Coffee Sipping Big Board Stocks

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Why stocks look primed for a meltdown within months

MARKETWATCH 9:21 ET 9/13/2016

Critical information ahead of the U.S. market's open

Pop goes the rebound. While you were sleeping, that overnight bounce all but vanished and left us almost exactly where we were this time on Monday.

That is, with stock futures deep in the red. Not helping out has been a big push south for oil prices after the IEA joined OPEC in flipping its picture of dwindling oil supply. And well, where oil goes, stocks often follow.

Those impatiently looking for real capitulation on oil, though, may have to hold off until the end of the month. That's when OPEC and Russia may fail to agree on a supply freeze, IG's Chris Beauchamp tells clients in a note. We've got more on oil below, in our chart of the day.

Back to stocks. Even after Monday's storming rally, we're not back up to pre-Friday levels, notes Beauchamp. Obviously the action out there this morning isn't doing anything to help, though the day is young.

"It's clear that Friday's tantrum was inspired by, but not wholly due to the Fed, with the bigger picture indicating that September will see a hefty dose of volatility before the traditionally strong October-December period kicks in," he says.

Note that Goldman ratcheted down its Fed rate-hike expectations this morning, post-Brainard.

Dana Lyons of J. Lyons Fund Management (http://jlfmi.tumblr.com/) did a tech dive on Friday's action and concluded that "widespread, frothy investor sentiment likely will need to be unwound much further before a durable bounce."

All this calls for patience, and many investors have about as much as my 8-year-old in that department. But who can blame them, when the market has been largely doing their bidding for so long? That brings us to our call of the day and a technical pattern that says we're working toward a pullback for the S&P 500. But ever so slowly.

Key market gauges

S&P 500 , Dow industrials and Nasdaq-100 futures are back in the red. In Asia (http://www.marketwatch.com/story/ asian-stocks-bounce-back-from-mondays-beating-2016-09-12), stocks rebounded from Monday's takedown, but had given much of that up by the close.. In Europe (http://www.marketwatch.com/story/european-stocks-punched-lower-on-prospect-of- higher-us-borrowing-rates-2016-09-12), French and German stocks are around 1.7% lower.

Crude oil (http://www.marketwatch.com/story/oil-futures-reverse-gains-ahead-of-weekly-supply-data-2016-09-13) was already falling when the International Energy Agency warned of a growing supply glut.

Gold is up, while silver is getting hammered. The dollar (http://www.marketwatch.com/story/dollar-flattens-out-in- wake-of-dovish-fed-signal-2016-09-13) (http://www.marketwatch.com/story/dollar-flattens-out-in-wake-of-dovish-fed- signal-2016-09-13) is flat.

The chart

The IEA dealt a blow to oil bulls this morning, slashing its global-demand predictions by 100,000 barrels a day for this year and by 200,000 for in 2017 -- thanks to "wobbling" appetite in China and India for the commodity.

"Even with a modest weather-related uptick forecast for the end of the year, oil demand growth in 2016 will struggle to get above 1.3 [million barrels a day]. Refiners are clearly losing their appetite for more crude oil," said the influential Paris-based agency (http://www.marketwatch.com/story/iea-cuts-oil-demand-forecasts-as-allure-of-cheap- prices-fades-2016-09-13).

The IEA's chart within that report, showing where they see that all-important balance between demand and supply up to the end of next year, says it all:

There's also a bit of contango chatter out there. Contango (http://www.investopedia.com/terms/c/contango.asp) means that near-month futures are cheaper than those expiring further into the future.

(https://twitter.com/StuartLWallace/status/775623360638222336)

The call

If a particular technical pattern plays out, the S&P 500 could face a 20% to 25% correction by spring, says NorthmanTrader's Sven Henrich to MarketWatch.

He lays out what's happening in a post to his website (https://northmantrader.com/2016/09/12/time-to-get-real-part- iii/). It features the chart below, which shows a rising-wedge pattern (http://www.investopedia.com/terms/w/wedge.asp? ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186) for the S&P 500, with the peak of that pattern pointing to next spring:

For the non-techies, a rising wedge pattern is taken as a bearish signal for an index. As the chart shows, the pattern begins wide at the bottom and narrows at the top as prices move higher and the trading range gets tighter.

Henrich says this rising wedge is developing alongside "extremely steep support lines," with the market still completely uncorrected.

"Every major top in the past 30 years has come on rising wedges with major negative RSI (relative strength index) divergences," he says. "And every one retraced between 0.50% and 0.618% of the move at least. Every time."

Here, Henrich is pointing out what happens when a key indicator (the RSI) and an asset's price are heading in opposite directions.

Even as the Northman Trader is warning on a spring bust, he says there's still a good chance stocks will rise going into the early part of next year. There could be some sort of "blowoff topping move, but in my view the risk is increasing the narrower this gets," he says.

(Here's an interview he gave to CNBC on Monday (http://video.cnbc.com/gallery/?video=3000550475), discussing some of this).

The buzz

Apple (AAPL) is bucking the downtrend this am. While supply issues could keep some eager beavers waiting for their iPhone 7's (http://www.marketwatch.com/story/apple-hits-iphone-7-supply-issues-on-first-day-of-preorders-2016-09-09), T-Mobile (TMUS) was positively upbeat this morning, talking shattered records in a statement this morning (http:// www.marketwatch.com/story/apples-stock-jumps-after-t-mobile-sees-record-preorders-iphone-7-2016-09-13). "The first four days of the iPhone 7 launch are by far the biggest ever for T-Mobile ... it's like four times bigger than the iPhone 6 for us at the preorder stage...phenomenon," CEO John Legere said via Periscope (https://www.periscope.tv/JohnLegere/ 1ypKdolYWBnxW) in the wee hours.

Sprint (S) piped up saying something similar, that its own iPhone 7 preorders are four times higher than last year (http://www.marketwatch.com/story/sprint-preorders-for-apples-iphone-7-are-4-times-higher-than-last-year-2016-09-13).

Wells Fargo (WFC) is trying to make amends after two million accounts were created without the consent of customers. The bank says it'll eliminate all product sales goals (http://www.marketwatch.com/story/wells-fargo-to-cut-sales-goals- to-rebuild-trust-2016-09-13) in its retail banking ops in January. Clearly they've got their work cut out for them:

(https://twitter.com/chetfaliszek/status/775534345754775552)

Berkshire Hathaway (BRKA) (BRKA) and one of its companies are being sued over allegations of running a "reverse Ponzi scheme" (http://www.marketwatch.com/story/berkshire-hathaway-and-its-unit-sued-for-running-reverse-ponzi-scheme-2016-09- 13) by misusing premiums that were earmarked for workers' comp coverage.

Intersil (ISIL) is up after Japanese chip maker Renesas Electronics (6723.TO) agreed to buy the U.S. chip group for around $3.2 billion (http://www.marketwatch.com/story/japans-renesas-to-buy-intersil-for-32-billion-2016-09-12)

Weight Watchers (WTW) shares slid more than 4% in late trade after the resignation of CEO James Chambers (http:// www.marketwatch.com/story/weight-watchers-looking-at-lowest-price-since-oprah-bought-stake-2016-09-12), with the stock looking at its lowest level since Oprah Winfrey said she was taking a stake. Winfrey's portfolio took about a $2.9 million hit on that late action.

J.P. Morgan CEO Jamie Dimon has ruled out a run for the presidential office (http://www.wsj.com/articles/jamie-dimon- says-hed-love-to-be-president-but-its-too-hard-to-run-1473716796) (http://www.wsj.com/articles/jamie-dimon-says-hed- love-to-be-president-but-its-too-hard-to-run-1473716796), saying "It's just too hard and too late." Hopes, dreams destroyed.

GE (GE) executives say the 2017 Bolt EV will have an estimated range of 238 miles (http://www.cnbc.com/2016/09/12/ chevys-238-mile-promise-a-game-changer-for-electric-cars.html) per charge.

The economy

The National Federation of Independent Business optimism index, released this morning (http://www.marketwatch.com/ story/nfib-small-business-optimism-index-dips-in-august-2016-09-13), showed a dip in August. The Federal budget is due at 2 p.m.

The stat

(https://twitter.com/IPCAthletics/status/775091079297142784)

3 minutes and 48.29 seconds -- The winning time for Abdellatif Baka of Algeria in the 1,500-meter final at the Paralympics in Rio Monday.

That time was faster than the one that won the gold medal for Matthew Centrowitz Jr. over the same distance at the Rio Olympics (http://www.huffingtonpost.com/entry/paralympic-1500m-t13_us_57d6d3a8e4b03d2d459b7e78?). Three other Paralympians, including Baka's brother, beat Centrowitz's time, and they weren't wearing blades -- the T13 classification is for visually impaired athletes.

The quote

(https://twitter.com/frignas/status/775468772291252225)

"My campaign was a picture of me holding my cat saying, 'Please don't vote for me.'" -- Black metal legend Fenriz on being elected to a Norwegian town council against his will (http://www.factmag.com/2016/09/12/fans-elect-black-metal- legend-fenriz-to-town-council-darkthrone/). Now there's some refreshing politics.

Random reads

(http://www.wsj.com/video/north-korea-us-sanction-threats-highly-laughable/B6A20B2F-2D6C-4ED2-A50F-ABAF84E5568C.html) (http://www.wsj.com/video/north-korea-us-sanction-threats-highly-laughable/B6A20B2F-2D6C-4ED2-A50F- ABAF84E5568C.html)Cease-fire in Syria off to a fitful start (http://www.wsj.com/articles/syrias-assad-swears-to-keep- fighting-terrorists-as-cease-fire-set-to-begin-1473693345)

Hillary Clinton tells CNN's Anderson Cooper that she's "feeling so much better." (https://www.youtube.com/watch?v= y03Sc0H3n8s)

Bust your brain with the 12-dot optical illusion (http://nymag.com/selectall/2016/09/12-dots-optical-illusion-hermann- grid-is-hurting-my-brain.html?mid=twitter_nymag)

A 160-year-old Arctic mystery solved after HMS Terror is located (http://www.npr.org/sections/thetwo-way/2016/09/12/ 493676137/second-vessel-from-doomed-franklin-expedition-found-in-the-arctic)

North Carolina GOP says losing NCAA championship events is "absurd." (http://www.marketwatch.com/story/north-carolina- loses-ncaa-championship-events-over-bathroom-law-2016-09-12)

(http://www.marketwatch.com/story/north-carolina-loses-ncaa-championship-events-over-bathroom-law-2016-09-12)"Grey"; haters, prepare yourself for "Fifty Shades Darker"

(https://www.youtube.com/embed/K3RSTGORH9Q)

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-Barbara Kollmeyer; 415-439-6400; [e-mail]


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09-13-160921ET
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