Written by Gary
Markets reacted ‘Meh’ to the FMOC meeting report melting higher at first and by the end of the session melting back down again. The U.S. Dollar eased back up to 100.00 and closed higher while WTI oil trended down and closed at the support level looking to test again tomorrow.
The Greek Friday deadline looms as the Greek PM meets with Putin trying to make payments to the IMF as Syriza faces the unenviable proposition of either completely giving up on its campaign promises or plunging the Greek economy and banking system into a drachma death spiral
By 4 pm the markets sorta didn’t do much in trending up or down. I think investors are waiting for the other shoe to drop as it is relatively obvious oil is going to fall further and they want to see how it affects Wall Street. Email me and I’ll tell you if you haven’t already guessed.
Todays S&P 500 Chart
Here is another disturbing thought on the coming oil glut. SA states that an Iran nuclear deal could open oil flood, hitting an already glutted market. The article goes on to say, “A nuclear agreement with Iran could lead to the easing of sanctions that in turn could cause crude to flood onto the market and depress prices even further, WSJ reports.
Iran’s oil minister says his country could double its exports to as much as 1M bbl/day within several months – another excuse to bet on lower prices . . .”
Some of us don’t need an excuse to ‘bet’ on lower prices as only a nuclear ‘accident’ in the middle of the Saudi oil fields would cause oil to rise. Here is the daily chart on WTI where you can clearly see the support is in danger of a downward breach and the next stop is in the mid 32’s set in 2008.
Our medium term indicators are leaning towards Hold portfolio of non-performers and the session market direction meter (for day traders) is 53 % bearish up from 44 % bearish at the opening bell. We remain mostly conservatively bullish, but with a bearish slant. I am very concerned any downtrend could get very aggressive in the short-term and any volatility may also promote sudden reversals that will only please the day traders. The SP500 MACD has turned flat, but remains below zero at -1.20. It is expect to move higher over the next few sessions before turning back down.
Having some cash on hand now is not a bad strategy as negative market changes are happening everyday. Many investors are starting to take in some profits from ‘high-fliers’ as a precaution and to build a better cash base for the ‘dips’.
The Market in Perspective
|Here are the headlines moving the markets.|
WASHINGTON (Reuters) – U.S. House Republicans on Tuesday proposed higher defense spending and deep cuts to social services including healthcare for the poor in an aggressive new budget plan that seeks to eliminate deficits by 2024.
NEW YORK (Reuters) – Brent oil closed up on Tuesday for the first time in four days, supported by a weaker dollar and short-covering after its recent losing streak, while U.S. crude fell again on bets that inventories had hit record highs for a 10th straight week.
Just blame it on the weather, because everyone knows no self-respecting 1%-er would be caught dead driving (or being driven) to their nearest Maserati dealership in their snow-ploughing $100K Range Rover, when it is snowing outside. In the middle of winter.
End result: only 481 Maseratis were sold in all of the US in February, a plunge of 43% from a year ago (following a 20% drop in January) back when it was the Polar Vortex’s fault that Q1 2014 GDP went from an initially forecasted 3.5%, to -2.5%.
But this time the snow is different.
Right on cue for the late-day squeeze ahead of tomorrow’s FOMC… The Nasdaq breaks and BATS declares self-help…
*NASDAQ OPTIONS MARKET CURRENTLY HAVING SYSTEM ISSUES
*BATS OPTIONS HAS DECLARED SELF-HELP VS NASDAQ OPTIONS MARKET –
As a reminder, every time the Nasdaq options market breaks, it is a green light to buy all-in. From February:
*NASDAQ OMX BX OPTIONS HAS DECLARED SELF HELP AGAINST BOX
And sure enough… the bounce begins…
(Reuters) – A $110 million lawsuit filed on Tuesday claims a U.S. division at Swiss drugmaker Novartis has routinely denied female employees equal pay and promotion opportunities, five years after the pharmaceutical giant was hit with a nine-figure jury verdict over similar claims.
While investors have grown to used to knife-catching heroics in equity markets, the Energy credit markets have been a poster child of yield-reaching, bottom-guessing, dip-buying exuberance in the past six months. As every leg lower in oil was met with more Oil ETF buyers and bond buyers (or loan financers) as “the bottom is in,” so each low has failed and new lows are made. The last few days have seen credit risk soar the most in 2015 in the energy sector as numerous firms enter bankruptcy or approach it with huge looming coupon and principal due. What is even more telling is the news of a huge liquidation sale of energy heavy equipment which will be the ‘tell’ for the entire industry if it is weak…
Who can resist a 1000bps spread?
But the last few days have seen credit risk surge most in 2015…
As Bankruptcies mount…as Bloomberg reports,
ATHENS (Reuters) – Greek Prime Minister Alexis Tsipras has requested a meeting with top European leaders including German Chancellor Angela Merkel at this week’s EU summit, a Greek official said on Tuesday, as Athens insisted it would not be ‘blackmailed’ over its debt crisis.
(Reuters) – The Dow and S&P 500 fell on Tuesday following a rally in the previous session, hit by declines in commodity-related shares and nervousness ahead of a Federal Reserve meeting.
NEW YORK (Reuters) – Citigroup Inc said on Tuesday it plans to exit its custody business in Argentina as soon as possible, after a U.S. judge refused to lift an injunction that blocked the bank from processing interest payments on $2.3 billion of Argentina bonds.
With Greece digging around in the couch cushions to try and scrape up â‚¬2 billion by Friday in order to make payments to the IMF, the ECB, and Goldman, and with celebrity FinMin Yanis Varoufakis doing his absolute best to sink the entire ship with a series of epic PR faux pas, one is left to wonder just where Athens will turn when Berlin and Brussels finally reach the end of their ropes with what increasingly looks like gross incompetence in the Aegean. We may have gotten the answer to that question today via Reuters:
There you have it. As Syriza faces the unenviable proposition of either completely giving up on its campaign promises or plunging the Greek economy and banking system into a drachma death spiral, it appears as though Athens is playing the one card it has left, which is threatening to effectively surrender itself to the Kremlin. As Reuters notes, this wouldn’t be the first time Greece has (maybe) inadvertently created speculation around the possibility that Moscow could end up being the White (or Red) Knight:
(Reuters) – Citigroup Inc and Barclays Plc are close to settling as early as this week a lawsuit with private investors who say the banks manipulated foreign-exchange rates, the Wall Street Journal said.
Facing a tough tone from Republican lawmakers about his handling of the rules, Tom Wheeler, chairman of the F.C.C., pushed back repeatedly.
The three countries said they would be part of the Asian Infrastructure Investment Bank, which Washington views as a rival to the World Bank.
BERLIN/WASHINGTON (Reuters) – The United States urged countries on Tuesday to think twice about signing up to a new China-led Asian development bank that Washington sees as a rival to the World Bank after Germany, France and Italy followed Britain in saying they would join.
When we first exposed the world to The Atlanta Fed’s GDPNow forecasting model (just 2 weeks ago), expectations were for 1.2% growth in GDP in Q1. A week later it was cut in half to 0.6% as dismal data just poured on. And today, The Fed model now predicts another 50% cut in growth to just 0.3% in Q1, led by a near 20% collapse in non-residential investment.
March 3rd… +1.2%
March 12th… cut in half to +0.6%
And now… March 18th… another 50% cut in growth to a mere +0.3%
As The Atlanta Fed explains…
Submitted by Mike Krieger via Liberty Blitzkrieg blog,
One of last year’s most popular posts was titled: Record Beheadings and the Mass Arrest of Christians – Is it ISIS? No it’s Saudi Arabia. Here’s an excerpt:
It appears last year’s jump in beheadings was just the beginning for the Saudi monarchy, which follows a form of Sharia Islamic law in which one can be p …
BERLIN (Reuters) – German union leaders called on state workers in schools, hospitals and fire stations to stage more short warning strikes next week after a third round of wage talks ended on Tuesday without agreement.
……….Submitted and posted with permission by Gary Christenson – The Deviant Investor
Mr. Ponzi was a charming con-artist who operated about a century ago in the United States and Canada. He enticed investors to contribute new money to his investment scheme (100% return in 90 days), skimmed a portion for his luxurious needs, and used the remaining money to pay off prior investors. The system worked marvelously until it collapsed and people realized that his postal reply coupon investments could not produce the profits that supposedly paid off early investors.
More recent “Ponzi” examples include Bernard Madoff as well as hundreds of others, plus the Alan Harper character in season 8 of “Two and One Half Men.” However Ponzi schemes are not limited to private investments. Governments engage in similar plans and have the advantage of declaring them legal. As with private plans, they work until they collapse, although their government granted legality increases their longevity.
