Written by Gary
Closing Market Commentary For 12-05-2013
Today's volume, although light by previous years standards, remained relatively moderate as the averages' trended down throughout today's session. Only the Russell 2000 remained in the green while the other major averages slowly melted down into the sunset.
"Good news" once again proved the undoing of the equity market (which some bright spark on TV said "has priced in the taper") and bonds and bullion also fell. Despite the ubiquitous late-day ramp to VWAP (thanks to to JPY selling and VIX stomping), equities closed red for the 5th day in a row for the first time since mid-September.
Perhaps most notably, new 52-week lows reached its highest in almost 4 months. Volume was above average yet again as Treasuries saw yields hammered higher with the belly under performing +4.5bps as 7Y broke above 2.20% to near-3-month highs.
The USD sold off - driven more by EUR strength as Draghi disappointed in his jawboning - which proved to stumble all the carry trades as USDJPY moved back below 102.
Gold and Silver were volatile but ended the day lower. VIX closed back over 15% for the first time in over 2 months and its reaching extreme inverted levels for 2013 into tomorrow's all-important NFP print.
The short term indicators are leaning slightly towards the sell side at the close, but I would advise caution in taking a 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, much lower.
The DOW at 4:00 is at 15821 down 68 or -0.43%.
The SP500 is at 1785 down 7.78 or -0.43%.
SPY is at 178.97 down 0.73 or -0.40%.
The $RUT is at 1122 up 1.09 or 0.10%.
NASDAQ is at 4033 down 5 or -0.12%.
NASDAQ 100 is at 3478 down 5 or -0.15%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been negative and the current bias is negative.
WTI oil is trading between 97.98 and 97.14 today. The session bias is sideways and is currently trading down at 97.28.
Brent Crude is trading between 112.23 and 110.77 today. The session bias is negative and is currently trading down at 111.07.
Gold fell from 1239.52 earlier to 1216.59, recovered to 1235.36 and is currently trading down again at 1224.00.
Dr. Copper is at 3.221 falling from 3.240 earlier.
The US dollar is trading between 80.84 and 80.23 and is currently trading up at 80.28, the bias is currently sideways.
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Written by Gary