“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:

“If you have an approach that makes money, then money management can make the difference between success and failure… … I try to be conservative in my risk management. I want to make sure I’ll be around to play tomorrow. Risk control is essential.” – Monroe Trout

1. China OKs Pension Funds to Pour $97B Into Market — China gave approval for pension funds run by local governments to invest in the stock market. The measure was approved over the weekend by the State Council. State media in China estimate close to $97B will be eligible to be invested under the new rule.
2. Oil Falls to 2009 Crisis Prices — US crude futures settled down to $38.2 per barrel, the lowest since Feb 2009. The latest decline in crude followed the collapse in Chinese stocks, which was fed by widening concerns over slowing growth in the world’s largest oil importer. Other commodities including copper and soybeans also fell.
3. China Cut Interest Rate AND Reserve Ratio To Offset Capital Outflow — China’s central bank lowered both deposit and lending ratios by 25 basis points, taking the one-year benchmark rates to 1.75% and 4.60% respectively. The central bank also lowered commercial banks’ reserve ratio by 50 basis points. Large banks will still have to keep 18% of their deposits as reserves after this move. The PBoC last week pumped a net 150 billion yuan into the market via 7-day repurchase agreements and another 110 billion in 6-month loans into financial institutions. But these efforts were perceived insufficient and too short-term.
4. CVS Expands Telehealth Coveragee — CVS Health is jumping further into telehealth with a partnership that will expand patients’ remote access to doctors. Three leading telehealth companies – American Well, Teladoc and Doctor On Demand – will begin receiving referred CVS (NYSE:CVS) customers, as well as referring their own customers to 150 CVS walk-in clinics, in six states by the fourth quarter.
5. Investors Yank Cash From Almost Everything Just Like 2008 — Bloomberg, since July, American households — which account for almost all mutual fund investors — have pulled money both from mutual funds that invest in stocks and those that invest in bonds. It’s the first time since 2008 that both asset classes have recorded back-to-back monthly withdrawals, according to a report by Credit Suisse. Credit Suisse estimates $6.5 billion left equity funds in July as $8.4 billion was pulled from bond funds, citing weekly data from the Investment Company Institute as of Aug. 19. Those outflows were followed up in the first three weeks of August, when investors withdrew $1.6 billion from stocks and $8.1 billion from bonds.

“The worse a situation becomes the less it takes to turn it around, the bigger the upside.” — George Soros

1. FDA Clears “Viagra For Women” — the first drug to treat low sexual desire in women has won approval from U.S. health regulators. Addyi (flibanserin), produced by privately-held Sprout Pharmaceuticals, will only be available through certified health care professionals and pharmacies due to its safety issues. The drug can result in potentially dangerous side effects such as low blood pressure and fainting, especially when taken with alcohol.
2. FOMC Meeting Minutes — according to the latest July meeting minutes, policymakers didn’t sound too convinced that its time for an initial rate hike but “noted that conditions were approaching that point”. Participants worried about China and currency swings before last week’s yuan devaluation.
3. Germany OKs Greek Bailout — Germany lawmakers approved a 3rd rescue deal, despite significant conservative opposition. That clears the way for Athens to receive money to make a 3.2 bil-euro debt payment to the European Central Bank. Greece PM Alexis Tsipras is weighting whether to hold a confidence vote or snap elections amid a rebellion within his left wing coalition.
4. Kazakhstan Devalued Currency — Kazakhstan’s tenge plunged a record 23% late last week, following a surprise announcement the government would allow the currency to float freely. The move continues a currency war being fought in the emerging markets. Vietnam devalued its currency for the third time this year after a similar move in China, while Russia is allowing the ruble to track the drop in crude.
5. Oil Poised for Eighth Weekly Decline — WTI crude is heading for its eighth straight weekly decline, the longest weekly losing streak in about thirty years. In late 1985, oil prices slumped to $10 from around $30 over five months, after OPEC raised output to counter an increase in production outside the group. Weaker global stock markets and data from China’s factory slowdown are particularly weighing on the commodity today, adding to worries about lower demand.

