Written by Gary
Closing Market Commentary For 01-07-2014
The averages put on a great show today with the DOW reaching 137 points at one point and settling at the close with a +106 point gain. Even the SP500 traded within a 7 point range all afternoon and the party continues.
By 4 pm the markets experienced a minor sell-off which is not unusual and the volume regained somewhat. Investors on the streets seem quiet content with the return of the positive market place and the bears are few and far between. The bullishness of many talking-heads is backed by the averages closing as serious gap made on 12-10-2013 clearing the way back up to the previous highs.
I have never heard such different opposing views of which way the market is going to go lately by some of the biggest names. The 'big boys' are claiming upwards while the not so well known are yelling watch out below. I do believe the 'problems and issues' both here and abroad HAVE NOT BEEN fixed and this casino market held with Viagra Market glue will eventually take the fall. The question is when? But I am one of those not so well known - what do I know?
Remember when the Fed got its Series 7 and Series 63, and was solely engaged in the business of advising on stock valuation? Neither do we. But that doesn't prevent it from now openly opining on what it thinks is the fair value of stocks:
FED'S WILLIAMS SAYS U.S. STOCKS AREN'T OVERVALUED
So, the implication is one should buy stock then? And if the market craters tomorrow, the Fed will surely make everyone who listened to this non-voting moron who has made a complete mockery of the Fed's inflation and full employment mandates and replaced them with the "fair stock value" mandate, whole at the expense of all the other taxpayers, right?
Finally, since the market is not overvalued here, what is the Fed's price target on the S&P 500, oh unregistered financial advisors-cum-Princeton academics of the Marriner Eccles building.
The short term indicators are leaning slightly towards the hold side at the close. I would advise caution in taking any position during this volatile transition period as the sudden reversals can make any trades worthless. I would closely watch the next several days as the markets approach their previous highs. Testing this area will be telling as I have warned that we might see a 5% 'correction'.
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.
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.
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 4:00 is at 16531 up 106 or 0.64%.
The SP500 is at 1838 up 11 or 0.61%.
SPY is at 183.38 up 1 or 0.61%.
The $RUT is at 1158 up 10 or 0.91%.
NASDAQ is at 4153 up 39 or 0.96%.
NASDAQ 100 is at 3558 up 31 or 0.88%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been negative and the current bias is negative.
WTI oil is trading between 94.18 and 93.37 today. The session bias is neutral and is currently trading up at 93.90.
Brent Crude is trading between 107.69 and 106.88 today. The session bias is neutral and is currently trading down at 107.47.
Gold fell from 1244.60 earlier to 1224.80 and is currently trading down at 1230.90.
Dr. Copper is at 3.360 rising from 3.343 earlier.
The US dollar is trading between 80.75 and 81.10 and is currently trading down at 81.01, the bias is currently positive.
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary