April 25th, 2012
in Gary's blogging
After Market Close Comment And Analysis:
The FOMC meeting and Dr. Bens remarks came and went. The market made a brief jump for the brass ring and missed. The green volume at 2:30 was the single largest 10 minute stint in at least 6 months but backed off radically. There were several half-hearten attempts to accelerate beyond the resistances, but in vain. The market kinda melted up, but fell short of giving you that warm, fuzzy feeling that everything is O.K.
The 500, the DOW and the $RUT never came close to their highs from this morning and the resistances held firmly. That is an important observation that has not gone unnoticed by the professional traders that are still leaning towards a bearish market in days to come.
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The 500 at the close. Notice that it did not come close to challenging its upper resistance which is a bearish indicator. I see the markets opening lower tomorrow morning and melting their way back up to today's highs.
The $RUT at the close. Notice that the Russell 2000 also didn't go above its upper resistance, even more bearish. If the markets do go higher, it would be nice to see the $RUT close up a gap at 816.43. That would clean up the chart and allow the Russell 2000 to descend more smoothly. The 4-17 session run-up only went to 816.32 and I am not sure if the charting purists see that as a gap closing.
The DOW at the close. The DOW is a lost cause for determining who is on 'second' as it wanders.
The Indexes at the close.
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Excerpts From The FOMC Meeting
Information received since the Federal Open Market Committee met in March suggests that the economy has been expanding moderately. Labor market conditions have improved in recent months; the unemployment rate has declined but remains elevated.
Household spending and business fixed investment have continued to advance. Despite some signs of improvement, the housing sector remains depressed. Inflation has picked up somewhat, mainly reflecting higher prices of crude oil and gasoline. However, longer-term inflation expectations have remained stable.
The Committee expects economic growth to remain moderate over coming quarters and then to pick up gradually.
The Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014.
WASHINGTON (MarketWatch) -- Federal Reserve policymakers were slightly more hawkish as to when the first rate will be made, according to an assessment of appropriate monetary policy released by the central bank on Wednesday. Of the 17 Federal Open Market Committee members polled, seven say the first hike will be in 2014 and four in 2015, with three each saying the right hike timing is 2012 and 2013.
Stocks stumble just a little following changes to the FOMC's economic forecast which show an upgraded view of the economy and inflation's speed - not the sort of estimates put together by a group fixing to launch additional policy easing. DJIA +0.3%, S&P 500 +1%.
Mid Day Commentary:
We have watched the market rise on exceptional earnings of Apple only to learn of lowered expectations in the following quarters. The markets dropped a little bit and then rose on some expecting the FOMC to announce something favorable about a possible QE. They fell short of topping their morning highs forming a sea-saw effect as the bulls and the bears fight it out under moderate volume.
The professional traders are taking pause waiting for the next axe to fall at the FOMC meeting coming up shortly.
The most difficult part of being a trader and an author is that it is nearly impossible to both at the same time. My toe-dipping with FAZ the other day could be viewed as a disaster for not selling at its high and watching it sink today over a half a point. But there is a silver lining in this in that it points out 2 important things about today's market.
One is that this FAZ - Direxion Daily Finan. Bear 3X Shs(ETF) (NYSEARCA) ETF can move in directions MUCH, MUCH greater than a half a point in market upheavals we have witnessed this morning. That in itself warns the market is in a indecisive zone while professionals are simply taking a time-out and not panicking.
The second is that I haven't come close to my stops which is comforting in my lameness of being proactive.
Noon Time Commentary:
The 'Dippers' are getting their fingers torched as the market weakness continues to slide under heavy red volume now at 8 to 3. The big question now and apparently being answered by the bears taking charge once again is the FOMC meeting and helicopter Ben's remarks later today.
Market volume has fallen off but the damage has been done as the bears once again get a hold in front of the FOMC
Sampling several investment banks' opinions on what to expect out of today's FOMC decision in a few hours, one would be left with the impression that absolutely nothing will happen.
Not surprisingly, this is what the official party line reps and warrants as well, as telegraphed by that faithful mouthpiece, Jon Hilsenrath.
And yet if the Fed has finally understood that its role is only effective if it is surprising, this gives all us all the opportunity to not only doubt what the media and the sellside wants us to expect, but to naturally fade Goldman - one of the best trades in the past three years - who says: "We expect no clarity from Wednesday's FOMC statement and press conference on additional monetary easing.
Further indicators of the market slipping in the long term is that institutional distribution is still going on.
“In this chart (see below), we plot the amount of daily Institutional Buying as a blue line, and we plot the daily amount of Institutional Selling as a red mountain chart. By doing so, investors can quickly see if there was more buying or selling on any given day.
The important events happen when the lines have cross-over's. When the Buying is higher than the Selling, it tell's you that Institutional Investors were in Accumulation and that is Bullish for the market.
When the Selling is higher than the Buying, then Institutional Investors are in Distribution and that is Bearish for the market as you can see on the chart.
The market will be excited today after the Apple news, however ... as you can see, Institutional Investors were still in Distribution yesterday. Unless the good Apple news convinces Institutional Investors to move back into Accumulation, any up movement will fizzle to the downside.“
The talk now among analysts this morning is that the Fed will not change the rates, but some of the Doves might want to stop any hit of a recession or further market weakness in its tracks by and do a QE3 now because of the current market weakness. Obviously the Hawks will not agree, but the number of dissenting votes noted at the end of the prepared remarks will telling. Investors are going to pay close attention to the wording regarding any outlook to further QE.
“Perhaps the last line of their statement, which tells us the number of dissenting votes, will be just as important as the statement itself.”
Additional unsettling news is a report from the Commerce Department showing a significant fall in durable goods orders in the month of March has been ignored by investors. The report showed that durable goods orders tumbled by 4.2 percent in March following a revised 1.9 percent increase in February. Economists had expected a more modest drop of about 1.5 percent.
11:00 am analysis:
The 'Dippers' have been VERY active as they believe this is the real thing but the smart money that moves my proprietary indicators tells a completely different story as the move in a positive direction that is down. The red volume is 2 to 1 of the green and I would take that as a sign to be cautious.
Naturally, all of this thinking could change by the time we see some indication, IF THERE IS ANY, with comments made by Dr. Ben and the FOMC later today. See the graphic below and you can understand why I don't regard any positive numbers here to be market movers unless you believe in the 'Snow Fairy' in summer time.
Mid Morning Market analysis:
A bit late in getting started this morning but Apple blowing away expectation because of 'low guidance' the is a flash in the pan, don't get all up and excited. The OIL didn't move much and the little that they did was based on a promise made by Iran to stop nuclear aspirations.
Yesterday we had Apple sandbagging expectations with yet another round of low guidance, now it's Iran's turn, which through its Russian Ambassador just said the country will consider halting nuclear expansion to avert the EU oil ban. Needless to say, just as the Apple forward guidance so this "promise" is utterly worthless.”
Naturally, all the markets opened higher and then peaked on heavy green volume for the first half hour and then turned red as the markets began to slide. The DOW went up 112 points, the 500 went up 18.77 points and the $RUT went up 15.79 points at the highest.
The DOW stayed in its resistance zone, but on the high side. The 500 never came close to its 1394 resistance and the Russell 2000 went right up to its resistance of 813 and stopped dead in its tracks and backed off.
If they FOMC has anything good to say that should push markets higher, but the lack of movement or volatility of some of the commodities, like the oils, has me believing that we will see lower number before the day is out. The red volume by 10:45 was heavy and had not started to fade.
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Written by Gary