Market Commentary: Markets Open Flat And Melt Down From There

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Opening Market Commentary For 09-10-2014

Premarkets were up +0.05% and briefly opened up the same way. Within minutes the averages became flat and slowly started to migrate south on low volume.

By 10 am the averages had sea-sawed down -0.15% to leave no doubt that investors are worried about the markets future. Most are holding tight and prefer to sit on their hands and see what Mr. Market is posed to do next.


Follow up:

The medium term indicators are leaning towards the hold side at the opening. The all important signs of reversal, up or down, have not been observed so we are mostly, at best, neutral and conservatively holding. The important DMA's, volume and a host of other studies have not turned and that is not enough for me to start shorting, but now I am very concerned. The SP500 MACD has turned flat, but remains above zero at 9.95. I would advise caution in taking any position during this uncertain period although some technical indicators have starting to turn bearish.

Investing.com members' sentiments are 64 % Bearish and when it switches over to bullish, as it did on Tuesday 8-5, watch for the market bottom to fall out some are saying as the markets usually go against 'Sheeple' buying high and selling low.

Investors Intelligence sets the breath at 61.1 % bullish with the status at Bear Confirmed. (Chart Here )

StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 65.64. (Chart Here) Very close to resistance and now flattening.

StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 75.20. (Chart Here) Remains below resistance and now flatting.

StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 25.31. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009. Moving up – bearish.

StockChart.com Overbought / Oversold Index ($NYMO) is at -37.34. (Chart Here) (Need to type in $NYMO) It is now around the area where it turns and starts to descend, but any thing below -30 / -40 is a concern. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. Wednesday, 8-20-2014, $NYMO climbed to 58.24 is signaling a market reversal and apparently it has started – which is short term bearish.

StockChart.com Consumer Discretionary ETF (XLY) is at 68.21. (Chart Here)

Chris Ciovacco says, "As long as the consumer discretionary ETF (NYSEARCA:XLY) holds above 67.06, all things being equal, it is a good sign for stocks and the U.S. economy." (Actually the support looks to be in the 66.88 range) This chart clearly shows that dropping below 65.50 should be of a great concern to bullish investors. Wednesday, 9-3-2014, XLY edged up to 69.25 and that is another notch in the gun signaling that we might have another reversal very soon – at least to cover the gap below at 67.85. Protect thyself.

Why You Should Not Be Comfortable With The Level Of The Stock Markets

Summary

  • The Dow Jones has set a new record above 17,000.

  • The NFP came out with a stronger than expected number of 288,000 new jobs for June.

  • Wage growth remains low, well below the level the Fed would like to see.

The U.S. economic recovery is not on sure footing yet. There are foundation issues, especially in the housing market and with wages. The Fed should take into account these problems before raising rates. The Fed is in the middle of tapering its massive bond buying program, hoping to end it by end of October 2014. They have continued to keep short term rates near zero, amid speculation they will raise them soon. The Fed is correct in keeping them as is. It is still too early to raise rates. While 200K new jobs a month is a good thing, a print of 300K would point to a stronger economic recovery.

There are reasons to be concerned. While there is a feeling of euphoria over the Dow Jones hitting 17,000 and closing above it, do not expect it to stay at this level. There is no real economic growth supporting it.

 

Bottom line here is that I have not seen any serious bears jumping out of the woods just yet, although I am VERY concerned that ANYminor correction could turn nasty in a heart beat. One significant signal would be daily losses in any of the major averages that go over the 'magic' 3 % and then you need to pay close attention to risk-off tactics. There hasn't been a 10% correction in several years and some investors are becoming increasingly concerned an imminent correction is on the way.

Sometime in the future, there will be another three percent drop, only it will go to four, recover somewhat and the BTFDers will cry halleluiah and buy again. Only this time it doesn't recover fully like in the past and drops again, increasing the net drop to seven percent and so on.

Investors are currently unhappy, unenthusiastic, skittish and ready to jump ship every time it nudges against a small financial iceberg. They remain long for now unable to afford to sell and live off cash savings that have negative real rates thanks to the Feds. They feel in their guts, correctly, that a real 'correction' is coming and can't do anything about it until it is too late. Greed rules the day and investors should be very cautious.

In Lance Roberts article he asks, Is The Market Consolidating Or Topping?

There are two ways to look at stagnation in the markets. It is either a consolidation process that works off an overbought condition which leads to further advances, OR it is a topping process that leads to a market decline. Discerning which process is currently "in play" is critical for investor decision making.

Let me be clear. I am not stating that the current consolidation process will absolutely collapse into a sharp correction in the months ahead. However, I am stating that the current environment is more similar to past markets which did correct, than not.

While it is certainly possible that the markets could ratchet higher from here due to the "psychological momentum" that currently exists, the likelihood of a runaway bull market from here is remote.

 

One thing to keep in mind is that stocks may not be setting up for a fearsome bear market. History shows that there are two types of corrections -- sharp, brutal downturns that clear the air fairly quickly and prolonged periods of backing-and-filling that gradually remedy built-up imbalances. Time will tell which one lies ahead.

It is still possible that Mr. Market is not through playing with the averages and even newer historical highs are a distinct possibility. Historically, accordingly to Eric Parnell, "major bull markets have almost never reached their final peak in a sideways grinding pattern. Instead, they have almost always peaked with flourish including one final crescendo toward a new all-time high before finally rolling over and succumbing to the forces of the new bear market".

As long-time readers know, says David Moenning, "I believe it is VITAL to have systems and/or models to guide one in their investing journey. As the late Marty Zweig used to say, 'Those who rely on a crystal ball will wind up with an awful lot of crushed glass in their portfolio'." This basically states our views on the market too, although it is best to be ready for the unexpected if you are bullish.

What I fear the most in relationship to the end of the infamous QE is that the FED has no backup plan to keep the markets from correcting as they have not done so for several years. As the liquidity starts to 'evaporate' that will in-turn deteriorate the props that have held the markets up so well. Each and every 'correction' will be deeper and deeper as this money phenomenon disappears.

Watch the Fund manages to keep an eye on the volume at AmeriTrade as the best indicator to what Maw and Pop 'Sheeples' retail trading are. Some analysts believe the Federal Reserve may raise interest rates more quickly than they have currently indicated but nothing from Janet Yellen has indicated this.

These managers are are closely monitoring any signals that Ms. Yellen is going to backtrack on exiting QE and these guys will exit the markets long before the 'Sheeples' if she doesn't. Watch the the fund managers!

The longer 6 month outlook is now 35-65 sell (probably should be 40-60 sell) and will remain bearish until we can see what the effects are in the Fed's game plan, Russia's annexing game playing and of course the World's newest player Iraq, ISIS and Israel. I would also take chart and other technical indicators with a lessor degree of reliability for the time being and watch what the Janet Yellen's Fed does over the next couple of months.

The DOW at 10:30 is at 16994 down 20 or -0.12%.

The SP500 is at 1985down4 or -0.18%.

SPY is at 198.97down0.34 or -0.17%.

The $RUT is at 1157 down 2 or -0.17%.

NASDAQ is at 4551 down 2 or -0.04%.

NASDAQ 100 is at 4059 down 3 or -0.07%.

$VIX 'Fear Index' is at 13.90 up 0.40 or 3.33%. Bearish Movement

(Follow Real Time Market Averages at end of this article)

The longer trend is up, the past months trend is positive, the past 5 sessions have been negative and the current bias is negative.

How Oil Really Gets Priced

WTI oil is trading between 93.02 (resistance) and 92.04 (support) today. The session bias is negative and is currently trading down at 92.05. (Chart Here) There is a very large gap at 97.06 and these types of gaps are usually filled sooner rather than later. It would not surprise me to see the oils move back up in the very near future. (Chart Here) (Look at the 5H time scale.)

Brent Crude is trading between 99.46 (resistance) and 98.50 (support) today. The session bias is negative and is currently trading down at 98.50. (Chart Here)

Why Gold Will Rise When The Dollar Falls

- and -

The general consensus is that gold prices will actually fall in the next twelve months (Sept to Aug. 2015). Goldman Sachs estimates that gold will fall to $1,050 an ounce, a drop of nearly 19%.

Gold fell from 1258.47 earlier to 1247.73 and is currently trading down at 1250.40. The current intra-session trend is negative. (Chart Here)

Dr. Copper is at 3.110 rising from 3.093 earlier. (Chart Here)

The US dollar is trading between 84.55 and 84.24 and is currently trading down at 84.38, the bias is currently neytral and volatile. (Chart Here) >>>> There is a gap below between 83.92 and 83.79, watch out below as any rise is expected to be temporary.<<<<<<

The markets are still susceptible to climbing on 'Bernankellen' vapor, use caution!

"Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation inequities, they should try to be fearful when others are greedy and greedy only when others are fearful." - Warren Buffett

If you would like to get advanced buy/sell tweets, sign-up in the column to the right of this post by clicking on the 'Follow' button. Write me with suggestions and I promise not to bite.

Real Time Market Numbers

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

Written by Gary

 

 

 









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