Written by Gary
Closing Market Commentary For 12-26-2013
Markets continued to climb until 3:45 when what I would call normal closing weakness stepped in and the averages became soft. Mr. Market didn't give any clues as to what he is going to tomorrow morning, but some indicators, very prone to error, indicate the closing softness means something this time.
By 4 pm the averages closed up higher with the SP500 and the DOW posting new highs again this afternoon. There was a brief dip before the close but was on its way back up on moderate volume.
I am not one to throw water on the Santa Claus Rally, but there some very ominous signs leading to market over reaching and making a significant correction. Now is certainly NOT the the time to throw caution to the wind and go long.
But, US investors have turned the euphoria dial to 11 this week as the percent bullish is the highest since the peak in Fall 2007 and bears are at their lowest percentage since Spring 1987.
Thus, the Bull-bear spread (based on AAII's survey) has never been wider (and don't forget, even Cliff Asness knows the unbridled idiocy of the 'money-on-the-sidelines'-meme).
The short term indicators are leaning towards the hold 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?
This morning one well know pundit put the sell at 100% and I have been on this bandwagon for the last week, but you still have remember the 'Fed Effect'. At noon the overall was an 80% sell and remained that way into the close.
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 in 4 months it 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 regardless of what we have seen over the past week. 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! Look at the last 3 sessions! I would like to see a blowout candle (shooting star) to verify a top along with heavy volume.
The DOW at 4:00 is at 16480 up 122 or 0.75%.
The SP500 is at 1842 up 8.70 or 0.47%.
SPY is at 183.82 up 0.93 or 0.51%.
The $RUT is at 1163 up 0.85 or 0.07%.
NASDAQ is at 4167 up 12 or 0.28%.
NASDAQ 100 is at 3584 up 12 or 0.33%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been bullish and the current bias is sideways with a slight negative slant.
WTI oil is trading between 99.06 and 99.69 today. The session bias is positive and is currently trading up at 99.61.
Brent Crude is trading between 111.47 and 112.08 today. The session bias is positive and is currently trading down at 111.98.
Gold rose from 1199.81 earlier to 1215.20 and is currently trading up at 1210.20.
Dr. Copper is at 3.390 rising from 3.322 earlier.
The US dollar is trading between 80.60 and 80.70 and is currently trading up at 80.67, the bias is currently sideways.
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Written by Gary