Written by Gary
Opening Market Commentary For 12-27-2013
Premarket SP500 futures were up +1.15% early this morning and in general SPY and others were up as well. It appears the HFT computers did not 'taper' their auto-response to euphoria to the off position and continued yesterday's climb.
The markets opened higher sending the SP500 and DOW to new historical highs again and both with opening gaps for the second day in a row - bearish! Within minutes of the opening bell the averages started to slide somewhat to where they were flat and mixed. The small caps were the first to show red on moderate volume while the DOW hung around the +0.18%.
By 10 am the averages clung around the new highs appearing to start another day sliding sideways remaining slightly elevated as volume is starting to fall off, but the party continues.
We have spoken many times about the house of cards existing withing the stock market and how it just keeps getting larger and seemingly unstable. The economy seems like it is improving slowly, but the markets look like the are accelerating at a faster rate. This chart below clearly details my concerns and from all appearances, it look like we could 'snap back' to the 9,500 level if it were to happen today. The longer the markets continue forward in time the less likely we will see these scary numbers. The question now is when is this pull back going to happen and how much?
This morning I will show you a chart of the DJI and I won't make any comments about it because it speaks for itself.
If you don't get what this 19 year chart of the DOW is saying, do a search on "expanding wedge technical analysis".
Some like testing the limits on patterns, but the snap back on an elastic is never pleasant when pulled to far.
The short term indicators are leaning towards the sell side at the opening, 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.
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 10:15 is at 16506 up 26 or 0.16%.
The SP500 is at 1844 up 2 or 0.11%.
SPY is at 184.08 up 0.23 or 0.12%.
The $RUT is at 1162 down 1 or -0.08%.
NASDAQ is at 4170 up 3 or 0.06%.
NASDAQ 100 is at 3587 up 3 or 0.08%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been bullish and the current bias is sideways.
WTI oil is trading between 99.37 and 100.37 today. The session bias is positive and is currently trading down at 100.11.
Brent Crude is trading between 111.53 and 112.17 today. The session bias is positive and is currently trading down at 112.05.
Gold rose from 1208.60 earlier to 1218.30 and is currently trading down at 1213.70.
Dr. Copper is at 3.387 rising from 3.370 earlier.
The US dollar is trading between 80.67 and 79.83 and is currently trading up at 80.18, the bias is currently positive.
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary