Views From The Hill

View From The Hill: August-25-2015

Commentary

The post-capitulation rally came and went, but the disconnect between Wall Street and Main Street remains. Stock market bears swiped and spat at the face of some actually encouraging economic data. Residential real estate prices and sales continue to improve at a steady pace while the U.S. consumer is ebulliently optimistic (hat tip to falling fuel prices at the pump and a legitimate ongoing recovery in the labor market). If none of the above is a cause for celebration, then a shrinking deficit relative to GDP should be.

So, what gives? Well, China’s undeclared currency war or lack of a sustainable resolution to its shrinking economic growth and capital markets might be the culprit. While I laud some of its recently creative measures to prop up its markets, it is beginning to smack of desperation with just a hint of panic too. The best support China can give its markets is the withdrawal of any type of support and let the invisible hands of the market gods and wizards sort it out. However, China is China and, although it is communist and home to some 2 billion people, unlike some free Western democracies, it is not a police state overseeing a nation of “sheeple”.

Getting back on point, financial media pundits note that China’s Shanghai Composite Index has declined more than -42%, which no one can refute being a bear market. Yet, other innocent victims are the emerging markets as the EEM (Emerging Markets ETF) is @ -30.82% lower than its 12-month high. Furthermore, volatility is no longer confined to just the equity markets, but is present in some currencies as well.

This is not over. In fact, the story is just beginning, so stay Hillbent for the Market Direction…

Market Breadth

Market breadth for the SP-500 components remains bearish.

  • Advancers (75) vs. Decliners (421).
  • New 5-day highs (5) significantly lagged the number of New 5-day lows (100)
  • New 52-week highs (1) also trailed new 52-week lows (205).
  • Bullish reversals (0) lagged Bearish reversals (185) today.

 

Performance Summary

Markets
Close
Chg
SP-500 1867.61 (-25.60 / -1.35%)
Nasdaq-100 4016.32 (-22.27 / -0.55%)
Russell-2k 1104.10 (-7.59 / -0.68%)
VIX 36.02 (-4.72 / -11.59%)
10-Yr Rates 2.13 (+1.36 / +6.81%)
US Dollar Index 93.97 (+0.63 / -0.67%)
Gold (Cash) 1138.30 (-15.30 / -1.33%)
WTI Crude (Cash) 39.31 (+1.07 / +2.80%)
DJ Real Estate 269.02 (-6.95 / -2.52%)
DJ Homebuilders 555.67 (-23.88 / -4.12%)

 

Volume Radar Alerts

Stock prices increasing on high volume
  • Best Buy Co Inc (BBY) @ 32.95 (+12.57%) on 1100% volume surge
  • Gamestop Corp (GME) @ 43.89 (+2.16%) on 185% volume surge
  • Expeditors Int’l (EXPD) @ 47.49 (+1.60%) on 173% volume surge
  • Saint Jude Medical Inc (STJ) @ 68.26 (+2.77%) on 167% volume surge
  • Starbux Corp (SBUX) @ 51.08 (+1.49%) on 146% volume surge
Stock prices declining on high volume
  • Pepco Holdings Inc (POM) @ 22.51 (-16.47%) on 1336% volume surge
  • Franklin Resources Inc. (BEN) @ 38.85 (-1.42%) on 345% volume surge
  • Plum Creed Timber REIT (PCL) @ 38.10 (-4.44%) on 315.6% volume surge
  • McKesson Corp (MCK) @ 188.44 (-4.73%) on 297% volume surge
  • Navient Corp (NAVI) @ 12.04 (-7.81%) on 267% volume surge

 

Market Moving Events

Bullish

  • Central Banks / Monetary Policy: The PBOC (China) lowered it benchmark one-year lending rate by 25 bps to 4.60 vs. previous @ 4.85.
  • Real Estate / Residential: July-2015 Home Sales rose 5.4% to 507k vs. consensus @ 516k and prior @ 481k. On an annual basis, sales were up 26%, while inventory supply dropped to 5.2 months vs. last month’s 5.3 and last year’s 6.1 months’ supplies.
  • Economy / Consumer / USA: The August-2015 Consumer Confidence Index catapulted to 101.5 vs. consensus @ 94.0 and prior @ 91.0.
  • Fiscal Policy / USA: The Congressional Budget Office (CBO) reported that the U.S. deficit will be @ $426bn or 2.4% of GDP and mark its lowest percentage since 2007. The previous deficit was @ $485bn or 2.8% of GDP. The CBO also expects the economy to grow at a 3.1% rate vs. last year’s 2.9%.

Bearish

  • N/A

Neutral

  • Real Estate / Residential: The June-2015 FHFA House Price Index indicated a slight pullback in prices this summer. The actual monthly change was @ 0.2% vs. consensus @ 0.4% and prior @ 0.5%. Annually, prices are up 5.6% vs. 5.7% prior month.
  • Real Estate / Residential: Results for the June-2015 Case-Shiller Home Price Index, sampling of 20 cities, were similarly flat to the above FHFA report. Non-seasonally adjusted (NSA), the HPI increased 1% vs. consensus @ 1.1% and prior @ 1.1%. Annually, it increased 5.0% vs. forecasts @ 5.2% and prior @ 5.0%.

 

Disclaimer

Hillbent does not provide individualized market advice. The information we publish regards securities in which we believe our readers may be interested and our reports reflect our sincere opinions. Nevertheless, they are not intended to be personalized recommendations to buy, hold, or sell securities. Investments in the securities markets, and especially in options, are speculative and involve substantial risk. Each individual investor should determine their respective appropriate level of risk. It is recommended that you seek personal advice from your professional investment advisor and conduct further independent due diligence research before acting on information published in any of our reports. Most of our information is derived directly from information published by the companies on which we report and/or from other sources we deem to be reliable, without our independent verification. Therefore, we cannot assure the completeness or accuracy of information contained within these reports and we do not in any way warrant or guarantee the success of any action which you take in reliance on our statements. Hillbent.com, Inc. or its affiliates may own positions in the equities mentioned in our reports. We do not receive any compensation from any of the companies covered in our reports.

 

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