“when the facts change, you must change your mind” — unknown

1. Volkswagen Admitting Diesel Emissions Cheat — Volkswagen (OTCQX:VLKAY) admitted to cheating on U.S. air pollution tests for years, risking billions in potential fines and heavily shaking investor confidence. Shares in Frankfurt plunged as much as 22% on the news, the steepest intraday decline in almost seven years, wiping out $18B in market value and extending the stock’s slump for the year to 32%. “I personally am deeply sorry that we have broken the trust of our customers and the public,” Volkswagen (OTCQX:VLKAY) CEO Martin Winterkorn said in a statement.
2. Alibaba’s $105B Lockup Comes to An End — the lockup on 63% of Alibaba (BABA) shares ended on Sept 19, freeing up the company’s largest shareholders to start selling stock beginning today. With Yahoo (NASDAQ:YHOO) still working out what to do with its 15% stake amid tax uncertainties, investors battered by the e-commerce company’s $128.5B market slump are bracing for the worst, such as more shares hitting the market and driving prices even lower.
3. The Democratic Front-Runner, Hillary Clinton Drug Plan Would Cap Consumer Costs, Mandate R&D Spending — Several details of the new plan have emerged. The plan would put a $250 monthly cap on the amount chronic pain patients would have to pay for prescription medications, approving more generic/imported drugs, forcing pharmaceutical companies to reinvest their profits into R&D, and ending their ability to write off consumer advertising as a business expense.
4. China Factory PMI Falls Again — activity in China’s factory sector fell to the lowest level in over six years. The preliminary Caixin China manufacturing purchasing managers’ index dropped to 47.0 in September, compared to the 47.5 reading expected by economists. The index came in at 47.3 in August. The decline was led by a weak read for new orders and new export orders.
5. House Speaker John Boehner To Resign From Congress — House Speaker John Boehner will leave Congress next month, an aide said on Sept 25, in a stunning shakeup of Republican leadership in Washington. Boehner has been embroiled in a fight with the conservative wing of his party as the federal government hurtles toward a possible shutdown next week. Congress has passed no funding bills for the fiscal year that begins Oct. 1, and without a stopgap bill, the government would partially shut down. There had been talk by conservatives of replacing Boehner as speaker.

The week ahead — Economic data from Econoday.com:

“The easiest thing to do is prepare. If you don’t, on behalf of the other market participants, we thank you.” — unknown

1. Retail Sales in U.S. Rise In August as Consumers Unshaken by Turmoil — Bloomberg, Retail sales in the U.S. climbed for a second straight month in August. The Commerce Department figures showed 0.2 percent increase in August followed a 0.7 percent gain in July that was larger than previously reported. Ten of 13 major retail categories showed increases last month, including auto dealers, restaurants and clothing stores.
2. S&P Cuts Japan Credit Rating as Abe Falls Short of Early Promise — Standard & Poor’s cut Japan’s long-term credit rating one level to A+, saying it sees little chance of the Abe government’s strategy turning around the poor outlook for economic growth and inflation over the next few years. Japan’s problems are mounting, with inflation near zero, the economy contracting last quarter and debt rising as the population ages. The International Monetary Fund estimates public debt will increase to about 247 percent of gross domestic product next year.
3. CPI Dropped In the Month of August — August Consumer Price Index fell 0.1% vs. July, its first drop since Jan as the labor dept. reported. Cheaper gas led the decline. Core CPI, which strips out food and energy, rose 1.8% vs. a year earlier for the 3rd straight month, below the Fed’s 2% target.
4. Federal Reserve Scrubs Sept. Rate Liftoff — citing “global economic and financial developments” – especially in China that could curb US growth and inflation, the Fed Reserve voted 9-1 not to raise interest rates for the first time in nearly a decode. Fed staff also cut GDP forecasts for 2016-17. Fed chief Janet Yellen said a rate hike could happen in Oct. or Dec.

The week ahead — Economic data from Econoday.com:

“Obviously the thing to do was to be bullish in a bull market and bearish in a bear market… I came to learn that even when one is properly bearish at the very beginning of a bear market it is not well to begin selling in bulk until there is no danger of the engine back-firing.” – Jesse Livermore

1. Chinese Trade Continues to Slump — Chinese imports fell for the tenth month in a row, tumbling a greater than expected 13.8% in August vs consensus of -8.2% and a drop of 8.1% in July. Exports dived 5.5% vs -8.3% previously. The fall in imports reflects lower global commodity prices and sluggish internal demand.
2. Chinese Government Plans Further Stimulus — China’s finance ministry has unveiled yet more stimulus as it again bids to re-spark the country’s slowing economy, which was exemplified by poor trade figures yesterday. The government intends to cut taxes for small businesses and allocate further funds for infrastructure projects, with two railway projects worth almost 70B yuan ($11B) being approved.
3. Standard & Poor Cuts Brazil Credit Rating to Junk With a Negative Outlook — Standard & Poor downgraded Brazil to BB+, the highest speculative grade, highlights the failure of President Dilma Rousseff’s administration to shore up the government’s budget amid forecasts for the longest recession since the 1930s, inflation at a 12-year high and a collapse in prices for Brazil’s commodity exports. S&P’s negative outlook means it may reduce the grade further, even as Fitch Ratings and Moody’s Investors Service keep the country at investment grade for now.
4. Consumer Sentiment in U.S. Slumps to Lowest Level in a Year — Bloomberg, the University of Michigan’s preliminary index dropped to 85.7 from an August reading of 91.9, the largest one-month decline since the end of 2012. Households were less upbeat about future growth in employment and wages than a few months earlier, while 73 percent of respondents reported hearing news of negative economic developments. Attitudes in September toward purchases of automobiles and other big-ticket items remained strong, especially among higher-income households, the report showed.

The week ahead — Economic data from Econoday.com:

“. . . Look for hysteria to see if you shouldn’t go the opposite way, but don’t go the opposite way until you have fully examined it. Also, remember that the world is always changing. Be aware of change. Buy change. You should be willing to buy or sell anything. So many people say, ‘I could never buy that kind of stock.’ ‘I could never buy utilities.’ ‘I could never play commodities.’ You should be flexible and alert to investing in anything.” — Excerpt of an interview with Jimmy Rogers

1. Shell Halts Alaska Oil Exploration — after spending $7Bil, Shell halts Alaska oil exploration after disappointing well results. Shell targeting finds it thought could be 10 times greater than the amount of oil and gas produced thus far in the North Sea. Though there were signs of oil and gas in the Burger J well in Alaska’s Chukchi Sea, they weren’t enough to warrant further production, and the well will be plugged and abandoned.
2. House Demecrats Request Subpoena For Docs on Valeant (NYSE:VRX) Drug Pricing — House Democrats want to subpoena Valeant (NYSE:VRX) for documents related to its increases in drug pricing. Valeant (NYSE:VRX) hiked the prices of Nitropress and Isuprel 212% and 525% respectively the day it bought them. Jason Chaffetz, Chairman of House’s Committee on Oversight and Government Reform, 18 Democratic representative stated,”We believe it is critical to hold drug companies to account when they engage in a business of buying old neglected drugs and turning them into high-priced specialty drugs,”. Biotech stocks sold-off on the news.
3. Senate Passes U.S. Spending Bill Hours Before Shutdown Deadline — the Senate and the House passed a short-term spending bill that will extend federal funding until December 11 and avoid a government shutdown by Sept 30’s midnight deadline. The measure comes amid a row over the financing of the women’s group Planned Parenthood. Following the votes, Republican leaders plan to start talks with President Obama about a two-year budget, although it’s unclear whether any successor to outgoing House Speaker John Boehner would be interested in such a deal. President Barack Obama has signed into law a bill that extends federal funding until December 11.
4. Chinese Manufacturing Continues To Shrink — Chinese factory activity continued to contract in September, albeit at a slightly slower pace, two surveys show. The government NBS Manufacturing PMI edged up to 49.8 from 49.7 in August, while the Caixin manufacturing PMI rose to an expected 47.2 from 47.
5. Nordstrom (JWN) Sells Credit Card Porfolio For $2.2B, Sets Buyback and Announces Special Dividend — Nordstrom has wrapped up the sale of its credit card portfolio for $2.2B in a long-term deal with TD Bank (NYSE:TD), which will be the exclusive issuer of Nordstrom (NYSE:JWN) brand Visa and private label cards. Net proceeds of the sale are about $1.8B after $325M in debt reduction, as well as transaction costs. Nordstrom’s putting the cash to work via a $1B buyback program and a $900M special dividend or $4.85 per share.
6. Market Correction Similarity Between 1011 and 2015 — chart below shows a similarity of 2011 vs 2015. We need to see more ingredients follow before we can say that a bottom has been created. A bottom is defined as a function of price & time and a level from which a multi-week up trend can begin.

Note:
a. Correction Length –> 8 weeks
b. Low set is retested –> 2015 low SPX 1,867
c. Check MACD & ADX before going long

2011 vs 2015 Comparision

The week ahead — Economic data from Econoday.com: