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06Feb2018 Market Update: Wall Street Roller Coaster Runs For A 3rd Session, Short-Sellers Vs BTFD'ers, US Stock Indexes Are See-sawing Between Positive And Negative Territory, Crude, US Dollar And Gold All Slip

Written by Gary

Punxsutawney Phil sees shadow, six more negative sessions say experts (SPY -0.1%). Volatile Dow has traded over a 900-point range in up-and-down stock session.


Here is the current market situation from CNN Money

North and South American markets are mixed. The Bovespa is higher by 1.33%, while the IPC is leading the S&P 500 lower. They are down 2.27% and 0.14% respectively.

Traders Corner - Health of the Market

Looking at the last three columns (below), 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.

Wall Street drops in volatile trade after steep falls

(Reuters) - U.S. stocks fell in volatile trading on Tuesday, as a pullback from record highs steepened following the biggest one-day declines for the S&P 500 and Dow in more than six years.

Market volatility spurs some funds to look again at currency hedging

LONDON (Reuters) - A pick up in currency market volatility over the last few days after years of suppression by central banks' easy-money policies has prompted some investors to look again at protecting against, or profiting from, sharp moves.

Senate spotlights virtual currencies as bitcoin price swings

WASHINGTON (Reuters) - Digital currencies such as bitcoin were in the spotlight again on Tuesday as lawmakers in the U.S. Senate questioned top markets watchdogs over how to better regulate the highly volatile and risky emerging asset class.

Dividend plays on slippery ground as bond yields steepen

(Reuters) - After a decade of easy-money policy that cut bond yields to almost nothing and lifted U.S. stock markets to records, companies that pay big dividends now look among the most exposed as Federal Reserve interest rate rises pull returns on government debt higher.

Stock sell-off overdue, investors lick their wounds and hunt

The speed of Monday's jaw-dropping sell-off on Wall Street had traders and investors bumped and bruised. But few seemed surprised that a pullback had actually happened. Some were looking for the right time and opportunity to wade back in - but wary of catching a falling knife.

Bitcoin rebounds from three-month low in volatile trade

NEW YORK (Reuters) - Bitcoin recovered from three-month lows below $6,000 in choppy trading on Tuesday, but worries lingered about a global regulatory clampdown and moves by banks to ban buying bitcoin with credit cards.

After profit beat, GM looks to trucks, SUVs to rev up margins

DETROIT (Reuters) - General Motors Co said on Tuesday a richer mix of full-size pickups and mid-size SUVs in North America should help it offset higher commodity costs in 2018 and maintain pretax margins above 10 percent.

Planemakers look at higher output to meet demand

SINGAPORE (Reuters) - The world's largest planemakers signaled a possible increase in output of their most popular passenger jets on Tuesday, highlighting their confidence about growth in demand for air travel.

Waymo may try to push Uber ex-CEO's buttons in car secrets trial

SAN FRANCISCO (Reuters) - Uber's ex-Chief Executive Travis Kalanick must subdue his notorious hot-headed demeanor and calmly withstand hostile questioning to appear sympathetic to jurors when he is cross-examined by Alphabet Inc's Waymo as early as Tuesday during a trade-secrets trial, legal experts said.

Goldman Exposes America's Corporatocracy - Wage Growth Is Slowing, Not Rising

By now most market participants have been able to see through the smoke and mirrors of Friday's 'explosive' wage growth data (driven by a drop in hours worked and declined on a weekly basis) but the narrative remains one of soaring wage growth and inflation anxiety on mainstream media today.

Perhaps that is why Goldman Sachs penned a rather fascinating report over the weekend that played down wage growth stories dramatically and - most surprisingly - pointed the squid-finger at the ever-increasing concentration of American business as the reason why... in other words, enabling oligopolistic (or monopolistic) economies across various sectors has crushed the American Dream for many - and will continue.

Goldman's Jan Hatzius notes that the wage data released last week provided positive early indicators of a potential reacceleration of wages, which disappointed in 2017, but a strong of recent data misses in the various wage series - including the Atlanta Fed wage tracker and median weekly wages series from the household survey - have pushed down our broader wage growth tracker to just 2.1% as of Q4, as shown below.

More broadly, the moderate pace of wage growth over the last couple of years has fallen short of the expectations of many observers.

While the labor share - the part of national income paid to workers—has recently continued its decades-long decline, US corporate profit margins have risen fu ...

What The Crypto Crash & Stock Market Plunge Have In Common

Authored by Adam Taggart via PeakProsperity.com,

Only one thing matters in bubble markets: sentiment

Yesterday saw Jerome Powell sworn into office as the new Chairman of the Federal Reserve, replacing Janet Yellen. Looking at the sea of red across Monday's financial markets, Mr. Powell is very likely *not* having the sort of first day on the job he was hoping for...

Also having a rough start to the week is anyone with a long stock position or a cryptocurrency portfolio.

The Dow Jones closed down over 1,200 points today, building off of Friday's plunge of 666 points. The relentless ascension of stock prices has suddenly jolted into reverse, delivering the biggest 2-day drop stocks have seen in years.

But that's nothing compared to the bloodletting we're seeing in the cryptocurrency space. The price of Bitcoin just broke below $7,000 moments ago, now nearly two-thirds lower from its $19,500 high reached in mid-December. Other coins, like Ripple, are seeing losses of closer to 80% over the same time period. That's a tremendous amount of carnage in such a short window of time.

And while stocks and cryptos are very different asset classes, the underlying force driving their price corrections is the same -- a change in sentiment.

Both markets had entered bubble territory (stocks much longer ago than the cryptos), a ...

That Was Just The Start: Risk Parity, CTAs Are In Process Of Selling $200 Billion

Now that inverse VIX ETFs have effectively blown up, suffering "termination events" like XIV earlier today, one of the forming bullish market narratives is that there will be no incremental "squeezed" buying of VIX from this key vol-selling group. Of course, there is a perfectly obvious flipside to that which few have pointed out, namely that holders of the inverse ETPs lost $3.4bn as the products went bankrupt, which removes a steady source of volatility supply over the last year.

But a bigger question is whether the vol selling is indeed over, and according to a just released analysts from Bank of America the answer is a resounding no. In a note from BofA's Benjamin Bowler, the derivatives expert writes that the ETP driven vol explosion which we described in painful detail previously, is just the beginning.

Here's why.

While BofA's model implements position changes in response to a given day's moves on the close the same day, in reality, both risk parity and CTA strategies operate over varying horizons. In any case, the bank's derivatives team expects actual rules-based risk parity and CTA strategies to implement significant allocation changes within a few days.

So, with BofA assuming $200bn in rules-based risk parity strategies and $250bn in model-driven CTAs, then its models estimate $140bn of global equity unwinds as a result of Friday's moves and another $60bn as a result of Monday's moves.

One Of The Greatest Squeezes Of All Time?

Authored by Kevin Muir via The Macro Tourist blog,

It seems like just yesterday the overly confident bulls were openly taunting any market participant that dared counsel about the increasing risks in the equity market.

"You don't get it. Trump's tax policies have ushered in a new era of corporate profitability. Why fight the rise? Nothing can stop this freight train."

Yadayadayada. It's always the same. Markets make opinions, not the other way round.

All of sudden, in less than a week, the S&P 500 has given up 200 points.

But what happened? Why the change of heart?

Well, as much as I would like to point to a specific economic release, or some other geopolitical development, the truth of the matter is that there really was no catalyst. Equities were simply up on a stick, with everyone chasing the ever-rising market. It was made worse by the new era of electronic trading that favours VWAP or TWAP type orders that spread the buying out over the course of the day resulting in a relentless drip higher. This had the effect of tricking market participants into believing that volatility had permanently disappeared. And in today's low alpha world, too many investors leaned on the short equity volatility trade to pick up yield.

I have written about this risk extensively.

How Stimulus Made a Soft Landing Harder

The tax cuts and high valuations so many have been cheering have made the Fed's job even harder—and could end up being the bull market's undoing.

If You Fear U.S.​Inflation, Buy Asia

U.S. markets are panicking about the prospect of higher, wage-driven inflation. U.S. wage inflation should be rather good for certain assets, however.

Are Americans Falling Out of Love With Chocolate?

As Valentine's Day approaches, investors should ask: How special is chocolate? Cocoa-based candy has maintained much of its appeal even as U.S. consumers have turned away from other sugary or highly processed foods. But cracks are starting to show.

November 2017 CoreLogic Home Prices Up 6.6% Year-over-Year

Written by Steven Hansen

CoreLogic's Home Price Index (HPI) shows that home prices in the USA are up 6.6 % year-over-year year-over-year (reported up 0.5 % month-over-month). CoreLogic HPI is used in the Federal Reserves' Flow of Funds to calculate the values of residential real estate.

December 2017 Trade Balance Again Worsened

Written by Steven Hansen

Trade data headlines show the trade balance again worsened from last month.

Therese Poletti's Tech Tales: Waymo and Uber are hurling mud, and no one will emerge unscathed

After the first complete day in Waymo vs. Uber, it's clear that neither company in this closely watched trial is going to emerge clean from the biggest legal case in Silicon Valley, which is spilling dirty little secrets from both sides.

Deep Dive: Five-star fund managers find 'idiosyncratic' companies to beat international benchmark

The AMG Managers Pictet International Fund buys 'attractive companies at attractive prices.'

In One Chart: Why the market's leaders could be most at risk in a stock selloff, in one chart

Monday's weakness was concentrated in some of the names that had recently been among Wall Street's biggest stand outs, and the trend of market leaders leading the way lower may just be getting started.

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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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