Perhaps Charles Ponzi deserves recognition as the patron saint of central bankers and politicians. Consider these systems that are similar to Ponzi schemes:
SOCIAL SECURITY: Current workers contribute a percentage of their wages into the Social Security system. Retiring workers collect benefits paid by current contributions from existing workers. If there were no current workers there could be no payout since all previous contributions have been spent. Is this a retirement system or a Ponzi scheme?
SOVEREIGN DEBT: For example, a government annually spends a trillion currency units more than i …
Let’s start with the basics: why is there a majority consensus that the Fed will hike rates after it removes its “patient” language tomorrow? One simple reason: non-farm payrolls. As reported earlier in the month, following the report of March’s expectations smashing 295,000 jobs added, there have now been a 13 consecutive months of 200K+ payroll months…
… something which together with the 5.5% unemployment rate, is for the Fed is a clear indication that the slack in the labor is about to disappear and wages are set to surge.
Sadly, as we showed before, wages are not only not rising, but for 80% of the population they are once again sliding.
Falling wages aside (a critical topic as it singlehandedly refutes the Fed’s bedrock thesis of no slack in a labor force in which there are 93 million Americans who no longer participate in the job market) going back to the original topic of which economic factors are prompting the Fed to assume there is an economic recovery, without exaggeration, all alone.
Is there nothing else that can validate the Fed’s rate hike hypothesis? Well… no.
Below is a selection of the economic data points that have missed expectations in just the past month.
(Reuters) – Macerich Co , the third-largest U.S. shopping mall owner, rejected a $14.39 billion unsolicited offer from larger rival Simon Property Group Inc , saying the proposal “substantially undervalues” the company.
Nintendo, the video game maker that has long resisted a move to devices like smartphones, said it and DeNA would team up to create mobile games.
While Bridgewater’s Ray Dalio “hopes that The Fed will be very cautious about tightening,” Saxobank CIO Steen Jakobsen explains in this brief clip that The Fed “is wrong, always wrong,” and will likely raise rates in June no matter what. The Fed is boxed in, Jakobsen notes, and despite the weak macro data, changing direction now is unlikely – leaving the market surprised as it recognizes that “this is a margin call on assets,” seemingly confirming Dalio’s conclusion that, “inadequate attention is being paid to the risks of a downturn in which central bankers’ abilities to ease are significantly impaired.”
Jakobsen explains in 2 minutes why The Fed is boxed in and the market will be shocked at “the margin call on assets”…
And Bridgewater’s Ray Dalio concludes rather uncomfortably,
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Those who refuse debt, regardless of the sacrifice, are starving the parasitic, exploitive machine; those with debt are feeding it.
We hear a lot about debtors, and very little about undebtors. I define an undebtor as an individual or entity that has sworn off debt or considers debt a necessary evil that must be paid off as quickly as possible regardless of the sacrifices required to do so. Undebtors are created by these conditions: 1. People with cultural/familial values that eschew/fear debt. 2. People who have been crushed by debt in the past and refuse to repeat the experience. 3. People who recognize debt as the status quo’s favored instrument of oppression, control and exploitation. 4. People who understand that paying off debt is the easiest way to earn a zero-risk significant return on one’s money. If you pay off a 12% credit card, that’s the equivalent of earning 12% on your money. There’s no mystery as to the low profile of undebtors in the mainstream media: undebtors are the equivalent of the cross to the vampire-parasites peddling debt.How can banks and other financial parasites make money off the undebtors? They can’t, and therein lies the problem for the status quo, which lives off the blood of debt extracted from debt-serfs.
FRANKFURT/BERLIN (Reuters) – Lufthansa has canceled 750 flights or about half the total due to a strike planned by pilots for Wednesday, affecting thousands of passengers in a long-running dispute over early retirement benefits and plans to expand budget flights.
Although US equity prices have demonstrated a remarkable propensity to completely disregard apparently unimportant things like macro fundamentals, forward earnings estimates, and top-line growth projections, we’ve long argued that eventually, reality will come calling and the farther stretched valuations become in the meantime, the more painful the correction will be. As we noted on Sunday, the cracks are starting to form as DB became the first sell-side firm to predict that EPS will in fact not grow in 2015, prompting us to remark that “EPS growth in 2015 [is] now a wash (if not negative), which implies the only upside for the S&P 500 will once again come from substantial multiple expansion.” Against this backdrop of declining revenues, declining earnings, and pitiable economic projections (thanks a lot Atlanta Fed Nowcast), we bring you yet another sign that a “correction” may indeed be in the cards: an epic decoupling of put prices and S&P P/E ratios.
Summary of Economic Releases this Week
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