Written by Gary
Opening Market Commentary For 11-25-2013
Premarkets were higher this morning while the oils gaped down after the Iranian nuclear deal over the weekend.
Markets gaped up at the opening setting new historical highs for the large caps and then a softening with trading sideways on low to moderate volume. By the 15 minute mark the $VIX was rising (12.53), the DOW falling off (-3.89) and the SP500 was quickly following the minor down trend.
At 10 am the US Pending Home Sales came in lower than expected and the averages continued to descend covering the opening gaps. Markets look bullish, but I would be very careful.
As usual, hard to predict what Mr. Market has in mind today with short term indicators very red and ominous but the averages are mostly up even after the poor financial news.
Despite the downtick in rates for a month or two, the housing 'recovery' appears to have come to an end.
This is the fifth consecutive monthly decline in pending home sales and even though a smorgasbord of Wall Street's best and brightest doth protest, it would appear the lagged impact of rising rates is with us for good (as the fast money has left the flipping building).
This is the biggest YoY decline since April 2011 as NAR blames low inventories and affordability for the poor performance.
Perhaps more worrying for those still clinging to the hope that this ends well is the new mortgage rules in January that could further delay approvals.
The RRR** has been very narrow at the opening bell for months and this trend of low volume and narrow trading sessions makes any predictions of session movements nearly impossible, thus making trading futile and mostly unprofitable.
The problem facing traders is that the trading range, which has been so narrow during the trading day lately, that way too much money has to be put on the table just to get back meager gains.
The short term indicators are leaning heavily towards the sell side at the opening, but I would advise caution in taking a long position because of the Fed's cryptic utterances in hinting when the taper will begin and by how much. I would also take chart and other technical indicators with a grain of salt for the time being and watch what the Fed does WHEN it actually does something.
The longer 6 month outlook remains 40-60 sell until we can see what the Fed is actually going to do, simple as that. If we get some Fed tapering in December the markets will certainly react in a negative fashion, how much of course depends on much bond buying takes place. If the tapering begins in March 2014, like many believe it will, the markets are going to price that in by declining sooner. I am expecting weak to negative markets for the foreseeable future.
Members of the FOMC believe the US economy has shown signs of improvement, but they have assured short-term interest rates would remain low for quite some time to come. Alpari Market Analyst, Craig Erlam, said: "Many members of the Fed now appear eager to start winding down its asset purchases and are looking for ways to do it that will create the least disruption in the financial markets, such as setting simple thresholds for reductions, or even more simply, providing a timetable for tapering that is not data dependent."
ADVFN reported, "The rally in question has been built on the back of the Fed's promise of a stimulatory environment. If any catalyst points to the Fed giving up its accommodative stance, there is a danger of a pullback and near term support for the index lies around the 15,965, 15,890 and 15,804 levels."
Personally, I think it could go a lot lower.
Also, many pundits have stated that we may be seeing the top - but I wouldn't count it as long as the Fed continues to hand out 'Market Viagra'! I would like to see a blowout candle (shooting star) to verify a top along with heavy volume.
The DOW at 10:15 is at 16087 up 22 or 0.14%.
The SP500 is at 1804 up 0.06 or 0.00%.
SPY is at 180.90 up 0.10 or 0.06%.
The $RUT is at 1124 down 0.79 or -0.07%.
NASDAQ is at 3994 up 2 or 0.04%.
NASDAQ 100 is at 3426 up 4 or 0.11%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been positive and the current bias is mixed.
WTI oil is trading between 94.90 and 93.24 today. The session bias is negative and is currently trading down at 94.00.
Brent Crude is trading between 111.19 and 108.07 today. The session bias is negative, but improving and is currently trading down at 109.44.
Gold fell from 1244.34 earlier to 1227.50 then turned around and is currently trading up at 1242.25.
Dr. Copper is at 3.217 falling from 3.270 earlier.
The US dollar is trading between 80.67 and 81.05 and is currently trading up at 81.05, the bias is currently positive.
** RRR = Risk Reward Ratio
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Written by Gary