Midday Market Commentary For 01-02-2014
The morning started out in what looked like a short squeeze and now the averages look to be sliding sideways now on anemic volume. However, the prevalent market weakness still remains with the US markets after the downbeat news on China manufacturing earlier. Then the better than expected ISM manufacturing numbers are also dashing hopes of Fed Chair Yellen 'tapering the taper' in January causing some investors to jump ship early.
So far, the symbolic 'First Day of Trading' losses have broken the 6-year streak in which the SP500 traded up since 2008. Apparently, the QE factor has just about worn out and I would exercise caution on future trading.
By noon the volume has dropped off the to the all familiar anemic level with occasional spurts of green and red spikes, by the trend is sideways for now with some very unhappy BTFDers. The sideways 'floor' has given way to further losses as we enter the afternoon session.
The main talk around the office this morning is about Janet Yellen and her so-called liberal economic views and potential willingness to be on-board the 'taper train'. This thinking would surly put negative pressure on the markets as investors are still banking on the bond buying to remain elevated longer than previously planned by the Bernanke Fed.
Despite the supremacy of Fed hubris and punter confidence in the Fed's Frankenstein Economy, the likelihood of some tail risk emerging out of nowhere is rising.
Indeed, the very confidence in central planners, i.e. that the Fed is now the ultimate power in the Universe, is a prerequisite for collapse.
Market Watch wrote: "Researches at MKM Partners crunched some numbers to see if the 'up' day on the first day means positive returns for the year and the answer is: it is not all that predictive."
Their bottom line:As with most quantitative data, it should be put into context with the broad trends. Our point from this data is to show that strong markets that close the year on the highs tend to bode well in the following year. However, putting too much emphasis on the first day of trading is likely not prudent. If weakness should persist later into January, we might have some bigger issues to deal with.
The short term indicators are leaning heavily towards the sell side at the midday, 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 12:00 is at 16452 down 124 or -0.75%.
The SP500 is at 1832 down 16 or -0.87%.
SPY is at 182.98 down 1.70 or -0.91%.
The $RUT is at 1147 down 16 or -1.42%.
NASDAQ is at 4137 down 39 or -0.94%.
NASDAQ 100 is at 3560 down 32 or -0.90%.
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 96.32 today. The session bias is negative and is currently trading down at 96.37.
Brent Crude is trading between 111.35 and 108.54 today. The session bias is negative and is currently trading down at 108.62.
Gold rose from 1202.80 earlier to 1228.10 and is currently trading up at 1225.40.
Dr. Copper is at 3.383 falling from 3.424 earlier.
The US dollar is trading between 80.29 and 80.86 and is currently trading down at 80.68, the bias is currently negative.
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
<p><strong><span style="font-family: arial,helvetica,sans-serif;"><span style="font-size: medium;">Written by <a rel=""author"" href="/files/gary.htm">Gary</a></span></span></strong></p>