Midday Market Commentary For 07-22-2013
By noon this market continued to march higher in face of 'not so good' news from this morning. Falling volume and a rising market is not a good sign and a correction could come at any time.
By noon the averages were still melting up with short pauses along the way suggesting the HFT algo computers were doing their thing again. I have some thought below that may be particularly useful in deciding what you are going to do next.
Investors are in a precarious spot right now and I would advise supreme caution in dipping your toes in the market waters. In April, speaking in a round table discussion at the Milken Institute Global Conference, Leon Black, famed founder of Apollo Group, with $114 billion under management, bluntly said, "With stock markets having doubled since their 2009 lows, it's time to sell... we're selling everything that's not nailed down."
Apollo executive Joshua Harris noted Apollo Group's opinion of "overvaluation in all traditional asset classes." Equally famed billionaire investor Wilbur Ross added, "Sometimes it is better to hide." The Eurozone is getting worse too and that is going to haunt anyone that believe things are improving.
The proud Q1 debt-to-GDP outliers, where the local economies are expected to continue plunging and thus send the stock markets (if mostly that in the US) surging, are the following:
Euroarea: 92.2%, up from 88.2% a year ago
Greece: 160.5%, up from 136.5% a year ago
Italy: 130.3%; up from 123.8% a year ago
Portugal: 127.2%, up from 112.3% a year ago
Ireland: 125.1%, up from 106.8% a year ago
Spain: 88.2%, up from 73.0% a year ago
Netherlands: 72.0%, up from 66.7% a year ago
Leavitt is correct below as the markets exceed their May peaks last week and many large caps reached new all-time highs.
The market’s momentum has continued to pickup steam with at least the short-term outlook firmly in bullish territory.
Cyclical sectors of the market apparently are leading for now, which is bullish. The main bearish concern is that the market is currently overbought, which could lead to some consolidation over the coming week if the earnings continue to disappoint.
“The market just concluded its fourth straight up week. The indexes are at or very near either all-time highs or multi-year highs. It’s hard to argue with the overall movement, but the market has often reversed within a couple days of options expiration. Let’s be on the look out for such a development the next couple days.
Nothing major came out of the 2-day G-20 meeting of finance ministers and central bank chiefs that concluded Saturday.
[Look at] the daily charts. Ridiculous. Throw TA out the window. The market is on crack right now. There are no trendlines that can describe the movement, and for the time being, indicators are useless. Overbought can stay overbought for a long enough time to frustrate anyone trying to pick a top.”
Patrick J. O'Hare writes in his article, The Stock Market's Blissful State Of Cognitive Dissonance that “that we have an inner drive to hold all our attitudes and beliefs in harmony and avoid disharmony (or dissonance)”.
He also points out that the stock market carries this 'Cognative Dissonance' out to the fullest in that:
The market believes the Federal Reserve will make sure a major stock market correction doesn't occur
The market believes the Federal Reserve's monetary policy is going to be effective in getting the economy to grow at, or above, potential again
The market believes interest rates are going to stay low for a very long time
The market believes the US can weather a lingering recession in the eurozone and a slowdown in China without any major earnings implications; and
The market believes stock prices are quite simply destined to trend higher, because the Fed is banking on the wealth effect to help meet its dual mandate.
A person who smokes knowing it causes cancer is an example of cognitive dissonance. They know it's bad for them, but they do it anyway, thinking perhaps they won't get cancer, or rationalizing it on the grounds that it reduces their stress level and/or that they are going to die of something someday anyway.
The cognitive dissonance for the stock market is that it knows the economy and earnings are weak, yet it keeps pushing stock prices and valuations higher.
And it is thought that central banks won't let things go any other way in the interim. Alas, don't worry. Be happy and buy stocks.
The Market is over 30% above its 200 day moving average and was in a similar deviation in 2007 get it?
Also note that Bank of America's Merrill Lynch said that retail clients have poured $7.4 billion into stocks so far this year, while institutional clients have pulled $10.7 billion out. That should tell you something.
The DOW at 12:00 is at 15555 up 12 or 0.08%.
The SP500 is at 1695 up 3 or 0.21%.
SPY is at 169.51 up 0.33 or 0.20%.
The $RUT is at 1054 up 3.31 or 0.32%.
NASDAQ is at 3598 up 10 or 0.30%.
NASDAQ 100 is at 3053 up 8 or 0.29%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been bullish and the current bias is positive.
WTI oil is trading between 108.59 and 106.96 today. The session bias is bearish and is currently trading down at 107.35.
Brent crude is trading between 108.68 and 107.55 today. The session bias is bearish and is currently trading down at 107.91.
Gold rose from 1295.34 earlier to 1330.94 and is currently trading up at 1330.15.
Dr. Copper is at 3.192 rising from 3.145 earlier.
The US dollar is trading between 82.66 and 82.13 and is currently trading up at 82.28, the bias is currently negative.
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary