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08Sep2016 Market Update: Wall Street Slipping Further Into The Red, Crude Prices Creeping Upwards, Watch For Sudden Market Reversals On Bearish Indicators

Written by Gary

US markets climbed to a positive opening, but trading has slipped into the red (SPY -0.3%) and appears to be heading towards the morning session lows. Crude prices and the US dollar have risen sharply while gold has waterfalled to the 1340 handle. Short-term indicators are moderately bearish.


Here is the current market situation from CNN Money

North and South American markets are mixed. The Bovespa is higher by 1.03%, while the IPC is leading the S&P 500 lower. They are down 0.55% and 0.33% respectively.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 72%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 69%
Investors Intelligence sets the breath Above 50 bullish 68%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. +11.63
StockChart.com NYSE % of stocks above 200 DMA Index ($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 $OEXA200R rises above 65%
Secondary Bullish Indicators:
a) RSI is POSITIVE (above 50)
b) Slow STO is POSITIVE (black line above red line)
c) MACD is POSITIVE (black line above red line)
87%
StockChart.com NYSE Bullish Percent Index ($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 ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 77%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value

16.08

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 80.34
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors

10,881

What Is Moving the Markets

Here are the headlines moving the markets.

Wall Street weighed down by Apple

(Reuters) - Apple weighed on U.S. stocks on Thursday, a day after the tech giant unveiled the new iPhone 7 that failed to impress Wall Street.

U.S. jobless claims fall as labor market remains strong

WASHINGTON (Reuters) - The number of Americans filing for unemployment benefits unexpectedly fell last week, pointing to sustained labor market strength even as the pace of job growth is slowing.

ECB hints at stimulus but keeps markets guessing

FRANKFURT (Reuters) - The European Central Bank held interest rates at record lows and kept the door open to more stimulus on Thursday but gave few hints about its next move, disappointing markets that had priced in a decisively dovish tone.

Apple will not give first-weekend sales of iPhone 7

SAN FRANCISCO (Reuters) - Apple Inc will not release first-weekend sales of its new iPhone 7, the company said on Thursday, making it harder for analysts to get a read on the product's prospects amid questions over whether its popularity has peaked.

Wells Fargo will pay $190 million to settle customer fraud case

(Reuters) - Wells Fargo will pay $185 million in penalties and $5 million to customers that regulators say were pushed into fee-generating accounts that they never requested, officials said on Thursday.

Liberty takeover offers a longer-term vision for F1

LONDON (Reuters) - Liberty Media's takeover of Formula One promises a long-term strategy for the cash-rich sport with a sharper focus on new media markets and another attempt to expand in North America.

Google to buy software developer Apigee in $625 million deal

(Reuters) - Alphabet Inc's Google is acquiring software developer Apigee Corp in a deal valued at about $625 million, as it strengthens its cloud business.

Bayer exploring sale of dermatology business: Bloomberg

(Reuters) - German chemicals and crop pesticides firm Bayer AG is exploring the sale of its dermatology business to push forward its deal with Monsanto Co , Bloomberg reported, citing sources.

Taiwan's Foxconn invests in Chinese ride-hailing start-up Didi Chuxing

HONG KONG/BEIJING (Reuters) - Taiwan's Foxconn has invested $119.9 million in Chinese ride-hailing firm Didi Chuxing via one of its subsidiaries, the world's largest electronics manufacturer said on Thursday, in a deal that could value the start-up at about $33.7 billion.

The ECB's QEnundrum: Draghi May Run Out Of Bonds To Buy As Soon As November

Yesterday we pointed out the many "Conundrums Of A Policy Maker" which focused on the waning ability of central banks and sovereign governments to continue to control asset prices as their traditional forms of stimulus are reaching the end of their useful life. As proof of just how ineffective the marginal stimulus from Central Banks has become, the Financial Times points out this morning that the ECB will likely have bought every dollar of eligible debt available by the end of this year under its $1.6 trillion QE program.

As the FT points out, there is about $7.5 trillion of government and agency paper outstanding in the EU. That said, the ECB is restricted to purchasing bonds with maturities ranging from 2-30 years and with a yield above the eurozone's deposit rate of -0.4%. According to FT calculations, those restrictions eliminate roughly $1.5 trillion of eligible paper. Moreover, the ECB is also restricted from purchasing more than 33% of any given issuance or of a single country's outstanding debt which reduces total supply of eligible paper further to just $2.0 trillion which is only slightly more than the $1.6 trillion approved for the QE program.

That said, other rules require the ECB to make purchases on a pro-rata basis in-line with the size of the economies of its member states. Therefore, the ECB will likely run out of paper to buy in larger countries like Germany earlier than others. Per the ...

Sharing Economy Shambles - Airbnb Hosts Having Difficulty Refinancing Homes

Submitted by Ashlee Kieler via Consumerist.com,

Until recently, home loans generally covered two types of properties: primary residences or investments. That was before services like Airbnb allowed anyone with an extra room to make a bit of extra money by renting it out for short periods of time. This blurred line between "my house" and "my investment" is causing trouble for some homeowners when they go to refinance their mortgages.

More and more homeowners say they are finding themselves on the receiving end of rejection letters from their long-time banks when trying to refinance their mortgage, simply because they rent a room on Airbnb, the Wall Street Journal reports.

When applying to refinance their loans, owners say they were under the impression that having a higher income would improve their credit. So they reported all income drawn for short-term rental deals.

But banks don't exactly see it that way, the WSJ reports.

Because short-term rentals made online through Airbnb are fairly new, banks are having a difficult time placing these homes in the two predefined categories.

The process of renting out one's home or a room gives the impression that the house is now considered a rental, or an investment property.

And these types of properties have long been considered to be riskier for banks, as homeowners have shown a higher tendency to default on investment-property loans.

One Seattle man says his application to refinance his home's loan through Bank of America was denied recently.

The ...

Is This The Simple Reason Why FX Traders Are Getting Out Of The Market

We previously reported that according to the latest BIS Triennial Central Bank survey, spot FX volumes fell 17% to $1.7 trillion from $2 trillion, the first time volumes have fallen since 2001. The drop was even more acute in the realm of hedge funds and proprietary trading firms, where volumes tumbled by more than 30% over the past three years.

There were various explanations for this: David Mechner, CEO at algo trading firm Pragma Securities, said that "the market has undergone a period of significant change, driven in part by allegations of trader misbehaviour and the subsequent development of a global code of conduct, but also by shifting attitudes within banks to allocate capital as efficiently as possible in light of ongoing regulatory constraints." JPM added that "the shrinkage in the share of FX trading by these investors is likely the result of regulatory pressures and FX rigging investigations which caused significant retrenchment by FX prop desks."

In other words, JPM suggested that if one can't trade a rigged market, one simply does not trade, period.

While that cynical explanation may be right - especially coming from JPM - overnight Bloomberg's Richard Breslow has come up with a different, even more pragmatic explanation. In a note titled, "Investors Not Rewarded by High Difficulty Level", the Bloomberg commentator makes the following simple argument:

Why beat your head against the wall trying to make sense of some ...

Is US Auto Sales Data Fabricated: FBI Investigating Chrysler For Falsifying Monthly Sales Reports

Ever wonder how car sales have been so remarkably strong over the past 7 years as the economy has seemingly stagnated? Sure, a massive subprime auto lending bubble has helped fuel auto sales as $0 cash down, 0% interest and 70 month terms have become the norm for people looking to "manage" monthly payments...though we're sure that buyers making $30k a year really can afford that new $80,000 vehicle. And, of course, government programs like "cash for clunkers" has also helped to fuel the recovery.

But, as Bloomberg points out today, there might be a little more to the story, at least at Fiat Chrysler. It seems that the FBI has become interested in whether or not Fiat Chrysler forced dealers to falsify vehicles purchases in order to manage monthly sales figures. Apparently, all fraudulent activities were handled through Fiat Chrysler's "Department of 'unnatural acts.'" Per Bloomberg:

Investigators are examining whether Fiat Chrysler improperly adjusted monthly numbers to show growth over the prior year, a person familiar with the matter said. They are looking into allegations the company ordered dealers to create false vehicle purchases, some of which were made in the names of friends and relatives of salespeople, including underage family members, the person said.

The allegations get even stranger. Investigators are probing calls from Fiat Chrysler officials to dealers saying its department of "unnatural acts" was open for business, the person familiar s ...

Nintendo's Super Mario Rides iPhone to the Rescue

Nintendo's Super Mario launch at the Apple iPhone event is a bigger deal for the Japanese game maker than wildly successful 'Pokemon Go.'

ECB: More Bond Purchases, Just Not Yet

The ECB is likely to be forced to extend its bond-purchase program beyond March 2017.

Why Investors Have High Hopes for HPE Software Under Micro Focus

The U.K. company's record suggests it can cut costs—though the scale of HPE's business is a new challenge.

'Star Trek' at 50: A franchise still givin' 'er all she's got

The original "Star Trek" television show first aired on NBC on this date, Sept. 8, 50 years ago, to both middling reviews and tepid ratings. Six television series and 13 feature films later, the franchise is stronger than ever.

Futures Movers: Oil rallies after largest weekly crude-supply drop since 1999

Oil futures trade at their highest levels in about two weeks after U.S. government data reveal a whopping 14.5 million-barrel weekly drop in domestic crude supplies.

Chuck Jaffe: These are the only good reasons to avoid index funds

If your case for owning actively managed funds isn't strong, maybe it's time to join the indexing party, writes Chuck Jaffe.

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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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