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29Dec2016 Market Update: Wall Street Quiet, Flat And Unattractive, Crude Prices Slip Along With The US Dollar

Written by Gary

U.S. stocks have slipped and are headed for a second day of losses as bank and technology stocks came under pressure (SPY -0.1%). The US dollar slips off highs into the 102 range. WTI oil futures passed briefly into negative territory. Data showed that oil supplies registered an unexpected inventory build. Forget about Dow 20K: Bitcoin's about to hit $1,000.

Here is the current market situation from CNN Money

North and South American markets are mixed today. The IPC is up 0.84% while the Bovespa gains 0.14%. The S&P 500 is off 0.76%.

Traders Corner - Health of the Market

Index Description Current Value Members Sentiment: % Bullish (the balance is Bearish) 70%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 64%
Investors Intelligence sets the breath Above 50 bullish 66% Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -10.64 NYSE % of stocks above 200 DMA Index ($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 $OEXA200R rises above 65%
Secondary Bullish Indicators:
a) RSI is POSITIVE (above 50)
b) Slow STO is POSITIVE (black line above red line)
c) MACD is POSITIVE (black line above red line)
70% NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 71% S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. % 10 Year Treasury Note Yield Index ($TNX) ten year note index value 24.64 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 82.06 NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 11,068

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.

Tech, bank stocks set Wall St. for second day of losses

(Reuters) - U.S. stocks slipped on Thursday and were headed for a second day of losses as bank and technology stocks came under pressure.

U.S. goods trade deficit widens; labor market near full strength

WASHINGTON (Reuters) - A drop in U.S. exports last month pushed the country's trade deficit in goods higher while the number of Americans filing for unemployment benefits fell last week in a positive sign for the labor market.

Trump tax reforms could depend on little-known 'scoring' panel

WASHINGTON (Reuters) - President-elect Donald Trump's goal of overhauling the U.S. tax code in 2017 will depend partly on the work of an obscure congressional committee tasked with estimating how much future economic growth will result from tax cuts.

Honda to recall about 650,000 Odyssey minivans in U.S.

DETROIT (Reuters) - Honda Motor Co said on Thursday it will recall nearly 650,000 Odyssey minivans in the United States covering 2011 to 2016 model years because second-row seats may not lock in the event of a crash.

Exclusive: J&J discussing breaking up Actelion in an acquisition - sources

(Reuters) - Johnson & Johnson is negotiating a deal to acquire Swiss biotechnology company Actelion Ltd that would separate its commercialized portfolio from its research and development assets, people familiar with the matter said on Thursday.

U.S. crude oil stocks rise, while products draw down: EIA

(Reuters) - U.S. crude oil stocks unexpectedly rose last week, while gasoline and distillate product inventories dropped, the U.S. Energy Information Administration said on Thursday.

Amazon looks to the sky to store products

(Reuters) - Inc has filed for a patent to use airships to store products and serve as a base for delivery-drones.

Peabody extends financing deadlines after creditor lawsuit

WILMINGTON, Del. (Reuters) - Peabody Energy Corp said on Thursday the deadline for creditors to join financing deals aimed at bringing the largest U.S. coal miner out of bankruptcy had been extended after large investors sued to slow the process.

U.S. refiners face severe labor shortage for deferred maintenance

(Reuters) - After years of running flat out, U.S. Gulf Coast refiners are lining up repairs to plants in 2017 - but facing a severe labor shortage that could delay work, drive up costs and raise accident risks.

A Tale of Two Housing Markets: Hot, And Not So Hot

Submitted by Charles Hugh-Smith via OfTwoMinds blog,

If we had to guess which areas will likely experience the smallest declines in prices and recover the soonest, which markets would you bet on?

Though housing statistics such as average sales price are typically lumped into one national number, this is extremely misleading: there are two completely different housing markets in the U.S. One is hot, one is not so hot.

Just as importantly, one may stay relatively hot while the other may stagnate or decline.

All real estate is local, of course; there are thousands of housing markets if we consider neighborhoods, hundreds if we look at counties, cities and towns and dozens if we look at multi-city metro regions.

But consider what happens to average sales prices when million-dollar home sales are lumped in with $100,000 home sales. The average price comes in around $500,000-- a gross distortion of both markets.

Here's a real-world example of what has happened in hot markets over the past 20 years. The house in question is located in a bedroom community suburb in the San Francisco Bay Area metro area. The home was built in 1916 and has 914 square feet, no garage and a small lot.

It sold in 1996 for $135,000. This was a bit under neighborhood prices due to the lack of garage and small size, but nearby larger homes sold in the $145,000 to $160,000 range.

The house was sold in 2004 for $542,000, and again in 2008 for $575,000. It is currently valued at $720,000. The neighborhood average is $900,000.

According to the Bureau of Labor Statistics inflation calculator, inflation since 1997 has added 50% to the cost of living: $1 in 1997 equals $1.50 in 2016.

Adjusted for inflation of 2.5% annually, calculated cu ...

Thursday Humor? Oman To Join Saudi "Anti-Terror Alliance"

When we first heard about this story, we thought it was a joke.

Wednesday humor

— zerohedge (@zerohedge) December 29, 2016

As it turns out, it was dead serious, and as Bloomberg reports, in an attempt to cozy up with Riyadh, Oman has told Saudi Arabia - perhaps the biggest single state sponsor of terrorism, one which even Americans can now sue for its involvement in the September 11 terrorist attack - that it will join "a Saudi-led military alliance", a sign that Iran's closest ally in the region is ready to improve its ties with the kingdom and/or sever ties with Tehran. Oman's ties with Saudi Arabia and its allies in the Gulf Cooperation Council have been strained because of its close relationship with Iran, the kingdom's biggest regional rival.

But while we can understand shifting regional alliances, we - and everyone else - laughed out loud when reading that in order to show his "ideological proximity" to the Saudis, Oman's defense minister sent a letter to Deputy Crown Prince Mohammed bin Salman, in which the small Gulf nation decided to join the... wait for it, Islamic Military Alliance Against Terrorism.


But back to the latest Gulf state entrant in the Saudi sphere of influence. As Bloomberg reports, the Saudi Prince will go to Oman in the coming weeks to pave the way for a visit by King Salman. The king's trip would help re-establish security, military and eco ...

Relationship Between The Dollar And Inflation Expectations Has Completely Reversed Since Summer

Submitted by Eric Bush via Gavekal Capital blog,

At least since 2003 (which is when our data on TIPS begins), the dollar and breakeven inflation expectations have had a negative relationship. Said differently, when the dollar strengthens (as it has done recently) inflation expectations tend to fall and vice versa. (note: the USD index is inverted in all the charts below)

A strong negative relationship has been especially true since 2010 when the correlation between the USD index and 10-year TIPS implied breakeven inflation has increased to a robust -80%. We know, of course, that in the short-term strong relationships can break down and sometimes completely reverse. This type of complete reversal is what has occurred since this summer.

Since 6/30/2016, the correlation between the dollar and inflation expectations has skyrocketed to +92%. So the dollar has gone up AND inflation expectations have increased as well step for step. Ultimately, we believe that these two series will likely revert back to the more traditional relationship and the "gap" that has opened up in the first and second chart below should close.

Dan Loeb Will Pay More Than $2 Million To His New 32-Year-Old Head Quant

It was some time back in 2009 when we first predicted that in a world in which central banks have taken away the "fun" from fundamental analysis (having effectively nationalized capital "markets"), that in the not too distant future quants - or "traders" whose only value added is to react rapidly after the news and/or be the fastest to chase any given momentum wave - would be paid far better than plain-vanilla fundamental analysts - those who use conventional financial analysis to make price forecasts, and whose work has traditionally been highly prized by hedge funds, yet are now on their way to becoming obsolete in the New Normal.

For the likes of Dan Loeb, and his Third Point, once a staunchly fundamental-analysis only driven hedge fund, that time has arrived.

According to Bloomberg, Dan Loeb will pay Matt Ober, a quant, pardon "data scientist" who left WorldQuant for Third Point more than $2 million according to a breach of contract claim filed by his former employer.

Matt Ober is smiling

Ober, 32, who starts next month as Third Point's "chief data scientist", i.e., head quant, said in a filing that he will be paid a base salary of $200,000, the same as WorldQuant gave him, plus bonuses, and disputed that $2 million in compensation is guaranteed.

As Bloomberg adds, Loeb is joining other hedge fund names in developing big data and quantitative ...

The Best and Worst U.S. Calls of 2016

From central banks to accounting scandals, from mergers to shadow financing, Heard on the Street columnists aim to provide useful advice for readers. Here's where we got it right—and wrong.

The Best and Worst Europe Calls of 2016

From central banks to accounting scandals, from mergers to shadow financing, Heard on the Street columnists aim to provide useful advice for readers. Here's where we got it right—and wrong.

The Best and Worst Asia Calls of 2016

From central banks to accounting scandals, from mergers to shadow financing, Heard on the Street columnists aim to provide useful advice for readers. Here's where we got it right—and wrong.

Futures Movers: Oil unable to hold bounce after supply data

Investors watching out for data due later that will confirm whether U.S. oil supplies are falling or rising. Prices are steady ahead of that.

The Moneyologist: Moneyologist revisited: What happened when this father stopped giving his kids $7,500 every year?

Six letter-writers over six days reveal whether they took this column's advice.

Market Extra: Social media ETF falls out of favor despite expected Snap IPO

In a sign that market participants may be losing enthusiasm for the formerly highflying sector, the prospect of one of the buzziest social media companies debuting on the stock market hasn't resulted in a flurry of buying for the Global X Social Media Index ETF, where assets have dropped by about a third since the news of Snap's IPO.

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