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20Dec2016 Market Update: WTI Crude And US Dollar Take Nose Dive, Wall Street May Follow, Fasten Seat Belts

Written by Gary

Wall Street rolls over in early afternoon trading (SPY +0.2%) falling from morning session highs. WTI crude prices suddenly waterfall 0.63 cents and the US dollar matches crude's fall. Short-term indicators turning bearish.


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 0.51% while Mexico's IPC is up 0.25% and U.S.'s S&P 500 is up 0.23%.

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 79%
Investors Intelligence sets the breath Above 50 bullish 66%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. +13.59
StockChart.com NYSE % of stocks above 200 DMA Index ($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 $OEXA200R rises above 65%
Secondary Bullish Indicators:
a) RSI is POSITIVE (above 50)
b) Slow STO is POSITIVE (black line above red line)
c) MACD is POSITIVE (black line above red line)
78%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 70%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 71%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 25.70
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 83.49
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 11,167

What Is Moving the Markets

Here are the headlines moving the markets.

Dow closing in on 20,000; Nasdaq hits record high

(Reuters) - The Dow and the Nasdaq hit record highs on Tuesday, with the blue-chip index just 13 points shy of the 20,000 mark, a level it has never scaled.

Linde, Praxair agree outline for $65 billion merger and ambitious cost savings

FRANKFURT (Reuters) - German industrial gases group Linde and U.S. suitor Praxair have agreed an outline for a $65 billion-plus merger, with the combined company to be run out of the United States by Praxair's chief executive.

Apple's new AirPods tough to recycle: report

SAN FRANCISCO (Reuters) - Apple Inc's new wireless headphones could be a problem for recyclers, according to an electronics firm that took apart the device to review its component parts.

UK PM and Murdoch did not discuss Sky bid at September meeting: minister

LONDON (Reuters) - Prime Minister Theresa May did not discuss with Rupert Murdoch the proposed takeover of UK pay-TV group Sky by the tycoon's Twenty-First Century Fox at a September meeting, Britain's media minister said on Tuesday.

Morgan Stanley to pay $7.5 million over customer protection violations

WASHINGTON (Reuters) - Morgan Stanley will pay $7.5 million to settle civil charges that it violated customer protection rules when it used trades involving customer cash to lower its borrowing costs, U.S. securities regulators said on Tuesday.

Rite Aid to sell 865 stores to Fred's

(Reuters) - Rite Aid Corp said it would sell 865 stores to Fred's Inc for $950 million to satisfy antitrust concerns over its proposed takeover by Walgreens Boots Alliance Inc.

Banks loosen lending standards for fourth straight year: U.S. regulator

WASHINGTON (Reuters) - Large U.S. banks raised their own risks by pushing down lending standards for a fourth consecutive year in 2016, one of the top federal banking regulators said on Tuesday.

U.S. probes a million Fiat Chrysler vehicles for roll-away crashes

WASHINGTON (Reuters) - U.S. vehicle safety officials said on Tuesday they have launched an investigation into about a million Fiat Chrysler Ram pickup trucks and SUVs prompted by complaints by some owners that the vehicles rolled away and crashed after being parked.

Kimberly-Clark, rival CMPC allegedly fixed Chile diaper prices-report

SANTIAGO (Reuters) - Kimberly-Clark Corp and competitor CMPC allegedly fixed prices for diaper products in Chile between 2002 and 2009, according to a document sent to the nation's competition regulator, daily newspaper La Tercera reported on Tuesday.

Two Minimum Wage Charts for Andy Puzder

Authored by Steve H. Hanke of the Johns Hopkins University. Follow him on Twitter @Steve_Hanke.

Donald Trump has tabbed Andy Puzder to lead the Department of Labor. Puzder is the CEO of CKE, the restaurant outfit (read: Hardee's and Carl's Jr.). CKE, thanks to Puzder saving it from the bankruptcy hammer, employs 75,000 workers (read: jobs). Puzder knows that "high" minimum wages, such as the $15 per hour one thrown around by progressives, is a job killer for those with poor job skills.

During his nomination hearings, Andy Puzder will no doubt be grilled about his views on "high" minimum wages. His inquisitors will trot out glowing claims about the wonders of a $15 per hour minimum wage, as did President Obama in his 2014 State of the Union address. As the President put it: "It's good for the economy; it's good for America." Not so fast.

