Written by Gary
Closing Market Commentary For 12-19-2013
Last minute gyrations had investors chasing first the bears and then the bulls all on moderate volume. The fight between the two factions hasn't been settled by any means as the afternoon trading remained in a narrow zone, but generally with a slight positive slant. The DOW ended up in the green while the other major averages remained in the red.
By 4 pm Mr. Market had not committed himself to any option of direction and so investors had to call it a day wondering if Santa still had a rally for them. I think he is working on it now.
Yes, there investors out there that think there is a logical plan to all this craziness.
Brad DeLong has a long and wonky post (based on a long and wonky post by Noah Smith, which in turn was based on a long and wonky post by John Cochrane) that argues for the existence of bubbles, contrary to what Eugen Fama and other adherents of the efficient markets hypothesis hold.
DeLong suggests that the people who believe that markets are rational are themselves irrational, in the sense that they are immune to having their minds changed by evidence.
DeLong argues that Robert Shiller has proved that bubbles exist with lots and lots of data going back 100 years. Others have proved that bubbles exist in simulated lab settings.
The short term indicators are leaning towards the sell side at the closing, but I would advise caution in taking any position during this volatile transition period. Here is the quandary some investors have now. They have bet on the QE program to bolster their profits and knowing full well they may see some eroding over the next few months, so what should they do? Start reducing positions now, most probable, or let profits ride a bit longer?
I would also take chart and other technical indicators with a grain of salt for the time being and watch what the Fed does over the next 4 months. Removing 10 billion from the bond buying program each month isn't going to do much in reducing the QE program in the beginning, but halving it in 4 months certainly will - IF - the Fed's continues the taper program.
My instincts tell me that the Keynesian's are going to be reluctant to stop their grand financial experiment and will want to taper the taper within the next several months - especially if the employment rate increases.
The longer 6 month outlook still remains 40-60 sell until we can see what the effects are in this almost nothing start of the Fed's 'Taper'. By March investors should know how the taper is going to work out in relationship to the stability of the US financial markets and their ability to not to slide downward.
For now, I am continuing to expect weak to negative markets for the foreseeable future. My advise is to invest in tennis balls as they have a higher rate of return!
Also, many pundits have stated that we may have seen the top - but I wouldn't count it as long as the Fed continues to hand out 'Market Viagra', even if it has been reduced somewhat! I would like to see a blowout candle (shooting star) to verify a top along with heavy volume.
I am going to take tomorrow off to be with the family over the weekend.
The DOW at 4:00 is at 16179 up 11 or 0.07%.
The SP500 is at 1810 down 1 or -0.06%.
SPY is at 181.44 down 0.21 or -0.12%.
The $RUT is at 1125 down 8 or -0.73%.
NASDAQ is at 4058 down 12 or -0.29%.
NASDAQ 100 is at 3499 down 11 or -0.31%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been mixed and the current bias is sideways.
WTI oil is trading between 97.87 and 99.47 today. The session bias is negative and is currently trading down at 98.70.
Brent Crude is trading between 109.13 and 110.49 today. The session bias is negative and is currently trading down at 110.08.
Gold fell from 1224.00 earlier to 1188.98 and is currently trading down at 1190.10.
Dr. Copper is at 3.295 falling from 3.322 earlier.
The US dollar is trading between 80.61 and 80.83 and is currently trading down at 80.80, the bias is currently sideways.
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary