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29Aug2016 Market Update: Wall Street Continues To Melt Upward From Opening, US Dollar Now Falling, Gold Rising Sharply, Crude Prices Rising Off Session Lows, Short-Term Indicators Moderately Bullish

Written by Gary

Afternoon trading sees weakness in the US dollar as major indexes melt upwards on anemic volume (SPY +0.6%). Consumer spending increased 0.3% last month, matching economist expectations. Consumer spending accounts for more than two-thirds of U.S. economic activity. Personal income increased 0.4%. That also matched estimates.


Here is the current market situation from CNN Money

North and South American markets are mixed today. The Bovespa is up 2.00% while the S&P 500 gains 0.66%. The IPC is off 0.49%.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 73%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 66%
Investors Intelligence sets the breath Above 50 bullish 66%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -35.02
StockChart.com NYSE % of stocks above 200 DMA Index ($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. 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 15.89
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 81.26
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.

Solid U.S. consumer spending boosts prospect of Fed rate hike

WASHINGTON (Reuters) - U.S. consumer spending increased for a fourth straight month in July amid strong demand for automobiles, pointing to a pickup in economic growth that could pave the way for the Federal Reserve to raise interest rates this year.

Apple is sued over unresponsive iPhone 6 touchscreens

(Reuters) - Apple Inc has been sued by owners of iPhone 6 and iPhone 6 Plus smartphones who say a design defect causes the phones' touchscreens to become unresponsive, making them unusable.

Wall Street gains as financials rally on Fed rate comments

(Reuters) - Wall Street snapped a three-day losing streak on Monday as financial stocks rose after Federal Reserve Chair Janet Yellen said the case for an interest rate hike had strengthened.

Facebook CEO says group will not become a media company

ROME (Reuters) - Facebook Inc. will not become a media company, its founder and CEO Mark Zuckerberg said on Monday, telling students the firm would remain a technology platform.

Mylan to launch generic EpiPen at half the price of original

(Reuters) - Mylan NV said it would launch the first generic version of its allergy auto-injector EpiPen for $300, half the price of the branded product, the drugmaker's second step in less than a week to counter the backlash over the product's steep price.

HSBC executive pleads not guilty in U.S. over forex scheme

NEW YORK (Reuters) - A senior HSBC Holdings Plc executive pleaded not guilty on Monday to charges that he participated in a fraudulent scheme to front-run a $3.5 billion currency transaction by one of the bank's clients.

European Commission says 'ball still rolling' on trade deal with U.S. after German comments

BRUSSELS (Reuters) - The European Union's executive said on Monday it had a unanimous mandate from the bloc's 28 members to finalise negotiations on a free trade deal with the United States, a day after Germany's economy minister said the talks had "de facto failed".

BlackRock withheld support from two key Exxon directors: filings

BOSTON (Reuters) - BlackRock Inc withheld support from two high-profile directors at Exxon Mobil Corp, securities filings show, a rare spat apparently driven by a board communications policy at the world's largest energy company.

Caesars shares plummet as it faces $11 billion in bondholder lawsuits

CHICAGO (Reuters) - Shares in Caesars Entertainment Corp shed 16 percent on Monday after a U.S. judge cleared the way for billions of dollars in bondholder lawsuits against the casino group to proceed, setting up a possible judgment as soon as Tuesday in New York.

The Apotheosis Of Bubble Finance - Folly Of The FANGs, Part 1

Submitted by David Stockman via Contra Corner blog,

The inexorable effect of contemporary central banking is serial financial booms and busts. With that comes increasing levels of systemic financial instability and a growing dissipation of real economic resources in misallocations and malinvestment.

At length, the world becomes poorer.

Why? Because gains in real output and wealth depend upon efficient pricing of capital and savings, but the modus operandi of today's central banking is to deliberately distort and relentlessly falsify financial prices.

As we have seen, the essence of ZIRP and NIRP is to drive interest rates below their natural market clearing levels so as to induce more borrowing and spending by business and consumers.

It's also the inherent result of massive QE bond-buying where central banks finance their purchases with credits conjured from thin air. Consequently, the central banks' Big Fat Thumb on the bond market's supply/demand scale results in far higher bond prices (and lower yields) than real savers would accept in an honest free market.

The same is true of the hoary doctrine of "wealth effects" stimulus. After being initiated by Alan Greenspan 15 years ago, it has been embraced ever more eagerly by his successors at the Fed and elsewhere ever since.

