The afternoon session has the markets down (SPY - 0.3%) and trading sideways since 10 am on falling volume. Home prices in 20 major U.S. metro areas rose 0.8% in June, while expecting a 5.3% rise. Consumer confidence rose in August at 101.1 from a revised 96.7, while expecting the gauge to rise to 97.0. Short-term indicators are neutral.
Here is the current market situation from CNN Money
North and South American markets are lower today with shares in U.S. off the most. The S&P 500 is down 0.28% while Brazil's Bovespa is off 0.20% and Mexico's IPC is lower by 0.16%.
$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)
WASHINGTON (Reuters) - A European Commission order requiring Apple Inc to pay $13 billion euros ($14.5 billion) in taxes on Tuesday drew swift and angry rebukes from the Obama administration and lawmakers in Congress, while re-igniting calls for international tax reform.
NEW YORK (Reuters) - U.S. consumer confidence rose to an 11-month high in August, with households more upbeat about the labor market, in a further sign that the economy was regaining steam after faltering in the first half of the year.
TOKYO (Reuters) - Mitsubishi Motors Corp said on Tuesday more of its vehicle models were involved in a mileage cheating scandal than initially stated, and that it would temporarily stop domestic sales of affected vehicles and compensate owners.
LONDON (Reuters) - Royal Dutch Shell's first oil field sale after its $54 billion BG Group acquisition bodes well for its disposal talks in the North Sea, Gabon and New Zealand, according to sources, signaling buyers will meet its expectations on value.
(Reuters) - Teen apparel retailer Abercrombie & Fitch Co posted its 14th straight quarter of declining sales and said it no longer expects comparable sales to improve this year, highlighting its struggles to win back shoppers.
NEW YORK (Reuters) - A U.S. judge has dismissed a lawsuit by Chevron Corp workers who said the oil company breached its fiduciary duties by putting costly and poorly performing investment options in a $19 billion employee savings plan.
UBS' Paul Winter believes we are witnessing the end of the credit cycle - earnings growth rates are flat, and the stock market impact has been increasing. Importantly, from a risk perspective, Winter warns that Systemic Risk is rising, and Economic Policy Uncertainty has hit all-time highs, warning that the key risk today lies in low-volatility stocks and the broad market's equity risk premia - "either earnings need to pick up dramatically, or alternately, equities would need to correct by around 20% to bring the equation back into equilibrium."
The age of excess liquidity and inexpensive debt is over, according to Winter, and that makes it harder for management to use credit to satiate investors' demands for corporate profits
UBS notes that "77% of stock crashes are driven by earnings announcements," and more companies are likely to disappoint the market in the future.
We are currently witnessing the end of the credit cycle. Credit spreads have been increasing, global earnings growth rates are in aggregate flat and market impact has been increasing.
Market impact is currently running at 80bps across developed markets, a level that tends to be commensurate with negative returns and an elevated risk of correction. The risk today, oddly is in so-called 'low risk' assets. We show that low volatility assets are generally more highly geared than higher volatili ...
The Greater Fool Theory is when the price of a good is not determined by its intrinsic value, but rather by irrational beliefs and expectations of market participants. Essentially, it is about buying a good at a price then offloading it to the next fool at a higher price. This vicious cycle would continue till the point where market participants 'wake up' and realize that the good is no longer worth that value. The best example would probably be the tulip mania where the Dutch were trading houses and lands just for plots of tulips. As absurd as it may sound, back then even the most rational were engaged in such madness. With such irrational beliefs and expectations of the market, it would ultimately result in a 'bubble'.
You only find out who is swimming naked when the tide goes out
- Warren Buffett
What does it mean for investors?
Companies with solid earnings and fundamentals trading at higher valuations are justifiable. However, not all companies that are trading at such high valuations have the same fundamentals backing it. Companies belonging to the latter category can be further divided into three sub-categories.
Firstly, it would be those that lack the fundamentals and earnings. These companies are constantly raising add ...
Econintersect's Economic Index has shown better growth for the second month in a row - but the economic outlook remains weak. The index remains near the lowest value since the end of the Great Recession. There remain recession warning flags in some of the data.
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