The week ahead — Economic data from Econoday.com:

“Son if you are going to be wrong, be wrong quickly, and for a de minimis loss of capital.” — Leon Levy

1. People Bank of China (PBoC) Devalue Yuan Against US Dollar After Weak Data — China sent a shock wave through currency markets by depreciating the Yuan almost 4 percent in 2-day period against the U.S. dollar to levels last seen three years ago. The move had a knock-on effect on currencies throughout the region, with the Singapore, New Zealand and Australian dollars, as well as the South Korean won, also dropping against the U.S. dollar in reaction. Also, Chinese exports slumped 8.3 percent in July, the biggest drop in four months and far worse than expectations for a 1 percent fall. Exports to the European Union fell 12.3 percent in July while those to the United States dropped 1.3 percent.
2. Moody Downgraded Brazil — Moody’s Investors Service has cut Brazil’s credit rating to near-junk status, citing weaker-than-expected economic performance, an upward trend in government spending, and lack of consensus on government reforms. Brazil’s government bond rating now stands at Baa3 with a stable outlook. “The numbers confirm that the authorities have been unable to deliver primary surpluses large enough to prevent an increase in debt ratios in 2015-2016,” Moody’s said.
3. Greece Rescue Terms Agreed — Athens and its international creditors agreed to specific reforms and budget cuts that would unlock nearly $95 bil in bailout aid after leaders reached a deal last month on the outlines of a new rescue plan. However, Greece PM Alexis Tsipras may face a political backlash that could force him to call snap elections.
4. Eurozone Growth Slows in Second Quarter — GDP (Gross Domestic Product) in the 19-nation region rose 0.3%, below views and down from 0.4% growth in the prior quarter. The top two economies lagged expectations, with Germany’s economy grew 0.4%, Italy’s 0.2%, while France reporting no growth. With market jolts coming from China, and Greece on the verge of a new bailout program, the euro area’s promising revival may still see difficulties ahead.
5. China Slowdown Worries and Oil Glut Press Oil to 6 1/2-year Low — crude prices have returned to more-than six-year lows as huge stockpiles and refinery shutdowns add to concerns about oversupply, while China’s devalued yuan heaps pressure on commodity markets. Oil futures slid earlier to $41.35 a barrel, a level last seen on March 4, 2009,.
6. Apple Now Aiming for 2016 Web TV Service Launch — Bloomberg, after previously aiming for a fall launch, Apple (NASDAQ:AAPL) is now looking to bring its Web TV service to market in 2016. The delay is blamed on slow-moving licensing talks with TV networks and the need for capacity upgrades. Sources suggest Apple wants to charge about $40/month for its service, in comparison to Dish’s (NASDAQ:DISH) Sling TV (which provides a limited number of channels) for $20/month and Sony’s (NYSE:SNE) more expansive PlayStation Vue service for $50-$70/month.

The week ahead — Economic data from Econoday.com:

“Short term volatility is greatest at turning points and diminishes as a trend becomes established.” – George Soros.

1. China Factory Activity Shrank Again in July — China’s factory activity shrank more than initially estimated last month, tightening the most in two years and extending the sell-off of Chinese equities. The final Caixin/Markit China Manufacturing PMI dropped to 47.8, from 49.4 in June, marking the fifth straight month of contraction. The final reading was lower than the flash PMI of 48.2 and the official manufacturing PMI, which fell to 50.0 in July from 50.2 in June.
2. Puerto Rico Debt-Crisis Grows as Payments Halt, Agency Defaults — Puerto Rico has confirmed that it failed to make a debt payment over the weekend, placing the U.S. commonwealth into default for the first time in its history. Congress may help the territory through the passage of a bankruptcy bill, although that effort has faced opposition. The island has also floated the idea that the Treasury Department could guarantee its debt when it seeks to borrow in the market again – helping to lower the cost significantly.
3. Greek Stock Market Re-Open After a Five-Week Shutdown — the Athen’s ASE Stock Index plunged nearly 30% last week, the worst fall on record, after the Athens Stock Exchange reopened following a five-week shutdown. Greek Banking stocks down by another near 30% plunge in banking stocks, as investors react to continuing questions about a new bailout from the EU and the country’s worsening economy.
4. Bill Ackman Takes $5.5 billion Stake in Oreo Maker Mondelez(MDLZ) — Ackman’s Pershing Square Capital Management LP revealed its stake, which amounts to about 7.5% including options and forward contracts, in a statement late Wednesday night. Nelson Peltz’s Trian Fund holds 3.1% of MDLZ.
5. China Spends Heavily to Prop Up Stocks — Peking University economist Christopher Balding has added up the bailout and stimulus measures announced since the Chinese equity panic in late June. They total $1.3T, or more than 10% of GDP. To put that in perspective, America’s Troubled Asset Relief Program was originally authorized to spend $700B. And that was a response to a systemic financial crisis in an economy some 70% bigger than China’s.
6. Bullish Sentiment Sees Slight Rise — courtesy of BIG, according to the weekly survey from the American Association of Individual Investors (AAII), bullish sentiment increased from 21.11% up to 24.32%. Even after the increase, though, bullish sentiment remains well below its average of 38% for the current bull market; a level it hasn’t been above for 19 weeks now.

