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28Feb2017 Market Update: Wall Street Down Moderately, WTI Crude In The High 53 Handle, U.S. Economy Expanded At A Slower Pace, And Expectations Of A Rebound In U.S. Shale Production Are Expected

Written by Gary

The major indexes gaped down on the opening bell and after the opening fell off sharply, further deepening session losses. The afternoon session is showing some paring of morning losses (SPY -0.2%), but US markets remain moderately lower. It appears that traders are showing an abundance of caution before President Trump's address to Congress tonight.


Here is the current market situation from CNN Money

North and South American markets are broadly lower today with shares in Brazil off the most. The Bovespa is down 1.18% while Mexico's IPC is off 1.11% and U.S.'s S&P 500 is lower by 0.24%.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 75%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 66%
Investors Intelligence sets the breath Above 50 bullish 69%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. +8.64
StockChart.com NYSE % of stocks above 200 DMA Index ($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 ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 78%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 23.51
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 86.50
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 11,516

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.

Target's profit outlook sinks retail stocks

(Reuters) - Target Corp shares plunged on Tuesday after executives issued a full-year profit forecast that fell well below analyst estimates and said the retailer would lower prices to compete with deep-discounting rivals.

Dow set to break 12-day winning run; Trump speech looms

(Reuters) - U.S. stocks traded lower on Tuesday, setting up the Dow to snap a 12-day winning streak, as financial and consumer discretionary stocks weighed and investors awaited President Donald Trump's speech to a joint session of Congress.

U.S. economy slowed in fourth quarter despite robust consumer spending

WASHINGTON (Reuters) - The U.S. economy expanded at a slower pace in the fourth quarter, as previously reported, and appeared to remain on a moderate growth path as President Donald Trump took office with a promise to reinvigorate manufacturing and protect jobs.

OPEC compliance with oil curbs rises to 94 percent in February: Reuters survey

LONDON (Reuters) - OPEC has cut its oil output for a second month in February, a Reuters survey found on Tuesday, allowing the exporter group to boost already strong compliance with agreed supply curbs on the back of a steep reduction by Saudi Arabia.

With businesses split on U.S. border tax, wider reform looks shaky

WASHINGTON (Reuters) - Major U.S. corporations are going to war in Washington over a Republican 'border adjustment' tax proposal meant to boost exports over imports, with lawmakers in Congress coming under pressure from some of the nation's biggest employers.

Proxy proposal on Apple directors defeated at meeting

CUPERTINO, Calif. (Reuters) - Apple Inc shareholders defeated a proxy proposal on Tuesday at the iPhone maker's annual shareholder meeting that would have let them nominate two directors on the company's board.

JPMorgan eyes bigger investor payouts as it nears capital needs

(Reuters) - No. 1 U.S. bank JPMorgan Chase & Co may return more money to shareholders than it earns over the next few years, it forecast on Tuesday, an encouraging sign for investors who have been waiting for richer dividends and share repurchases.

TransCanada's U.S. Keystone XL lawsuit suspended: arbitration court

CALGARY, Alberta (Reuters) - TransCanada Corp has suspended a $15 billion suit filed against the United States over the Keystone XL pipeline after U.S. President Donald Trump approved the project last month.

Trump to shift biofuel blending burden off U.S. refiners: sources

(Reuters) - U.S. President Donald Trump intends to revamp the national biofuel program to ease regulations on oil refiners while providing new incentives for ethanol and biodiesel production, people familiar with the plan told Reuters on Tuesday.

Police Sharpshooter Accidentally Opens Fire At President Hollande Speech, Two Injured

A police sharpshooter accidentally opened fire during a speech by French President Francis Hollande, injuring two people in the process, AP reported. The incident happened on Tuesday afternoon in Villognon, Charente in western France where Hollande was preparing to reveal the LGV high speed rail line, when a shot was clearly heard in the background of event, prompting the French president to stop and look around concerned.

"I hope that wasn't serious," Hollande said nonchalantly after the loud shot rang out, before continuing with his speech at the unveiling of the LGV high speed rail line.

Coup de feu pendant le discours de François Hollande à Villognon lors de l'inauguration de la LGV Tours Bordeaux pic.twitter.com/c0Sp5dpLty

— F3 Poitou-Charentes (@F3PoitouChtes) February 28, 2017

According to Soud Ouest, the weapon's safety mechanism was not on when a security services agent, located on a nearby rooftop, accidentally fired.

Although it has been confirmed that two people were injured as a result, there are conflicting reports as to who they were. Initial reports suggested the agent shot himself in the leg, although it now seems a waiter and a member of the LGV maintenance crew both received leg injuries, according to L'Express.

Incident de l'inauguration de la LGV Tours-Bordeaux. Coup de feu accidentel. Un vigile s'est tiré dans la jambe...

— Eric Béziat (@ericbeziat) February 28, 2017

Nervous Retailers Launch Ad Slamming Border Adjustment Tax

How do you know America's retailers are nervous? They make an ad. And while usually it is meant to "incept" consumers to have a strong desire for a particular product or service, in this case the object of the ad is something every retailer across the US hates with a passion: the Border-Adjustment Tax, or BAT.

The proposed BAT, which House Republicans are looking to institute as a way to offset the loss of federal revenue from Trump's proposed tax cuts, and to support domestic manufacturing, is loved by US exporters but hated by the retail industry because it raises taxes on imports (while encouraging exports). As a result, on Tuesday morning, the US National Retail Federation, launch the following commercial which is meant to explain the fundamental dilemma faced by retailers - and ultimately consumers - should BAT pass: consumers everywhere like low prices, while the benefits of supporting domestic manufacturing are concentrated in one industry. Rising import taxes will force retailers to pass through prices to consumers which would lead to less end demand, reduced consumption and even more carnage among the US retail sector (which as the latest results from Target demonstrate, is already in pain).

However, if a recent news report is accurate, the ad will have no impact whatsoever. According to Bloomberg, House Speaker Paul Ryan - the biggest proponent of the BAT - has won over an unlikely ally to salvage his controversial tax plan: Steve Bannon. Trump's top strategist once described Ryan as "the enemy," but now the former Breitbart News chief is the speaker's best chance to win approval for his border-adjusted tax, which Republicans currently say has almost no hope of clearing the Senate. ...

Treasury Curve Collapses To Pre-Trump Flats, Banks Don't Care

It's not NIM stupid...

The UST 2s30s curve has tumbled flatter and is now below election night flats - banks don't care...

And the absolute level of real yields have plunged back to earth as Trumpflation bets fade fast.

Please... please... STFU with the "banks are surging due to steepening yield curves helping NIM" narrative... this is all about allowing the bank execs out and deregulation (and releveraging) hope.

Bond Yield "Regime Line" Being Tested

Via Dana Lyons' Tumblr,

The 10-Year U.S. Treasury Yield is testing the "ultra low-rate" bounds again.

A month ago, we noted the significance of the post-election spike in bond yields. Of course, yields have been in a secular decline since topping out in the early 1980′s. However, since 2007, just prior to the financial crisis, yields experienced an acceleration to the downside. This acceleration marked what we considered a new regime for bond yields: an "ultra low-rate" regime. For nearly 10 years, this ultra-low rate regime in the 10-Year U.S. Treasury Yield (TNX) was contained by a Down trendline stemming from the 2007 peak in yields. The post-election move sent the TNX breaking above that trendline. Thus, while yields still remained well within the 30-plus year secular downtrend, the breakout, we surmised, signified the end of the ultra low-rate regime.

image

Of course, this is all subject to change if yields decide to cross the threshold back into the ultra low-rate zone. That threshold in the TNX, in our view, would appear to be the broken post-2007 Down trendline. Presently, that trend line is in the vicinity of the 2.31% level. Also in that vicinity are two key Fibonacci Retracement levels:

The 23.6% Fibonac ...

The Stock Market's Crowded House

Investors are piling into stocks that do best when growth picks up and inflation runs hotter. What if they are wrong?

Will Big Wins Equal Big Payoff at Workday?

Workday has shown it can land big clients—the key for investors is, at what cost.

Trumpflation vs Negative Rates: The Battle Endures

Why have U.S. bond yields stopped moving higher? Look to Europe, where German two-year yields have fallen to a record low. Monetary policy isn't done yet in determining the path for bond markets.

Deep Dive: 10 best-performing stocks in February include Monopoly maker Hasbro

Health care is the top sector, as Trump seeks to redo the Affordable Care Act.

Capitol Report: How the stock market has reacted to State of the Union speeches

President Donald Trump is due to speak to Congress on Tuesday night, and investors will be looking for plenty of clues about tax policy, Obamacare and other market-sensitive items from his speech. Here's how the stock market has performed after such speeches.

The Technical Indicator: Dow sustains 30-year technical breakout, vies for historic record-setting streak

Technically speaking, the Dow Jones Industrial Average is vying for a 13th straight record close, a stretch never registered in its history. Meanwhile, the S&P 500 has rallied from first support — the 2,350 area — reaching a nominal all-time high. More plainly, the U.S. benchmarks' February price action remains technical, and still supports a bullish view.

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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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