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30Sep2016 Market Update: Wall Street Almost One Percent Higher, Gold Falling Like A Rock, USD To Slip 4 Percent, Are You Afraid Yet

Written by Gary

Wall Street higher (SPY +0.9%) as Deutsche Bank worries taper, MS claims the USD will fall another 3% to 4% from current levels (95.47). Investor sentiment rises as gold waterfalls, but WTI crude remains higher in the 48 handle.

Here is the current market situation from CNN Money

North and South American markets are mixed today. The S&P 500 is up 0.89% while the Bovespa gains 0.74%. The IPC is off 0.07%.

Traders Corner - Health of the Market

Index Description Current Value Members Sentiment: % Bullish (the balance is Bearish) 64%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 46%
Investors Intelligence sets the breath Above 50 bullish 64% Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -16.20 NYSE % of stocks above 200 DMA Index ($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 $OEXA200R rises above 65%
Secondary Bullish Indicators:
a) RSI is POSITIVE (above 50)
b) Slow STO is POSITIVE (black line above red line)
c) MACD is POSITIVE (black line above red line)
81% NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 67% S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 71% 10 Year Treasury Note Yield Index ($TNX) ten year note index value

16.10 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 80.12 NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 10,732

Looking at the last three columns, the first one (Actual), is what was reported this morning. The second column (Forecast) is what analysts had forecast and the third column is the previous report. Full calendar HERE.

What Is Moving the Markets

Here are the headlines moving the markets.

Drop in U.S. consumer spending clouds Fed rate hike outlook

WASHINGTON (Reuters) - U.S. consumer spending fell in August for the first time in seven months while inflation showed signs of accelerating, mixed signals that could keep the Federal Reserve cautious about raising interest rates.

Wall Street rises on bounce in Deutsche Bank's shares

(Reuters) - Wall Street extended gains on Friday as a bounce in Deutsche Bank's shares helped lift financial stocks amid broad gains across sectors.

Atlanta Fed trims U.S. third-quarter growth forecast to 2.4 percent

NEW YORK (Reuters) - The U.S. economy is on track to grow at a 2.4 percent annualized rate in the third quarter, the Atlanta Federal Reserve's GDP Now forecast model showed on Friday, following the latest data on inventories, trade and consumer spending this week.

Deutsche lifted by CEO letter, settlement report

FRANKFURT/LONDON (Reuters) - A report that Deutsche Bank was close to a cut-price settlement with U.S. authorities over the sale of toxic mortgage bonds helped to fuel a recovery in its shares on Friday after its chief executive said the group remained stable.

Costco should pay $5.5 million for selling fake Tiffany rings: U.S. jury

NEW YORK (Reuters) - Costco Wholesale Corp should hand over $5.5 million to compensate Tiffany & Co for selling counterfeit Tiffany diamond engagement rings, a federal jury said on Thursday.

Exclusive: China set to export corn, posing new threat to battered global market - sources

BEIJING (Reuters) - China has given approval to at least two companies to export corn, trading sources said, in a radical move by the world's No. 2 producer to cut its ballooning surplus and unleash more supply into a saturated global market.

Japan's Mitsubishi Motors to resume sales after latest cheating scandal

TOKYO (Reuters) - Japanese automaker Mitsubishi Motors Corp will resume domestic sales of eight vehicle models on Oct. 1, the company said on Friday, after correcting overstated mileage readings in its second cheating scandal this year.

BMW says it plans to offer electric X3 SUV and Mini models

(Reuters) - German luxury auto maker BMW AG said Friday it will offer all electric versions of its next generation BMW X3 compact sport utility vehicle and electric Mini models, expanding its entries in the emerging electric luxury vehicle market.

Qualcomm to fight EU antitrust charge at November 10 hearing: sources

BRUSSELS (Reuters) - U.S. chipmaker Qualcomm will attempt to fend off EU antitrust charges at a hearing on Nov. 10 that it used anti-competitive methods to squeeze out a rival, two people familiar with the matter said on Friday.

