Written by Gary
Opening Market Commentary For 12-19-2013
Premarkets were about even with yesterday's closing numbers, but started to ease downward after the poorer than expected jobs claim was reported. Crazy market, normally that is good news for investors.
Markets opened down (-0.30%) on low to moderate red volume that was quickly being replace by the green variety. The $VIX dropped to 13.26 but the BTFDers were having difficulty getting a foothold during the first 10 minutes of trading. Maybe everyone this morning saw this taper thing yesterday like I did, handing out one piece of toilet paper to each person in contemplating natures calling. Too little, too late.
By 10 am the averages remains in the red, flat and going nowhere and looking tired.
Reader Paul noted yesterday's session was like a 'bottle rocket' which is a good analogy if we see the markets decline today. Which might dash all hopes of a Santa Claus Rally; in other words: the rally was yesterday, sorry you missed it. On the other hand I would love to see the averages shoot sky high today and then fall leaving no doubt of reaching a top. Whatever happens I do not see a 2% decline in the works, not today anyway.
The lousy job report this morning brings up another possibility of seeing the employment rate rising next year.
For everyone who shrugged off last week's enormous spike in initial jobless claims as "can't be real", the BLS has another "holiday volatility"-blamed statistical anomaly for traders to ignore. Initial claims rose 10k to 379k - dramatically worse than the 336k expectation - and the worst since March.
Though the BLS says no states estimated jobless claims last week, they would suggest, ever so humbly, that we ignore this data and focus on the trend of the 4-week moving average.
Total benefit rolls also rose to 3 month highs, up 94k to 2.88 million. The piece de resistance - non-seasonally-adjusted initial claims were down 48.2k (against the seasonally-adjusted 10k), yet both are up exactly 13k from a year ago (seems the Sandy-based YoY adjustments are playing havoc).
Lastly, 1,374,031 American on Emergency Unemployment Compensation (ie. extended benefits) - which are about to run out thanks to Congress (which will implicitly send the unemployment rate plunging).
The short term indicators are leaning towards the hold side at the opening, but I would advise caution in taking a 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.
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.
The DOW at 10:00 is at 16148 down 24 or -0.15%.
The SP500 is at 1805 down 6 or -0.33%.
SPY is at 181.06 down 0.65 or -0.35%.
The $RUT is at 1129 down 5 or -0.43%.
NASDAQ is at 4053 down 16 or -0.41%.
NASDAQ 100 is at 3492 down 17 or -0.49%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been mixed and the current bias is down, but sideways.
WTI oil is trading between 97.87 and 98.70 today. The session bias is positive and is currently trading up at 98.55.
Brent Crude is trading between 109.13 and 110.35 today. The session bias is mixed and is currently trading down at 109.92.
Gold fell from 1224.00 earlier to 1197.18 and is currently trading down at 1197.50.
Dr. Copper is at 3.290 falling from 3.322 earlier.
The US dollar is trading between 80.61 and 80.81 and is currently trading down at 80.73, the bias is currently sideways.
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary