11Jan2016 Pre-Market Commentary: Monday Morning Futures Flat, SP500 At Critical Support, Expect A Dead Cat Bounce

Written by Gary

US stock futures indexes are flat this morning with a hint of melting into negative territory. The red line in the sand for the Spooz (SP500) was 1920 and I can see a ‘dead cat’ bounce today or tomorrow. Oil prices remain at their 12 year lows and little action. It is possible that today’s session will open flat, make a ‘minor’ dip and trade sideways.

Here is the current market situation from CNN Money
	European markets are higher today with shares in Germany leading the region. The DAX is up 0.95% while France’s CAC 40 is up 0.86% and London’s FTSE 100 is up 0.34%.

What Is Moving the Markets

Here are the headlines moving the markets.
	Investor group offers to buy American Apparel for $300 million (Reuters) – Hagan Capital Group and Silver Creek Capital Partners said they had jointly offered to acquire bankrupt teen apparel retailer American Apparel Inc for $300 million.
	Drugmaker Shire wins Baxalta for $32 billion after six-month pursuit LONDON (Reuters) – Drugmaker Shire Plc clinched its six-month pursuit of Baxalta International Inc on Monday with an agreed $32 billion cash and stock offer, catapulting it to a leading position in treating rare diseases.
	China’s yuan spikes higher, but stocks tumble SHANGHAI (Reuters) – China guided its yuan currency higher on Monday, and offshore it surged against the dollar, spurred by what traders called aggressive intervention by Beijing, although Chinese stocks tumbled again as doubts persisted over policymakers’ intent.
	Alcoa gets $1.5 billion supply contract from GE’s aviation unit (Reuters) – Alcoa Inc said on Monday it had signed a $1.5 billion long-term contract with General Electric Co’s aviation unit to supply components used in aircraft engines.
	Uber pushes into public transit with new app partnership SAN FRANCISCO (Reuters) – Transportation technology company TransLoc announced on Monday a partnership with Uber, marking a significant advancement in the ride-hailing company’s effort to ally itself with public transit agencies.
	German carmakers see steady U.S. sales in 2016: VDA DETROIT (Reuters) – Sales of German carmakers including Volkswagen < ŽVOWG_p.DE>, Daimler and BMW in the United States may hold steady this year, the VDA auto industry association said on Monday.
	Shares, oil steady in Europe after China sends Asia sprawling LONDON (Reuters) – World stocks fell to near 2-1/2 year lows on Monday as a fresh pounding for Chinese markets left Asia at a four-year trough and sent oil and commodity markets sprawling again.
	China will find it tough to achieve over 6.5 percent growth over 2016-2020: state adviser SHANGHAI (Reuters) – China will face great difficulty in achieving economic growth above 6.5 percent over the 2016-2020 period due to slowing global demand and rising labor costs at home, the China Securities Journal quotes a top state adviser as saying.
	USDJPY, Crude Spike As PBOC Tries To Calm Panic Yuantervention overnight steadied the Chinese currency and despite a plunge in Asian equities, stabilized US equities thanks to an incvessant bid for USDJPY. However, this morning has seen PBOC’s Ma crawl out from under the desk to attempt to calm investor panic with two-faced comments about the nation’s new FX regime. Noting that PBOC will focus on stability of Yuan vs their new CFETS basket, Ma then back-handedly said two-way volatility was expected to increase (in a clear nod to stopping carry traders piling on). Of course, the crude oil algos loved it and surged, USDJPY jumped, but for now US equities and bond are unimpressed. First we got this… PBOC MA SAYS YUAN TO FOCUS MORE ON STABILITY VS BASKET: XINHUA Then we got this… CHINA PBOC MA: YUAN TWO-WAY VOLATILITY AGAINST USD TO INCREASE Pegged to a single currency would lead to large volatility of country’s trade competitiveness, increasing imbalance of international payments and causing more arbitrage activities, according to a statement on PBOC website, citing research bureau chief economist Ma Jun Which led to this… And Ma kept going: CHINA PBOC’S MA: NO TIGHT PEG TO CURRENCY BASKET PBOC ECONOMIST MA JUN COMMENTS IN PBOC NEWSPAPER PBOC MA: TO APPROPRIATELY LIMIT YUAN DAILY VOLATIL …
