket cost of its severe allergy treatment EpiPen through a discount program, a day after Democratic Presidential candidate Hillary Clinton joined lawmakers in criticizing the drug's high price.

Japan's ANA finds problem with Boeing 787 Rolls-Royce engines, cancels some flights

TOKYO/LONDON (Reuters) - Japanese carrier ANA Holdings needs to replace damaged compressor blades in the Rolls-Royce engines powering its Boeing 787s, it said on Thursday, forcing it to cancel some Dreamliner flights over the coming weeks.

Whirlpool to recall 15,200 microwaves due to fire hazard issue: CPSC

(Reuters) - Whirlpool Corp , the world's largest maker of home appliances, is recalling 15,200 Whirlpool brand microwaves due to a fire hazard, the U.S. Consumer Product Safety Commission said on Thursday.

Volkswagen reaches deal to compensate U.S. dealers for polluting diesels

WASHINGTON (Reuters) - Volkswagen AG said on Thursday it reached a deal to pay its 650 U.S. dealers for their losses from the German automaker's diesel emissions scandal, and a judge ordered it to move quickly to decide whether to fix or buy back 85,000 luxury vehicles with polluting engines.

U.S. SEC fines 13 advisers for false performance claims

(Reuters) - The U.S. Securities and Exchange Commission on Thursday fined 13 investment advisory firms for spreading false claims made by the now defunct F-Squared Investments Inc, once one of the largest marketers of investment products using exchange-traded funds.

These Are The Three Things That Will Break The "China Calm" According To UBS

There has been no shortage of crises in the Western World lately with heightened concerns over Brexit, Italian Banks, Portugal's sovereign debt rating, Fed decisions, etc, all rattling the nerves of investors. But amid all the chaos in the West, Donna Kwok of UBS recently pointed out that China has been relatively "calm". That said, UBS sees 3 things that could disrupt the relative "calm" in China by the end of the year. In summary, downside risks remain in China's continued effort to work through sizable inventory overhangs in their real estate market as well as in the restructuring of State Owned Enterprises (SOEs) which need to undergo substantial capacity reductions and management realignments. Failure of property developers to return to the market with new developments and/or an increase in unemployment related to capacity reductions at SOEs could derail the "China Calm."

With that, here are the details:

1. Property developers have lagged on investment in new real estate projects despite the rebound in sales of existing properties. Many believe the lack of new investment is a sign that property developers see a slow down in 2H16. Despite the strong double-digit growth prints in YTD sales (26%y/y) and new starts (14%y/y), YTD construction and investment have expanded only by around 5%, with little sign of more pipeline momentum to come. Soft property developer sentiment and caution over the longevity ...

The Lowest Vol In A Lifetime

Via Macro Man blog,

It says everything you need to know about the nature of this market that yesterday's 11-point swoon in the SPX felt like a proper downdraft. If you've felt that this month has been unusually quiet, you're not alone- and with good reason. Macro Man ran a few numbers, and was startled to see that as of Tuesday's close (i.e., prior to yesterday's "collapse") there have been only five prior days in his lifetime where the 30 day historical volatility of the SPX has been lower.

(For those interested, the five days were January 3-6, 1994 and September 12, 1995.)

Yesterday's "crash" nudged the historical vol higher, but not by much; the current 30 day historical vol of 5.4% is the 23rd lowest of all trading days since the start of 1970. The days when "market volatility" served as the excuse du jour for Fed inaction suddenly seem like a long, long time ago.

US markets are hardly alone in experiencing a decline in volatility, of course; realized vol throughout global equity markets has tumbled this month. That being said, vol in the US is unusually low by global standards (as well as its own.) Amusingly, the other market that has experienced exceptionally low volatility recently has been the UK, another excuse du jour for standing pat. Tellingly, the current trough in SX5E vol is only a little lower than the post-Brexit peak in SPX realized vol.

"The Great Unraveling" - Hilsenrath Slams The Fed: "Years Of Fed Missteps" Foster US Populism, Disillusion

For years we have argued that the main reasons for rising social anger, populist sentiment, and general disillusion with the US economy boils down to one thing: the Federal Reserve, which as we have argued since 2009, has approached the crisis aftermath in a wrong way, generated unprecedented wealth inequality through its monetary policy favoring a tiny fraction of the population - those invested in risk assets - and instead of reflating another debt bubble, should have allowed the system to undergo a debt purge and start afresh.

For this we have been branded perpetual conspiracy theorists and permabears.

Moments ago, none other than the WSJ's Fed "whisperer", Jon Hilsenrath admitted these allegations have been correct in an article titled "Years of Fed Missteps Fueled Disillusion With the Economy and Washington", and which as the WSJ notes "helps explain one of the US's most unpredictable, populist political years."

In other words, it is the Fed's policies that have led to the current failed economic regime (as noted again yesterday by Citi's Matt King and today by former Fed governor Kevin Warsh), and which are responsible for the rise of such candidates as Donald Trump. Which, incidentally, is also something we have predicted over the years would happen. As such we are delighted that one of the most popular establishment Fed watchers now agrees with our assessment.

This is what Hilsenrath writes:

In the 1990s, a period known in economics as the "Great Modera ...

Uber & Out? nuTonomy Launches First Driverless Taxi Service In Asia

Last week we noted Uber's intention to launch "semi-autonomous" taxis in Pittsburgh (see "Uber Determines Pittsburgh Lives Most Expendable; Plans To Unleash Autonomous Vehicles There Within Weeks"). For now, the Uber cars will still have an engineer in the driver's seat ready to grab the wheels at anytime as they continue to work out "bugs" like the inability to cross bridges with one engineer noting that "bridges are really hard."

Now, nuTonomy's "semi-autonomous" vehicles are hitting the streets in Singapore. The company has invited a select group of people to use the service during this initial "test phase" and expects to launch full service by 2018. Per an interview with Reuters, nuTonomy executive Doug Parker sees autonomous vehicles changing "how cities are built, how we really look at our surroundings." Unlike Uber which partnered with Volvo, nuTonomy rides will be conducted in the stylish Mitsubishi i-MiEv electric vehicle.

As we pointed out in a post last week, to the extent the technology works consistently, avoiding the nasty consequences of death and mayhem in the event of failure, autonomous vehicles are worth big money to taxi services and consumers...though not so much for the automotive OEMs (see "Ford Announces Plans To Self-Destruct Starting In 2021< ...

What to Learn From the ECB's Great European Corporate Bond Squeeze

The European corporate bond market is heading into ever more extraordinary territory.

Mixed-Up German Data Pose Challenge for Investors

As soon as investors gain any measure of confidence, a piece of information arrives to challenge it. The surprise decline in Germany's Ifo index is the latest example.

Bond Market Smackdown: SolarCity vs. Sri Lanka

Elon Musk's big bond purchase should give his investors, and Tesla shareholders,​pause.

The Fed: A new Fed first: FOMC official takes to Twitter to pan banker

Perhaps for the first time ever, a senior Fed official on Thursday slammed a former U.S. central banker on twitter.

Market Snapshot: Stocks waver as Fed officials hint that time is ripe for a rate hike

U.S. stocks on Thursday struggle for direction, switching between small gains and losses, ahead of a key economic symposium in the Rocky Mountains.

The Balance: This simple, but surprising, thing will improve your kid's grades

How your cell phone can boost your kids grades.

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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