NYSE short sales and daily volume are trending lower, suggesting that selling pressure is fading.
S&P 500: Market risk remains elevated
NYSE daily volume and short sales declined Thursday & Friday, indicating selling pressure is easing.
There is no sign yet on the daily chart, however, with 21-day Twiggs Money Flow respecting the zero line from below. Breach of support at 1900 would warn of another decline. Follow-through below 1870 would confirm. Recovery above 2000 is unlikely at present, but would suggest that the correction is over.
Daily VIX indicates market risk remains elevated.
The market is closed Monday 7th for Labor Day.
NYSE short selling rises
NYSE short sales and daily volume dipped slightly on Wednesday but remain elevated, warning of selling pressure.
If we don’t understand both sides of China’s balance sheet, we understand neither | Michael Pettis
From Michael Pettis’ OpEd in the Wall St Journal:
History suggests that developing countries that have experienced growth “miracles” tend to develop risky financial systems and unstable national balance sheets. The longer the miracle, the greater the tendency. That’s because in periods of rapid growth, riskier institutions do well. Soon balance sheets across the economy incorporate similar types of risk.
….Over time, this means the entire financial system is built around the same set of optimistic expectations. But when growth slows, balance sheets that did well during expansionary phases will now systematically fall short of expectations, and their disappointing performance will further reinforce the economic deceleration. This is when it suddenly becomes costlier to refinance the gap, and the practice of mismatching assets and liabilities causes debt, not profits, to rise.
NYSE Short Sales
NYSE short sales and daily volume are only published 24 hours after the close of trade, but are still a useful indication of where the market is headed. Short sales over 500 million on Monday, remain elevated. Keep an eye out for any increase above 600 million this week — which would warn of rising selling pressure and a likely breach of support.
China: It just got worse
China: It just got worse – more bad news and more policy mistakes: http://t.co/h6pwguOJl9 #China #PBoC #EndOfTheDollarBloc @bill_easterly
— Lars Christensen (@MaMoMVPY) September 1, 2015
S&P 500: Dead cat bounce?
After Friday’s narrow consolidation between 1970 and 1990, S&P 500 September 2015 E-mini futures broke support at 1970, indicating moderate selling pressure.
Sound domestic economic performance is likely to ensure that the S&P 500 returns to its primary up-trend in the medium- to long-term, but upheaval in international financial markets may have sapped investor confidence in the short- to medium-term. The doji star on the daily chart reflects indecision. A close below 1970 would suggest another test of support at 1870, with respect of resistance at 2000 a bearish sign. A 21-day Twiggs Money Flow peak below zero would also warn of selling pressure. Follow-through above 2000 is less likely, but would indicate light selling and a snappy recovery.
NYSE volumes reflect the increase in activity, starting Friday August 21st, with daily volumes over 2 billion and short sales jumping to 800 million. It will be worth keeping an eye on short sales this week. Recovery above 600 million would warn of rising selling pressure.
China’s conundrum: Capital flight or deflation
China's conundrum: Selling FX reserves to support the yuan threatens deflation. But falling yuan fuels capital flight http://t.co/XGz6S4HPz6
— Colin Twiggs (@Colin_Twiggs) August 29, 2015
AND capital flight causes collapsing stock and real estate prices, which could lead to…… deflation.
Greece and Its Misguided Champions
From Michael G. Jacobides in Harvard Business Review:
….while some EU policies are punitive or counter-productive, the strength of opinion of pundits long on conviction and short on detail seems to ignore the real root cause of the crisis. This is that the Greek economy has become inward-looking, unproductive, incumbent-favouring, and rife with rent-seeking. They may also underestimate how Grexit would exacerbate many of the Greek pathologies at the root of the crisis.
Greece’s main problem isn’t its currency. Rather, it is that its Byzantine regulations and institutional uncertainties discourage investments and reduce competitive pressures. Grexit would further restrict available capital, shatter the fragile banking sector, and increase the investment gap, which, as McKinsey’s recent study shows, is the key issue.
Read more at Greece and Its Misguided Champions.
ASX during the 1997 Asian financial crisis
Performance of the All Ordinaries during the 1997 Asian financial crisis and ensuing Russian financial crisis in 1998.
The index gained 7.9% in 1997 and 7.5% in 1998 despite the upheaval in Asian markets. Australia is now a lot more reliant on exports to Asia, however, than in 1997/98.
Reversal of 13-week Twiggs Money Flow below zero warns of long-term selling pressure. Follow-through of the All Ords below 5000 would confirm a primary down-trend.