1. Moving the Markets

U.S. stocks shrugged off a selloff in Shanghai and were higher as Wall Street seeks to build on yesterday’s V-shape come-back that wiped out big losses and allowed stocks to finish the day up.

There was a huge sell-off of Chinese stocks overnight plunging 6%. It was the worst day of losses in a month. Investors cited fears about the economy, profit taking and liquidity. The early sell-off ins the U.S. and subsequent recovery was almost a mirror image of yesterday prompting speculation of intervention and/or continuation of last week’s short squeeze. You can read more about it here.

Restoration Hardware (RH) took a massive blow today with shares falling 25% on financial results that fell well short of expectations. The CEO cited volatile oil prices and slowed global growth as the culprits.

Wall Street was also digesting mixed economic data. The latest reading on first-time jobless claims rose 10,000 to 272,000. But January durable goods orders for long-lasting big-ticket items like refrigerators and dishwashers rose a better-than-expected 4.9%. So, not only are bad news good news, but also good news are good news. Makes you wonder how much in control the mindless computer trading algos really are.

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1. Moving the Markets

Stocks pulled out of an early deep slide to close higher as the common “follow the leader” trend that has dominated Wall Street for most of 2016 came back in play: The direction of oil prices determines the direction of stocks.

The “disappointing” sentiment that oil production caps would not come into play seemed to turn around today, when news of a smaller-than-expected build in crude inventories last week caused the price of oil to go from a loss of nearly 4% to a gain of 1.3%. Stocks followed in suit despite some horrific economic data showing that home sales were the worst in some 2 years and the Services industry was the worst in 3 years. Go figure…

Also impacting market sentiment on Wall Street early Wednesday were comments after Tuesday’s market close from Federal Reserve vice chairman Stanley Fischer. In a speech, Fischer did not rule out an interest rate hike from the Federal Reserve at its meeting next month. “We simply do not know” if (the Fed) will increase borrowing costs in March, he said.

Given that bad news is good news again, anything can happen as we’ve seen today with the Dow rallying over 300 points off the bottom. One of these days, reality about not just domestic but also deteriorating global economic conditions will set in causing rebound attempts to fail miserably leaving the bears in charge. In my view, this is not the time to be a hero and engage in bottom fishing.

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1. Moving the Markets

After posting its best weekly gain in what has been a dismal start to 2016, stocks kicked off the new week in rally mode as investors reacted to rising oil prices and signs of alleged stability in China’s stock market. Well, there really was no stability but the naming of a new regulator to police the markets is supposed to be a sign that things are under control.

However, economic data points were horrible not just out of Europe but also domestically with the PMI (Purchasing Managers Index) showing the weakest numbers since 2012, so we’are back to the theme that bad news is good news.

Boosting market sentiment to start the week was a big jump in the price of U.S.-produced crude back above the key $30 per barrel mark, which pulled equities higher, however, crude oil news headlines were negative with falling demand and increasing supply framing the big picture. Shorts were squeezed again supplying the upward momentum for this move.

Last week, stocks rallied sharply as investors swooped in to pick up some bargains after the steep selloff to start the year. Wall Street also got a boost from news that Saudi Arabia, Russia and other major oil producers were considering a production freeze, a move, if it comes to fruition, is seen as the first step to stabilize oil prices.

With the S&P 500 now bouncing against overhead resistance in the 1,950 area, I would not be surprised to see the indexes shift in reverse or at least pause until new momentum is found to justify not only the current levels but also a break through this glass ceiling. Still, at this point this entire rebound is nothing but a strong bear market rally, and we need to see far more momentum to push our Domestic TTI (section 3) back into bullish territory.

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