Written by Gary
Closing Market Commentary For 01-02-2014
Around 2:15 the bottom dropped out marking the sessions low point, but then slowly melted upwards shaving off some of the day's losses by the closing bell.
By 4 pm the Blue Chips had climbed up from the days lows somewhat on moderate volume to close the first day of the year with a loss and some BTFDers upset. Today's session is not as bad as it could have been, so there is hope for better days ahead.
However, having said that I can see the SP500 falling to the 1808 area to test the support before moving back up to 1840's levels. The problem lies if that support fails and then we are looking at the 1770's which is a somewhat weak support. Just saying, watch ass-ets, they could be in danger. It now appears we could have several down days ahead of us, purely speculation, but that is how the averages acted before in similar situations, so trade accordingly.
There is also a large gap on the US dollar chart starting at 80.44 to 80.29 and FOREX charts are usually filled sooner rather than later and that is bullish for the US markets.
Despite the best efforts of 330RAMP CAPITAL, US equity indices ended the first trading day of the year with the biggest loss (on that day) since 2008.
Led by weakness in the high-beta indices as Trannies tumbled their most in 4 months and the S&P's biggest daily downswing in over 3 weeks.
On a side-note, gas prices have never been this high on the first day of the year. VIX closed higher once again as stocks began to catch down to it's recent warnings. Bonds rallied from the open this morning (with 10Y 6bps lower in yield from its opening print) with 10Y back under 3%.
EUR weakness drove the USD higher (but JPY strength weighed on stocks). The biggest moves appeared in commodities with gold and silver up nicely and WTI crude down hard.
The short term indicators are leaning heavily 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.
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 4:00 is at 16441 down 135 or -0.82%.
The SP500 is at 1832 down 16 or -0.89%.
SPY is at 183.05 down 1.77 or -1.11%.
The $RUT is at 1151 down 13 or -1.11%.
NASDAQ is at 4143 down 34 or -0.80%.
NASDAQ 100 is at 3564 down 28 or -0.79%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been positive and the current bias is negative.
WTI oil is trading between 98.96 and 95.39 today. The session bias is negative and is currently trading down at 95.48.
Brent Crude is trading between 111.35 and 107.65 today. The session bias is negative and is currently trading down at 107.70.
Gold rose from 1202.80 earlier to 1230.00 and is currently trading down at 1223.40.
Dr. Copper is at 3.386 falling from 3.424 earlier.
The US dollar is trading between 80.29 and 80.86 and is currently trading down at 80.70, the bias is currently sideways.
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Written by Gary