Written by Gary
Wall Street began the last trading week of the year in negative turf with the DOW down 50 points and sometimes anemic volume.
The oversupply pressure on crude oil prices showed no signs of abating falling 3 percent today, with global benchmark Brent back near 11-year lows.
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 0.34% while Mexico’s IPC is off 0.25% and U.S.’s S&P 500 is lower by 0.22%. |
Traders Corner – Health of the Market
| Index | Description | Current Value |
| Investors.com Members Sentiment: | % Bullish (the balance is Bearish) | 47% |
| CNN’s Fear & Greed Index | Above 50 = greed, below 50 = fear | 42% |
| Investors Intelligence sets the breath | Above 50 bullish | 39.3% |
| StockChart.com Overbought / Oversold Index ($NYMO) | anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. | +50.14 |
| StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) | $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% – 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. | 32.55% |
| StockChart.com NYSE Bullish Percent Index ($BPNYA) | Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. | 44.32% |
| StockChart.com S&P 500 Bullish Percent Index ($BPSPX) | In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. | 55.80% |
| StockChart.com 10 Year Treasury Note Yield Index ($TNX) | ten year note index value | 22.30 |
| 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 | 78.53 |
| StockChart.com NYSE Composite (Liquidity) Index ($NYA) | Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors | 10,192 |
What Is Moving the Markets
| Here are the headlines moving the markets. | |
| Wall Street in 2016: What could possibly go wrong? NEW YORK (Reuters) – By all rights, 2016 should be a good year for the U.S. stock market. |
| Valeant to be led by group of executives while CEO fights pneumonia (Reuters) – Valeant Pharmaceuticals International Inc on Monday said a group of company executives will immediately take over for its chief executive officer until he returns from medical leave, sending shares tumbling 10 percent. |
| U.S. holiday retail sales grow a ‘solid’ 7.9 percent: MasterCard (Reuters) – Strong online sales and demand for furniture and women’s apparel helped U.S. retail sales grow by a “solid” 7.9 percent this holiday season, according to MasterCard Advisors SpendingPulse. |
| China central bank says to keep reasonable credit growth, yuan stable BEIJING (Reuters) – China’s central bank said on Monday that it would “flexibly” use various policy tools to maintain appropriate liquidity and reasonable growth in credit and social financing. |
| Volkswagen’s Audi tempers spending plans for 2016 FRANKFURT (Reuters) – Volkswagen’s flagship Audi division reined in its spending plans for 2016 and delayed the construction of a new wind tunnel on Monday, after the German carmaking group was hit by a scandal over rigged emissions tests. |
| All about China and oil again as shares slip LONDON (Reuters) – Shares in Europe and Asia fell on Monday in trade thinned by holidays in a number of financial centres, hit by slumping oil prices and concerns over Chinese growth and finances – two of the year’s major factors. |
| Russia says Saudi Arabia destabilized oil market: TASS MOSCOW (Reuters) – Saudi Arabia has destabilized the global oil market by increasing production, TASS news agency quoted Russian Energy Minister Alexander Novak as saying on Monday. |
| Schizophrenic 2 Year Auction Results In Huge Short Squeeze Despite Slumping FundamentalsMoments before today’s 2 Year auction we made a simple prediction:
The reason for this forecast: as we have repeatedly shown in the past, any time a given CUSIP is trading super special in repo (lack of underlying collateral) just ahead of its auction, there always is a panic scramble to cover shorts into the auction, leading to a super strong high yield relative to the When Issued. And, as the SMRA table below shows, the 2 Year was trading about as special as can be, hitting -2.15% in repo earlier today after trading super special for the past week.
Sure enough, when the When Issued data hit minutes ahead of the auction pricing, we were expecting a number well through the 1.073% When Issued. This is precisely what happened as the Treasury confirmed moments ago when it announced it had sold $26 billion in 2 Year notes at a yield of 1.056%, a whopping 1.7 bps through the When Issued: just like that, the short squeeze worked again. That, however, is as good as it gets for today’s short end issuance, because all the other metrics were quite terrible: the Bid to Cover plunged to just 2.796 (from 3.154 a month ago) was the lowest since August of 2009! |
| More Mutual Funds Liquidating: Whitebox Calls It QuitsIt may not be the latest junk bond-heavy mutual fund, but moments ago another iconic name in the asset management arena, Andy Redleaf’s Whitebox Advisors threw in the towel on rigged markets and announced that it, too, has closed its mutual funds ahead of a January 19, 2016 liquidation.
According to the funds’ overview, “Whitebox Mutual Funds are managed by Whitebox Advisors LLC, ( œWhitebox or the œAdviser ) an SEC-registered investment adviser, founded and led by visionary investment manager Andrew Redleaf.” It appears his vision got clouded when the market would no longer levitate every single day. Among the funds to be liquidated are: the Whitebox Tactical Opportunities Fund (down -9.7% in the quarter, and 16.8% YTD) the Whitebox Market Neutral Equity Fund (down 3.7% YTD) the Whitebox Tactical Advantage Fund (up 1.58% YTD) Of these the Tactical Opportunities Fund (mixed 27% equity, 18% fixed income, cash 43%) is by far the bigest (full portfolio as of Sept 30, 2015 here), and its top equity holdings are the following:
And its largest debt holdings: |
| U.S. Stocks Are Ending 2015 With a WhimperMany of the forces that have weighed on U.S. shares “including low commodity prices, sluggish growth and tepid corporate profits “could persist into next year. |
| Global Stocks FallGlobal stocks fell on Monday along with oil prices, as many markets reopened after the Christmas holiday. |
| China’s Stock Market Still a Draw After Tumultuous YearInvestors are still buying stocks and the Shanghai Composite Index is up almost 10% for the year, despite the summer’s crash. |
| December 2015 Texas Manufacturing Survey Manufacturing Activity Improves Again.
Of the five Federal Reserve districts which have released their December manufacturing surveys – three are in contraction and two in expansion. A complete summary follows. |
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