Written by Gary
Opening Market Commentary For 01-02-2014
Happy New Year and welcome back. The premarket's started falling on the closing session of the year and gaped down to where the DOW was down 33 points (16461) and the NASDAQ 100 futures were down 8.25 points, mostly because of the better than expected Jobless Claims Data this morning.
The oils were down and gold was up along with the US dollar showing an unfamiliar green as investors scramble to protect positions - just in case the first of the year surge doesn't happen.
Markets opened down with the DOW off 100 points and the NASDAQ off 30 looking to head lower on low to moderate volume before the session is over. By 10 am the averages had made a short pit stop and were showing additional signs of weakness.
Every year, the first day 'surges' ahead and a lot of BTFDers are counting on this phenomenon today as the bought in heavily on the last session.
A few days ago Goldman pointed out an interesting observation: "if you were an index investor and weren't long Jan 1st, you underperformed this year."
To be sure, index investors have been well aware of this self-fulfilling prophecy. As it turns out, one can extend this pattern not only to 2013 but virtually every year in the Fed's centrally-planned "abnormal", as can be seen on the chart below: adding up the performance of just the first trading day of the year in the S&P shows a total out-performance of 10% across the past five years.
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 10:00 is at 16470 down 105 or -0.65%.
The SP500 is at 1836 down 12 or -0.66%.
SPY is at 183.35 down 1.36 or -0.73%.
The $RUT is at 1153 down 11 or -0.94%.
NASDAQ is at 4140 down 36 or -0.87%.
NASDAQ 100 is at 3559 down 33 or -0.92%.
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 96.70 today. The session bias is negative and is currently trading down at 96.80.
Brent Crude is trading between 111.35 and 109.31 today. The session bias is negative and is currently trading down at 109.47.
Gold rose from 1202.80 earlier to 1228.10 and is currently trading down at 1224.50.
Dr. Copper is at 3.384 falling from 3.424 earlier.
The US dollar is trading between 80.29 and 80.86 and is currently trading down at 80.77, the bias is currently positive.
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary