June 20th, 2013
in Gary's blogging
Closing Market Commentary For 06-20-2013
I predicted the 'Great Fall' would occur when the percentage was over 2.25% and that happened today. Sadly for the bulls that were so sure we were going to see 20,000 before year end were BTFD this morning. This is not to say we won't see a 'Great Turn Around' tomorrow morning, but the hand-writing is on the wall predicting what should have happened 3 years ago.
I have some thoughts for tonight below.
Very interesting session today. I would have loved to grab some stocks because in previous years (prior to 2009) this decline would have been the perfect invite for major profits in the coming days. In today's world this still might be so however most likely not, but this 'new normal' anything can happen and does.
Look at it this way, the Bernanke news yesterday wasn't all that bad, in fact it was good in that the free ice cream is still coming, for now anyway. But what happened is that the markets panicked where the DOW fell over 200 points leaving many stocks depressed and be ripe for some terrific bargains. Yes they are IF the market rise up again and of course that is the question.
So what is going to happen? I think there is a reasonable chance the averages will continue to fall another 5%, consolidate and then rise back up to at least the closing prices of yesterday.
This needs to happen before any deeper decent of the indices if that is really what is in store for Mr. Market. Old school maybe, but gaps in the charts are always covered sometime quickly and sometimes not for years. The more important charts like the FOREX and major markets cover gaps much more quickly than others and we have serious gaps in several of the major indices.
My thinking is after all of this current decline is completed and then allowing for the closing of gaps from this mornings opening we will see this bull run continue for a little while anyway. The current thinking is a depressed World market place by the end of 2014 with China's growing credit bubble forming and unemployment continuing to rise in the EU. All which will have rippling effects on the US economy and ultimately the market place.
Neither the ending nor its timing can be forecast with any accuracy. Markets may continue higher as this drama plays out with future Fed announcements and deceptions. Markets, however, cannot levitate forever.
Eventually they coincide with reality, which in this case probably means another major market correction. Continuation and expansion of Fed liquidity may hold markets up or even drive them much higher. At some point the entire scheme crashes, probably when enough people recognize that the greater fool theory is in danger of exhausting the quantity of fools.
All Ponzi schemes have limits. Participating in these markets is akin to playing a version of Russian roulette. If the chamber is empty, you make money. If not, you financially die.
The DOW at 4:00 is at 14758 down 354 or -2.34%.
The SP500 is at 1588 down 41 or -2.50%.
SPY is at 159.57 down 4 or -2.37%.
The $RUT is at 960.52 down 26 or -2.63%.
NASDAQ is at 3364 down 78 or -2.28%.
NASDAQ 100 is at 2890 down 69 or -2.34%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been neutral and the current bias is bearish.
WTI oil is trading between 98.22 and 94.64 today. The session bias is bearish and is currently trading up at 94.97.
Brent crude is trading between 105.04 and 101.74 today. The session bias is bearish and is currently trading up at 102.08.
Gold fell from 1347.16 earlier to 1275.49 and is currently trading down at 1279.85.
Dr. Copper is at 3.052 falling from 3.137 earlier.
The US dollar is trading between 81.43 and 82.32 and is currently trading down at 81.95, the bias is currently bullish.
The 55 day chart of the 500 with today's closing price. (see the gap)
The 55 day chart of the DOW with today's closing price.
A little special commentary is appropriate today, given the market's steep decline since the FOMC events of Wednesday. Basically, my interpretation is that where the Fed should have killed tapering talk, it instead confirmed a tapering plan starting this year and concluding asset purchases in 2014.
It's obvious, and been obvious, by the rise in rates and mortgage rates that this is not digestible by markets.
The real estate recovery and tepid economy are not yet ready to stand on their own, and so the Fed may destroy everything it has worked so hard to sustain in real estate, and in turn, the economy. It may be recession before it realizes how important these interest rate increases were to a still vulnerable economy.
Stocks had booked big gains year-to-date and institutions will lock those up now if they had not already. Gold and silver will perform poorly on the Fed pull back in cash creation. Bonds will fall on rising rates.
There's nowhere to go but cash, and that's where money will go. So, sell it all and wait it out is today's theme.
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Written by Gary