The week ahead — Economic data from Econoday.com:

“Don’t be afraid to take a loss. Mistakes are part of the game. The cost price of a security is a matter of historical insignificance, of interest only to the IRS.” — Arthur Zeikel

1. China Stock Dive Continues — the benchmark Shanghai index sank almost 10% last week, renewing doubt that Beijing can reverse fears about the safety of its equities markets. The Shenzhen index lost 9%. The losses nearly erased gains made since the low point of the earlier sell-off this month. China ‘s regulator later said that Beijing will step up stock purchases.
2. Standard & Poor Warns Brazil’s Investment Grade Rating At Risk — Standard & Poor’s has warned Brazil it could lose its coveted investment-grade rating in the coming year if fallout from a number of corruption investigations further stymies economic growth and implementation of austerity measures. The agency has now put the country’s foreign currency rating, which is rated one notch above junk, on negative outlook for possible downgrade.
3. Q2 US GDP at 2.3% vs 2.6% expected — U.S. economic growth accelerated in the second quarter as a pick up in consumer spending offset the drag from soft business spending on equipment. First-quarter GDP, previously reported to have shrunk at a 0.2 percent pace, was revised up to show it rising at a 0.6 percent rate. The Fed on Wednesday described the economy as expanding “moderately” while upgrading its view of the labor market and saying housing had shown “additional” improvement. The Fed’s assessment left the door open for a possible hike in interest rates in September, which would be the first rise since 2006.
4. AAII Bullish Sentiments — the latest survey of investor sentiment from the American Association of Individual Investors (AAII) also showed a large drop in bullish sentiment. This represents the lowest level since early June and the 18th straight week that it has been below the average reading of 38.19% since 2009.

The week ahead — Economic data from Econoday.com:

Whenever a well-known bearish analyst is interviewed in the financial press, it usually coincides with an important near-term market bottom – Clif Droke

1. Berkshire Returns to Energy Sector with $4.5B Stake in Phillips 66 — according to an SEC filing disclosed late on Friday, Berkshire Hathaway (BRK.A, BRK.B) has taken a $4.5B stake in Phillips 66 (NYSE:PSX), as Warren Buffett takes a renewed interest in the energy industry. Berkshire now holds nearly 58M shares after purchases this week, or more than 10% of the total outstanding. The latest wager comes amid a slump in crude prices, driven by concerns that a supply glut will persist.
2. Hedge Funds Took a Beating in August — billionaires David Einhorn and Daniel Loeb saw heavy declines at their main funds during August’s dramatic market selloff, as many other hedge funds suffered significant losses. Einhorn’s Greenlight Capital (NASDAQ:GLRE) fell 5.3% in August, extending the roughly $12B firm’s loss for the year to 13.8%. Others like Pershing Square Holdings portfolio dropped 9.2%, and is now down 0.1% since January. Last year the fund gained 40%, beating the S&P’s 13.7% gain. Other hedge fund losses for August: Third Point -5.2%; Jana Partners -4.3%; Viking Global -2.1%; Andor Capital -4.5%.
3. China Targets Media In Market Rout — Beijing punished nearly 200 people for allegedly spreading Internet rumors amid its market sell-off. In a broadcast confession, a reporter for a top Chinese financial news publication said he caused stock market “panic and disorder”. The head of the hedge fund’s Chinese unit has been detained by police to help with an investigation into market volatility.
4. Chinese Markets Closed on Sept 3 & Sept 4 due to Military Parade — Chinese markets closed on Sept 3 & Sept 4 due to a giant military parade marking the 70th anniversary of the end of World War II. Presiding over the extravaganza, President Xi Jinping said China would remain committed to “the path of peaceful development” and unexpectedly pledged to slash 300K troops from the country’s 2.3M strong military. The cuts, the largest reduction since 1997, will be mostly complete by the end of 2017.
5. ECB Ready To Add Stimulus — the ECB, seeing weaker growth and inflation, left open the door to expand and extend its monthly $66.7 bil bond-buying program, which is set to end in Sept 2016. ECB President M. Draghi signaled that the central bank is prepared to act. The ECB cut its GDP growth forecast to 1.7% from 1.9% in June and its inflation forecast to 1.1% from 1.5%.

The week ahead — Economic data from Econoday.com: