Uncertainty Reigns In Anticipation Of Jobs Report

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

The markets were definitely mired in uncertainty, as an early sell-off reversed and pulled the major indexes back up close to the unchanged line. As the chart above shows, the S&P traded within a 2 point range for some 4 hours all in anticipation of tomorrow’s jobs numbers.

Traders hope that they will shed some light as whether the Fed will continue with its “bark and no bite” policy or succumb to the need for “more data” to avoid having to make a rate hike decision that surely will rattle markets. November and December rate hike odds have risen sharply.

In regards to market reaction to either a weak or strong jobs number, it does not really matter. If this year’s history is any indication, the S&P 500 will rally no matter what according to these spot on charts from ZH. Take a look:

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Stocks In Rebound Mode

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Economic data were mixed with ADP reporting that the US economy added 154k jobs in September vs expectations of 165k. The US trade deficit unexpectedly grew in August as imports increased more than exports putting downward pressure on Q3 GDP while factory orders declined for the 22nd straight month. The only bright spot was that the ISM services index exploded to its highest level since October 2015, which makes me wonder if such an outlier will be revised sharply next month.

Just because I haven’t mentioned Deutsche Bank (DB) in a couple days, does not mean all of their issues have been resolved. Far from it! I am sure there are a lot of behind-the-scenes discussions going on as to how to save this behemoth of a bank.

Reuters reports that the German government is persuing “discreet” talks with US officials to possibly help DB secure a swift settlement:

One senior government official told Reuters there was “contact at all levels” between German and American officials. Another source said Finance Minister Wolfgang Schaeuble was not planning to meet DOJ officials during a trip to Washington this week for International Monetary Fund meetings, but added: “You can hold talks. It doesn’t have to be the minister.”

I believe the heat is on and despite jawboning to the opposite by one German party member that “At the present time, I rule out capital assistance.” While that maybe his current view, ZH concluded accurately:

There is just one small problem: Deutsche Bank holds over half a trillion euros in deposits on its balance sheet, which means that if push comes to shove, Germans will be begging for a bailout just to have access to their savings.

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Hawkish Fedspeak Pulls Markets Lower; Precious Metals Get Clobbered

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

With no economic data points being published today, trading was extremely choppy with the major indexes vacillating around the unchanged line until bearish sentiment took over. A last hour rebound limited the damage in the S&P to about -0.5%, a very minor pullback given the bubble territory the markets are hovering in.

The US dollar rallied after some hawkish comments from the Fed about the likelihood of an interest rate hike in the coming months, which pulled bonds and equities down, while precious metals were taken behind the barn for a spanking. Gold dipped to its lowest level since the Brexit vote 3 months ago. The worst performer of the day was utilities, while Financials were the best in the absence of any negative news from Deutsche Bank.

Tomorrow, the economic calendar will heat up again with reports about the non-manufacturing index and the services PMI index being on deck. I expect these data points to come in soft confirming the temporary weakness in the economy.

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Major Indexes Drop As Deutsche Bank’s Liquidity Concerns Remain

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

As I mentioned Friday, Deutsche Bank’s (DB) rumor of an impending and sharply reduced settlement blew up in smoke over the weekend as it turned out that not only was a settlement not reached but there had not even been a meeting with the DOJ to discuss matters. But the good news is DB’s executives are scheduled to head to the US very soon.

Adding insult to injury were reports that some DB customers could not access their ATMs or debit cards. That’s why I think the rumor was just a diversion to keep the troops calm and orderly. DB has over $320 billion in retail deposits and any question in the public’s eye as to potential liquidity problems would result in a bank run.

But that was not all as Italy added even more insult to injury by filing a lawsuit against several DB executives alleging improper/criminal behavior in regards to derivatives. Good thing Germany had a bank holiday today, so we’ll have to wait for tomorrow to see if there is more fallout. At this moment, it sure smells like a 2008 Lehman Brothers repeat in the making.

In case you are wondering how closely DB is tied to the rest of the world, take a look at this chart, which makes it abundantly clear that whatever happens to DB will spread around the globe.

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One Man’s Opinion: Euro “Might Start To Unravel” If Collapse Of Deutsche Bank

Ulli Market Review Contact

OneMan'sOpinionBy ZeroHedge

The euro “might start to unravel” if Deutsche Bank collapses according to respected financial journalist Matthew Lynn. “It all has a very 2008 feel to it …” he warns in the Telegraph where he outlines his growing concerns about Deutsche Bank, concerns we have written about in recent months. He writes:

Our image of German banks, and the German economy, as completely rock solid is so strong that it takes a lot to persuade us they might be in trouble.

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ETFs On The Cutline – Updated Through 09/30/2016

Ulli ETFs on the Cutline Contact

Below please find the latest High Volume ETFs Cutline report, which shows how far above or below their respective long-term trend lines (39 week SMA) my currently tracked ETFs are positioned.

This report covers the HV ETF Master List from Thursday’s StatSheet and includes 366 High Volume ETFs ETFs, defined as those with an average daily volume of more than $5 million, of which currently 325 (last week 323) are hovering in bullish territory. The yellow line separates those ETFs that are positioned above their trend line from those that have dropped below it.

Take a look:

The HV ETF Master Cutline Report  

In case you are not familiar with some of the terminology used in the reports, please read the Glossary of Terms.

If you missed the original post about the Cutline approach, you can read it here.