	Gartman: “In Our Retirement Funds We Shifted To Modestly Net Short, We Have Had No Choice” In a world of sheer confusion and pervasive central bank intervention, there is one immovable force of stability and direction: Dennis Gartman. Here is his latest: SHARE PRICE CONTINUE THEIR PARLOUS, GLOBAL WEAKNESS as all ten of the markets comprising our International Index have fallen since we marked things on Friday morning, with several markets down more than 1% and with one market ¦ that in mainland China ¦ down by more than 3% and with several others down by more than 1%, sufficient to take our index down another 1.3%. It is now down 684 œpoints for the year-to-date or a stunning 7.2% and it is now down 2,359 œpoints or 21.1% from its high made in late May. We believe we’ve been rather clear about our view of the equity markets here in the US and abroad: this is a bear market and it began, with the benefit of retrospect, back when our International index made its high May 25th at 11,186. One only knows the high of a bull market and the low of a bar market in retrospect, but the important thing is finally to recognize that fact and when recognized to trade effectively. As we have said here for years, during a bull market there are only three positions that one can have: aggressively long; modestly long or neutral. In a bear market, one can have only one of three positions also: aggressively short; modestly short or neutral. In our retirement funds here at TGL we began last week and indeed we began the year modestly long but by the weeks’ end we had shifted to modestly net short. We have had no choice. The market’s voice was loud and very clear. End result: S&P FUTURES +16PTS, NEAR SESSION HIGH; WTI NOW LITTLE CHANGED
	Goldman Closes “Top Trade For 2016” With 5.4% Loss Just 11 Days Into 2016, As US Banks Tumble Less than two months ago, on November 19, Goldman released its list of top trades for 2016, #1 of which was the infamous long USDJPY, short EURUSD equial-weighted basket which has led to massive losses for anyone who had put it on. At the current rate of carry trade unwinds, we expect that trade will be closed out shortly, and may have been overnight when the USDJPY plunged to the lowest since the ETFlash crash. But while we wait, here is a reminder what the #6 top trade for 2016 was: Top Trade #6: Long large-cap US Banks relative to the overall S&P500 Go long large-cap US Banks through the BKX Index relative to the S&P500, indexed at inception to 100, with a target at 110 and stop loss at 95. US banks tend to be mildly pro-cyclical and also benefit from a rising longer-dated yield environment (we forecast a steeper US term structure than the forwards discount), as the Fed tightening will lead to a progressive upward revision of expectations on terminal rates, while the ECB and BoJ’s efforts to boost inflation should restore bond premium across major markets. US banks are still relatively well-priced, trading just above book value and with a P/E below that of the overall market, and at about median levels compared with its own past history. Moreover, they remain off their recent highs, unlike other possible implementations of the domestic growth theme in the US stock market. We bring it up because overnight, just 11 days into 2016, Goldman was stopped out of this “top trade” following a 5.4% loss on these “relatively well-priced, trading just above book value” assets.
	Global Shares Steady European markets and U.S. futures showed signs of steadying after a bruising start to the year, as investors largely shrugged off another steep fall in oil prices and China’s stock market.
	Fed Eyes Margin Rules to Bolster Oversight The Federal Reserve is dusting off a legal power it has largely ignored for four decades, a move that could significantly expand the Fed’s influence over financial markets.
	Cash Is Back at Pensions, Funds U.S. public pension plans and mutual funds are sheltering more of their holdings in cash than they have in years, a sign of growing stress in financial markets.
	Metals Stocks: Gold back to 2-month high as stock bearishness grows Gold futures pitched higher Monday morning, pushing the precious metal back to its highest levels since November as sentiment around stocks dimmed.
	The Wall Street Journal: Arch Coal files for bankruptcy Arch Coal files for bankruptcy as the coal producer looks to cut $4.5 billion in debt.
	The Margin: Rock legend David Bowie was a financial innovator, too David Bowie’s influence reaches beyond the impact of his music; he was also a financial innovator.