The glowing claims about minimum wage laws don't pass the most basic economic smell tests. Just look at the data from Europe. The following two charts tell the tale and should be tucked into Andy Puzder's briefing portfolio.

There are six European Union (E.U.) countries in which no minimum wage is mandated (Austria, Cyprus, Denmark, Finland, Italy, and Sweden). If we compare the levels of unemployment in these countries with E.U. countries that impose a minimum wage, the results are clear. A minimum wage leads to higher levels of unemployment. In the 21 countries with a minimum wage, the average country has an unemployment rate of 11.8%. Whereas, the average unemployment rate in the seven countries without mandated minimum wages is about one third lower — at 7.9%.

2017 Trades - The Euro is Effectively a Call Option (Video)

By EconMatters

We delve into 2017 Trading Ideas focusing on the currency markets, specifically the Euro against the US Dollar being a buy from a good risk/reward setup of 1/3 in what is a very crowded trade right now as we close out 2016, i.e., the US Dollar "Is the only game in Town" trade.

There will be some time in 2017 when the Euro moves back up to 1.15 to 1.18 against the US Dollar, and let it play out at this upper end of the 2016 range for a breakout to the next level of 1.22 against the US Dollar. Every dog eventually has its day in major trading partners currency pairs. Believe it or not the Euro should finally get a reprieve in 2017 as the strong US Dollar starts exporting considerable inflation to Europe, and we like this risk/reward setup for a longer term trade in the Euro.

Morgan Stanley Fined $7.5 Million For Commingling Customer Cash In "Delta One" Desk Trades

On Tuesday, the SEC announced that Morgan Stanley will be fined $7.5 million to settle civil charges that it violated customer protection rules, when it used trades involving customer cash to lower its borrowing costs. The SEC said MS will settle the case without admitting or denying the charges, effectively letting slide a violation which, in an exaggerated format, was exposed as a quasi-criminal offense engaged in by Jon Corzine's now defunct MF Global.

Ok so, Morgan Stanley engaged in some creative "commingling" - what's the big deal, most banks do it. What makes this particular case curious is the basis of the commingling: it involves some of the more interesting, and abstract, concepts of modern finance, including Morgan Stanley's "Delta One" trading desk, as well as the rehypothecation of collateral, all of which participated in a complicated violation of customer protection.

While we present more details below, here is a quick primer on the Customer Protection Rule:

"it is intended to safeguard customers' cash and securities so that they can be promptly returned should the broker-dealer fail. The SEC order finds that from March 2013 to May 2015, Morgan Stanley's U.S. broker-dealer used transactions with an affiliate to reduce the amount it was required to deposit in its customer reserve account."

According to the SEC order, Morgan Stanley's transactions violated the Customer Protection Rule, which prohibits broker-dealers from using affiliates to reduce their customer reserve account deposit requirements.

In the SEC's order, the regulator says that Morgan Stanley had its affiliate, Morgan Stanley Equity Financing Ltd., serve as a customer of its U.S. broker-dealer, a relationship that allowed the affiliate to use mar ...

Property Investors Need to Step Out of Their Comfort Zone

The future of property could be niche. Specialist buildings typically offer higher returns than the old staples of commercial property investment.

Dow 20000: Nike Is Missing Out

Retail giant Nike is one of only two Dow Jones Industrial Average components that are down this year.

German Economy Gets in Festive Mood

Germany's widely watched Ifo index posted a strong showing in December, painting a hopeful picture for early 2017.

NewsWatch: Dow 20,000 tantalizingly close as 'Santa rally' takes stocks to new heights

U.S. stocks rise Tuesday, with the Dow and Nasdaq hitting their latest in a series of records as the market's recent upward trend—in particular a rally in bank stocks—continued.

The Wall Street Journal: Berlin on edge as police concede suspect in Christmas market truck attack may be wrong man

The German capital was on high alert Tuesday after authorities said the suspect they had detained in connection with a deadly truck rampage through a Christmas market may have been the wrong man.

Futures Movers: Oil prices jump with supply data in sight; natural gas slumps

Oil prices trade sharply higher ahead of a weekly supply update on crude inventories in the U.S.

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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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