Written by Gary
Opening Market Commentary For 01-06-2014
Premarkets were up +0.30% this morning, WTI oil was in the low 94's, gold was at 1240 and steady and the US dollar was at 81.00 and rising.
Markets opened by gaping upwards (+0.30%) from Fridays closing numbers, remained there briefly and slowly began to melt down with the NASDAQ 100 showing a -0.12% loss. By the 15 minute mark all of the major averages were in the red but at the 'start' numbers and remaining flat amidst lots of volatility as WTI oil went below 93.80. The BTFDers were pushing the green volume up as hard as they could go cutting losses pausing the decent.
At 10 am the US ISM Non-Manufacturing Composite came in at 53.0 versus 54.7 expected and the averages reacted negatively pushing the short term sell indicators into a much deeper decline. The bear is showing its teeth.
I would tend to 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.
Services ISM Misses, Slides To Lowest Since June; New Orders Records First Contraction After 52 Months Of Growth
First it was the Manufacturing ISM posting its first drop since September, and now it was the Services ISM's turn to not only record its second miss to expectations (of 54.5) in a row, but drop from 53.9 to 53.0, for the lowest print since June.
However, the most notable development in today's release in addition to the slide in Inventories from 54.0 to 48.0 (impacting Q4 GDP) was the tumble in New Orders down from 56.4 to 49.4 - back to contraction territory: this was the first contraction in the New Orders index since July 2009 after 52 consecutive months of growth.
Is it time to start worrying about the Untaper yet?
The short term indicators are leaning towards the buy side at the opening and quickly changing to sell, but I would advise caution in taking any position during this volatile transition period.
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.
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 of profits over the next few months, so what should they do? Start reducing positions now, my choice, or let profits ride a bit longer? I would be afraid that if a serious 'Black Swan' popped up, the market decent would wipe out a lot of profits. This 'house of cards' the Fed has built is fragile and would not take a lot to tear it down.
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 to signify a market top.
The DOW at 10:30 is at 16500 up 30 or 0.18%.
The SP500 is at 1833 up 1 or 0.08%.
SPY is at 182.95 up 0.06 or 0.03%.
The $RUT is at 1156 up 0.01 or 0.00%.
NASDAQ is at 4119 down 13 or -0.32%.
NASDAQ 100 is at 3523 down 16 or -0.44%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been sideways and the current bias is negative.
WTI oil is trading between 94.59 and 93.78 today. The session bias is negative and is currently trading up at 93.93.
Brent Crude is trading between 106.83 and 107.96 today. The session bias is negative and is currently trading down at 107.25.
Gold fell a few minutes ago from 1247.62 earlier to 1217.27 and is currently trading back up at 1236.50.
Dr. Copper is at 3.345 falling from 3.364 earlier.
The US dollar is trading between 81.08 and 80.83 and is currently trading down at 80.89, the bias is currently negative.
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary