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19Jan2017 Market Update: Wall Street Lower, Crude Prices Slip, US Dollar Showing Strength, Expect Market Volatility Next Week

Written by Gary

Wall Street is experiencing another sideways session (SPY -0.2%) ahead of the presidential inauguration tomorrow on light volume. The Dow on track to mark its fifth day of losses as investors stayed away from making risky bets ahead of Donald Trump's swearing-in as president on Friday.


Here is the current market situation from CNN Money

North and South American markets are lower today with shares in Brazil off the most. The Bovespa is down 0.47% while Mexico's IPC is off 0.43% and U.S.'s S&P 500 is lower by 0.25%.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 65%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 55%
Investors Intelligence sets the breath Above 50 bullish 68%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. +6.50
StockChart.com NYSE % of stocks above 200 DMA Index ($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 $OEXA200R rises above 65%
Secondary Bullish Indicators:
a) RSI is POSITIVE (above 50)
b) Slow STO is POSITIVE (black line above red line)
c) MACD is POSITIVE (black line above red line)
76%
StockChart.com NYSE Bullish Percent Index ($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 ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 74%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value

24.87

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 83.90
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 11,160

There will be "trouble for equity markets" if the yield on the 10-year U.S. Treasury note moves beyond 3%, warned Jeffrey Gundlach, while another bond king stated 2.6% was the key level to watch.

According to Bill Gross, the number is much more important than Dow 20K, the price of oil or dollar strength, as it would signal a bear bond market. The 10-year yield last stood at 2.49%. (above)

What Is Moving the Markets

Here are the headlines moving the markets.

Wall Street dips as investors ready for Trump's inauguration

(Reuters) - U.S. stocks fell on Thursday, with the Dow on track to mark its fifth day of losses as investors stayed away from making risky bets ahead of Donald Trump's swearing-in as president on Friday.

Exclusive: Aon nears $4.5 billion sale of benefits outsourcing unit - sources

(Reuters) - Insurance broker Aon Plc is in advanced talks to sell its employee benefits outsourcing unit to buyout firm Clayton Dubilier & Rice LLC for nearly $4.5 billion, people familiar with the matter said on Thursday.

Judge to block mega-merger of Anthem and Cigna: NY Post

(Reuters) - A federal judge is expected to block a proposed deal between health insurer Anthem Inc and Cigna Corp as soon as Thursday, the New York Post reported, citing sources.

U.S. regulator closes Tesla death probe; no evidence of defects

WASHINGTON (Reuters) - U.S. regulators said on Thursday they found no evidence of any defects in Tesla electric cars after investigating the death of a man whose Model S collided with a truck while he was using its Autopilot system, the first fatality involving semi-autonomous driving software.

U.S exchanges rent helicopter, drape banner in pursuit of Snapchat IPO

SAN FRANCISCO/NEW YORK (Reuters) - This past November, Nasdaq Inc hired a helicopter to film Manhattan's skyline using Snapchat's new video-camera sunglasses and sent the aerial footage to its social media followers.

Western Union settles U.S. money laundering allegations for $586 million

WASHINGTON (Reuters) - Western Union agreed to pay $586 million and admitted to turning a blind eye as criminals used its service for money laundering and fraud, the U.S. Department of Justice said in a statement on Thursday. With the help of Western Union agents, Chinese immigrants used the service to send hundreds of millions of dollars to pay human smugglers, wiring the money in smaller increments to avoid federal reporting requirements, U.S. authorities said. Prosecutors said

Exclusive: Pentagon, Lockheed near deal on $9 billion F-35 contract - sources

WASHINGTON (Reuters) - The U.S. Department of Defense and Lockheed Martin Corp are close to deal for a contract worth almost $9 billion as negotiations are poised to bring the price per F-35 below $100 million for the first time, people familiar with the talks said Wednesday.

Tech firm creates Trump monitor for stock markets

LONDON (Reuters) - Just in time for his inauguration, London-based fintech firm Trading.co.uk is launching an app that will generate trading alerts for shares based on comments made on social media by Donald Trump.

Starwood to buy Canada's Milestone Apartments REIT in $2.9 billion deal

(Reuters) - A unit of private investment firm Starwood Capital Group said it would buy Canada's Milestone Apartments Real Estate Investment Trust in a deal valued at about $2.85 billion.

More Cooperation Between America and China Than There Seems

Via The Daily Bell

Xi portrays China as global leader as Trump era looms ... China will build a "new model" of relations with the United States, President Xi Jinping said on Wednesday in a speech that portrayed China as the leader of a globalized world where only international cooperation could solve the big problems. -Reuters

With Trump focusing on domestic problems, China is stepping up to become an international moderator and consensus builder.

"Trade protectionism and self-isolation will benefit no one," Xi told the United Nations in Geneva. "Big countries should treat smaller countries as equals instead of acting as a hegemon imposing their will on others."

During his speech, Xi made an extraordinarily bold proposal, saying the world should unite on a variety of major issues supposedly tearing governments apart today, "everything from environmental protection to terrorism and nuclear disarmament."

"We will build a circle of friends across the whole world," Xi said. "We will strive to build new model of major country relations with the United States, a comprehensive strategic partnership of coordination with Russia, a partnership for peace, grow ...

Will The Fed Start Reducing Its Balance Sheet? Here Is Goldman's Answer

With the fate of Fed's balance sheet suddenly under Wall Street's spotlight, following last week's hints by several Fed presidents that a runoff in the balance sheet may be on the horizon and prompting various sellside analysts to share their thoughts. Overnight, Goldman too decided to opine on the rising debate of what happens next to the Fed's $4.2 trillion balance sheet, and cutting to the case, says that it continues to expect full reinvestments to end in the middle of 2018 (i.e., no runoff for at least 18 months), but adds that while "we would be very surprised to see a discussion of asset sales under Chair Yellen's leadership" a shift to "more active management of the maturity of new Treasury purchases could be an option; shortening the duration of new purchases would quicken portfolio runoff once it begins."

Goldman also confirms what other analysts have said previously, namely that "ending reinvestments would result in an increase in MBS issuance to private investors. For Treasuries, the impact on duration supply will depend on how the incoming administration chooses to adjust its sources of financing."

However, should inflation indeed spike up and surprise to the upside as Jeff Gundlach recently hinted, the Fed may have no choice but to engage in just this kind of balance sheet deleveraging, which many have said should have taken place prior to the Fed's launch of rite hikes in December of 2015.

For more details on Goldman's opinion, read the full Goldman Q&A on the Fed's Balance Sheet


Recent public comments from Fed officials have renewed interest in the outlook for the central bank's balance sheet. Here we tackle the most common questions from investors.

At the momen ...

Investors "Stunned" To Learn Hedge Funds Expense Bar Tabs, Private Jets, Trader Bonuses

With storm clouds already building above the hedge fund industry, which as reported last night posted deplorable results in 2016 as only 32% of fundamental and quantitative funds outperformed their benchmarks according to JPM data - the worst performance this decade - leading to the largest redemption requests since the financial crisis, as over $100 billion was withdrawn from the industry last year, the latest shock to hedge fund investors, already displeased with underperforming the S&P for years, is the realization that they also pay for many if not all hedge fund expenses, resulting in substantial payments over and above those envisioned by the conventional 2 and 20% model.

The reason for their confusion and/or anger is simple: as Reuters points out, some of the more prominent hedge funds such as Citadel LLC and Millennium Management LLC charge clients for such costs through so-called "pass-through" fees, which can include everything from a new hire's deferred compensation to travel to high-end technology. And it all adds up with investors often paying more than double the industry's standard fees of 2% of assets and 20 percent of investment gains, which in light of recent performance has already infuriated countless investors leading to a historic outflow from active to passive managed funds.

Clients of losing funds last year, including those managed by Blackstone Group LP's Senfina Advisors LLC, Folger Hill Asset Management LP and Balyasny Asset Management LP, likely still paid fees far higher than ...

Jewish Trust Sues Deutsche Bank For $3 Billion

Just when it seemed that no more lawsuits are possible for Germany's largest lender, which over the past two years has settled or otherwise paid billions to set aside a barrage of allegations of wrongdoing leading to the bank's suspension of bonuses for most senior bankers, today we learn that Deutsche Bank was sued by a Jewish charitable trust in Florida, alleging that the bank wrongly withheld as much as $3 billion from the heirs to a wealthy German family.

According to Bloomberg, the lawsuit claims the bank refuses to return the funds initially deposited by the Wertheim family in accounts opened at what is now Credit Suisse Group AG before the rise of the Nazis in Germany. Those accounts were later transferred to Deutsche Bank, according to the complaint filed Wednesday in federal court by Wertheim Jewish Education Trust LLC.

Deutsche Bank has "refused to cooperate with the heirs of the Wertheim family fortune in the recovery and return of the monies that they are withholding from the rightful heirs," and preventing the use of the funds for charitable and other purposes, according to the complaint filed in Fort Lauderdale.

While on the surface, the case looks mindane, the details are interesting.

The charitable trust is an heir to the descendants of Joseph Wertheim, a family that amassed a fortune by building the KaDeWe department store in Berlin and a textile and manufacturing empire in Frankfurt, according to the complaint. One of those descendants, Karl Wertheim, feared the German rise of anti-Semitism in the 1920s, moved his businesses to Spain and opened an account at Credit Suisse i ...

GE's Stock Rally Needs More Power

Fourth-quarter earnings will put the industrial giant's stock rally to the test.

ECB: Going Nowhere Despite German Inflation Anxiety

The ECB struck a dovish tone and the euro fell. The bigger picture is steady ECB policy even in the face of German worries about inflation.

How to Place Your Chips on Electric Cars

German chip maker Infineon has a stake in the car of the future, whoever makes it.

January 2017 Philly Fed Manufacturing Survey Significantly Improves and Remains In Expansion.

Written by Steven Hansen

The Philly Fed Business Outlook Survey improved and remains expansion. Key elements were strong.

Currencies: Dollar climbs after Draghi says no 'convincing' signs of inflation rise

The U.S. dollar rises against its major rivals, recovering off earlier weakness after European Central Bank President Mario Draghi said he didn't see any "convincing" pickup in eurozone inflation.

Investors are cheering student loan stocks ahead of President Trump

Will bets on Sallie Mae, Navient and others pay off?

Key Words: Rick Perry asks to rephrase risqué response to Al Franken, bipartisan laughter erupts

President-elect Donald Trump's nominee to run the Energy Department faced some tough questions in his confirmation hearing on Thursday, but the first one from Democrat Al Franken certainly wasn't one of them.

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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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