Here, the monetary transmission channel is through the top 1% that own 40% of the financial assets and the top 10% that own upwards of 85%. To wit, stock prices are intentionally driven to artificially high levels by means of "financial easing". The latter is a euphemism for cheap or even free finance for carry trade gamblers and implicitly subsidized hedging insurance for fa ...

Oil Extends Losses As 'Short-Squeeze' Ammo Is Now Exhausted

WTI Crude is now down 6% from last week's highs, back below $47 as supply concerns (Abu Dhabi production rise and ConocoPhilips' CEO comments) and OPEC freeze talks doubts have combined with the biggest collapse in speculative short positions in history (following the Saudi statement) - removing the last 'short-squeeze' leg of support from this dead-cat-bounce.

From record short positioning, hedge funds have suffered the biggest squeeze cover in history over the past 2 weeks since Saudi Arabia made a statement hopeful of OPEC freeze talks...

Longs have surged though - now near 2-year highs - as shorts covered...

With net positioning now exploding to the long side...

h/t @JKempEnergy

But the extreme positioning power driving crude prices appears to have broken as prices fell despite the net increase in longs...

This Is The Way The World Ends...

Submitted by Howard Kunstler via Kunstler.com,

Would fate permit it, the election of Hillary Clinton will be the supreme and perhaps terminal act in an Anything-Goes-And-Nothing-Matters society. Yet, even with the fabulous luck of running against a consummate political oaf, she struggles to get the upper hand, and she may land in the White House with the lowest voter turnout in modern history. And then her reward in office may be to dodge indictment for four years while the nation crumbles around her. This is the way the world ends: not with a bang or a whimper but with a cackle.

Imagine the scene following Hillary's election.

In order to salvage the last shred of its credibility, the Federal Reserve raises its overnight funds rate another quarter percent and crashes the last Potemkin semblance of a "recovering" economy, that is, the levitated stock markets. Tens of millions of retired individuals previously driven into them by zero interest rate policy are wiped out. Even more gravely, pension funds and insurance companies are destroyed, but not before their troubles trigger derivative contracts with big banks which then explode and expose the inability of counterparties to make good on their ends of the bet.

In a blind panic, the Federal Reserve reverses its policy in December, drops the Fed Funds interest rate back to 25 basis points and announces the grandest new round of "quantitative easing" (money printing) ever, while congress is coerced into voting for the greatest bailout of institutions the world has ever seen, along with a "one time" helicopter drop of a cool trillion dollars in the form of combined tax cut ...

US Bank Stocks Surge To 2016 Highs Despite Collapse In Yield Curve To 9 Year Lows

US bank stocks are exuberantly listening to mainstream media pushers as the hopes of a double-rate-hike-rainbow has sent S&P Financials to their highest since Dec 2015. However, despite the rise in implied rate-hike odds, the Treasury curve is utterly collapsing (which is what really matters for NIM) with 2s30s now at its lowest since 2007...

As we noted previously, the business models of pension plans, insurance companies, money managers are all affected by what happens to the yield curve, in different ways. But nobody like a Bank is so inescapably impacted by its shape.

At times, good Banks can skilfully outperform their core commodity - the yield curve - and smoothen its widest gyrations across the cycle. Like a good oil company can diversify and smoothen the violent swings of oil prices.

But can they totally disconnect from it? Unlikely.

Why China Hasn't Cut Rates in What Feels Like Forever

Growth isn't budging and economic data continues to underwhelm. But China hasn't eased monetary policy in over six months. Or so it seems.

Why Lighter Shelves Won't Support Sagging Retailers for Long

Retail inventories are the healthiest they have been in a long time, but investors shouldn't expect the discipline to last very long.

The Price of the Calm After the Storm

Markets are calm this August. Policy makers have ensured that, but distortions are rife.

Leading Index Review: July 2016 Philly Fed Leading Index Jumps Around

Written by Steven Hansen

This post is a review of all major leading indicators follows - and no leading index is particularily strong. A summary of the indices are at the end of this post.

Capitol Report: No all-day breakfast in real estate as McMansion price premium declines

Have Americans grown tired of the massive, mass-produced new homes, or are there technical market factors driving the decline?

'Mylan must be held accountable': why a generic EpiPen could prevent a cheaper product in the long term

The CEO called it an "extraordinary" move. But companies do it all the time.

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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