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Thursday, March 28, 2024

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  1. phil

    Good morning!  (not for bulls)

    Another 3.4% drop in the Shanghai got us off to a bad start in the morning and all of Asia was off 1-2% too.  /NKD way down at 19,940 so I guess we could have held those EWJ puts a bit longer (now $12.56). 

    3,500 is the line in the sand on the Shanghai and we can expect the Government to support it again tomorrow or over the weekend.  Very, very bad if they don't.  The July 9th (also Thursday) spike low was 3,373 and the index was jammed up 10% off the low the same day (see "Flip Floppin’ Thursday – China Arrests the Short Sellers" and "Friday Market Fakery – Dollar Dip Does the TRICK!").  

    Keep in mind, China halted 2/3 of the stocks ahead of the 10% pump job.  If they try to prop up the index without the halts this time – they may find it's much more expensive than they realized to prop up the market and that may cause their resolve to falter – so we're going to be VERY concerned about China for the next few days!  

    Europe not happy either but only down 1% and we're down about 0.65% in our Futures but 2,060 has been good support on /ES and 4,475 on /NQ and 1,190 on /TF and 17,150 on /YM.  In general, we're just following through on yesterday's drop but decelerating as opposed to free-falling.

    And, of course, as usual on a selling day – volume doubled from the day before:

    SPY  5  MINUTE

    SPX DAILY

    That's the big story today – we're failing the 200 dma on SPX and that 2,055 line really needs to find support or we'll be quickly back to 2,035 (our 10% line on the Big Chart) and below that is a real correction – all the way back to 1,942.50!  

    SPX WEEKLY

    NDX WEEKLY

    Oil and gas also decelerating with oil down 1.5% at $40.65 (and I like /CL long here) and /RB at $1.52 (and I like the long here and still in my painful longs from yesterday, riding out the NYMEX rollover day for oil contracts).  $1.52 is the -2.5% line and, if that holds – it's a good sign but we could drop another 2.5% (0.4) and bottom out at $1.485 before we get a real turn, completing a  10% drop from $1.65.

    The oil bears are out in force and they are milking this contract rollover for all it's worth, trying to drive everyone out of oil and that makes me want it more, not less.  We won't know what's real until next week but I would be surprised if we're below $40 on /CL or below $1.50 on /RB and probably $42 and $1.60 or higher.  

    Bigger picture could turn ugly though as we haven't been below $1.60 since Feb and then we were way down at $1.175 in Jan.

    Oil is testing $40 and, if that breaks – gotta take the loss on /RB and wait for the bottom to form:

    Economic Crisis Goes Mainstream – What Happens Next

    Citi: China could lower its growth target for 2016 to just 6%

    Asian Stocks Fall Fifth Day on Fed Minutes, China Slowdown FearsAsian stocks fell for a fifth day after Federal Reserve minutes showed U.S. officials sought more progress on inflation and investors watched China as concerns heighted over the nation’s slowdown. The MSCI Asia-Pacific Index slid 0.1 percent to 135.87 as of 9:05 a.m.

    Echoes Of 1997: China Devaluation "Rekindles" Asian Crisis Memories, BofA Warns

    China’s Stocks Resume Declines Amid Economy, Outflow ConcernsChina’s stocks fell to a two-week low as traders gauged government support for the equity market amid concern a slowing economy and weaker yuan will spur capital outflows. The Shanghai Composite Index lost 1.4 percent to 3,743.77 at 9:59 a.m. local time, led by health-care and energy companies. Hong Kong’s Hang Seng Index lost 1.1 percent, taking its decline from its April 28 high to 19.5 percent, approaching the 20 percent decline that some traders consider the start of a bear market.

    Bear Market Looms for Hong Kong Stocks as Index Sinks With China. Hong Kong stocks are poised to enter a bear market as declines in mainland markets and the devaluation of the yuan erode support for the city’s shares. The Hang Seng Index lost 1.8 percent to 22,743.54 as of 10:16 a.m. in Hong Kong on Thursday, bringing its decline from a seven-year high on April 28 to 20 percent. The Hang Seng China Enterprises Index of Chinese equities listed in the city, which entered a bear market last month, fell 2.5 percent on Thursday. Shares in the former British colony have been buffeted by a rout in China that destroyed about $4 trillion in market value. The Shanghai Composite Index fell by almost a third from its peak in mid-June, prompting the government to step in with unprecedented measures to support the market. “People are scared,” said Rahul Chadha, co-chief investment officer at Mirae Asset Global Investments in Hong Kong. “It’s the fear factor.”

    LatAm credits wider on commodity concernsLatAm credits took another beating on Wednesday, as a rally in US Treasuries after the Fed's minutes failed to offset concerns about growth in China as well as sputtering commodity prices. Ten-year US Treasury yields fell back to around 2.12% after the minutes suggested the FOMC wanted more data on US growth and inflation before an "approaching" hike in rates. The possibility of a delay in monetary tightening in the US, however, brought little comfort to investors looking at EM assets in Latin America.

    World drowns in oil as producers slug it out

    One-year oil at 10-year low with no respite in sight. Oil is already trading at the lowest level in a decade in New York, as far as one-year contracts go, signalling traders don't expect much reprieve from the current rout. West Texas Intermediate oil for delivery in September 2016 touched $US47.90 a barrel on the New York Mercantile Exchange Wednesday, the lowest intraday price for a contract out 12 months since February 2005"This says that the price prospects for 12 months from now are bleak as we speak," John Kilduff, a partner at Again Capital, a New York-based hedge fund, said by phone. "The curve is a representation of the collective wisdom of the market. It's a best guess of market conditions 12 months from now."

    Junk-Bond Risk Gauge Surges to '15 High Amid Escalating Oil Rout. Junk-bond investors are getting fidgety amid a renewed plunge in the energy market. The risk premium on the Markit CDX North American High Yield Index, a credit-default swaps benchmark tied to the debt of 100 speculative-grade companies, surged 6.3 basis points to 394 basis points, the highest level this year. BlackRock’s iShares iBoxx High Yield Corporate Bond ETF, the largest fund of its kind, extended its slump this month trading near a four-year low. Oil prices that have dropped below $41 are rattling investors in the high-yield bond market. The debt is poised to post a third straight month of losses — something that has never happened since 2008. “The best of times for high-yield are behind us and we are now witnessing the beginning of the end of the credit cycle,” Bank of America Corp. strategists wrote in a report Monday.

    Cheap Oil’s Making It Tough for Ethanol to Pay the Bills. Cheap crude oil may make it hard for ethanol companies to pay their bills on time. The lowest oil prices in six years are hitting biofuel producers two ways: They’re making ethanol less attractive as a blend for gasoline, and emboldening the arguments of petroleum backers who say the U.S. law mandating consumption of the fuel alternative is obsolete, Standard & Poor’s Rating Services Inc. said in a report Wednesday.

    Cliffs CEO Takes Aim at Crazy China Steel Exports as Glut Grows. Steel exports from China will surge to more than 100 million metric tons this year as local mills benefit from a rising tide of cheap iron ore to produce more than Asia’s top economy needs, according to Cliffs Natural Resources Inc. “It’s like a bad virus,” Lourenco Goncalves, chief executive officer of the largest U.S. iron ore producer, said in a phone interview from the company’s headquarters in Cleveland, Ohio. “Australia continues to give iron ore to China almost for free, allowing them to produce more than they need.”

    Hacker's Ashley Madison data dump threatens marriages, reputations. Love lives and reputations may be at risk after the release of customer data from infidelity website Ashley Madison, an unprecedented breach of privacy likely to rattle users' attitudes towards the Internet. Hackers dumped a big cache of data containing millions of email addresses for U.S. government officials, UK civil servants and high-level executives at European and North America corporations late on Tuesday, the latest cyber attack to raise concerns about Internet security and data protection. The hacker attack has been a big blow to Toronto-based assignation website firm Avid Life Media, which owns Ashley Madison and has indefinitely postponed the adultery site's IPO plans.

    Time to End Quarterly Reports, Law Firm SaysWachtell Lipton argues the ritual distracts companies from long-term results. Influential law firm Wachtell, Lipton, Rosen & Katz has an idea that may be music to the ears of its big corporate clients and a nightmare for some investors and analysts: end quarterly earnings reports.



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