Greece Says It's "Safe" From Deutsche Bank Turmoil

"We now have the tools, which didn't exist in the past, to tackle difficult situations," Bank of Greece Governor Yannis Stournaras tells reporters in Athens, when asked about developments in European banking system. Phew...

Bloomberg reports that

"Greek banks not at risk from turmoil in European banks," says Stournaras, who is also a member of the Governing Council of the ECB, after meeting with Greek PM Alexis Tsipras.

The Greek economy showing positive signs, Tsipras reassured that next bailout review will be concluded promptly.

Stournaras, Tsipras also discussed conditions for Greece's inclusion in ECB's QE program.

* * *


Cash Funding Shortage Soars To Highest Since Financial Crisis In Repo

Two days ago we noted that as we approached the quarter end's window dressing, when the financial system's balance sheet most closely approaches what it would be like without Fed backstops if only for regulatory purposes, General Collateral - a closely followed indicator of dollar funding costs and thus of cash availability - spiked to the highest in 7 years, surging to 0.85% after opening the day at 0.68%.

We expected this number to keep rising as we neared the Sept 30 quarter end, and sure enough it did not disappoint: as SMRA points out, as of this morning, the overnight general collateral rate has soared to 1.25% - indicative of where funding would be had the Fed hiked not once but three times in 2016 - from an average of 0.89% yesterday. This is the highest that the GC rate has been since the financial crisis.

For those unfamiliar with GC repo, here is a quick primer from the ICMA:

General collateral or GC is the range of assets that are accepted as collateral by the majority of intermediaries in the repo market, at any particular moment, at the same or a very similar repo rate --- the GC repo rate. In other words, the repo market as a whole is indifferent between general collateral securities. They are close substitutes for each other. GC assets are high quality and liquid, but none is subject to exceptional specific demand compared with very similar assets. The GC repo rate is therefore driven purely by the supply of and demand for cash (not by the supply of and demand for individual assets). In other words, GC repo can b ...

As Europe's Dollar Shortage Intensifies, Funding Pressure Surges Most In 4 Years

As the world wakes up to the fact that Deutsche Bank is not Lehman - it's massively bigger, and massively more systemic, oh and it has depositors - contagion is spreading through global funding and asset markets.

DB share price just hit single-digits...

And the expectations of a major debt haircut soar (CoCos hit record lows)

With Deutsche Bank Sub CDS now at record highs (remember Senior still supressed a little via ECB buying systemically)

And that has crushed the European banking system... (with European bank credit risk soaring, despite the ECB's bond-buying overlay)

EUR FRA/OIS spreads shot up 280bps in the last 2 weeks - from record lows! (the biggest percentage surge in counterparty risk since 2011's crisis began)

NXP Can Help Qualcomm Shift Its Gears

Qualcomm remains too reliant on smartphone chips; a deal with NXP would add diversity.

Europe's Rising Inflation Little More Than Energy Jolt

Inflation is finally rising in the eurozone. But the European Central Bank can't take much of the credit. All the movement is in energy prices.

H&M Turnaround Will Take More Than Cooperative Weather

Third-quarter numbers offered scant evidence of recovery at the Swedish fashion retailer.

The Tell: Trump's 'ugly' claim about stocks is backed by Morgan Stanley economist

"We are in a big fat ugly bubble and we better be careful," declared Republican presidential nominee Donald Trump at the first of three debates with Democratic rival Hillary Clinton on Monday.

Europe Markets: European stocks score a fillip from Deutsche Bank to end up

European stock markets on Friday erase earlier sharp losses and close slightly higher as concerns over Deutsche Bank's financial health subside on hopes the lender will pay a lower-than-feared fine to U.S. regulators.

Why regular therapy isn't good enough for millennials

America can't decide what to make of millennials. Neither can its therapists.

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