Written by Gary
Closing Market Commentary For 01-08-2014
The averages trended downward after the FOMC Minutes were published at 2 pm. The DOW has remained in the red all day while the SP500 has been in and out of the green several times and the small caps have fared well. Overall the markets looks weak and investors are edgy regarding the future.
By 4 pm stocks closed mostly lower after volatile afternoon trading session. Tomorrow's markets could move in any direction depending on investors mode and reevaluation of today's FOMC Minutes.
The volatility after the FOMC minutes was released was heavy, the reversals were many and the $VIX went down into the high 12's.
The majority of participants noted the marginal efficacy of QE was declining over time, and a few wanted a larger-than-announced taper in December. However, those concerned about a potential unintended tightening of financial conditions won out and the FOMC ultimately decided to proceed cautiously with the QE exit.
A few suggested lowering the unemployment rate threshold to 6% from 6.5% to convey the Fed's intention to continuing sticking with ZIRP, but the FOMC decided instead to provide qualitative guidance on how it might react to a range of labor market indicators.
The short term indicators are pointing strongly towards the sell side at the closing, but I would still 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.
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 each and every month.
My instincts tell me that the Keynesian's are going to be reluctant to stop their grand financial experiment and will look for ways to taper the taper - especially if the employment rate increases. We will soon find out if Ms. Janet Yellen is going to be a boon or bust to the markets, I do not think there is going to be anything in between.
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 16463 down 68 or -0.41%.
The SP500 is at 1837 down 0.39 or -0.02%.
SPY is at 183.63 up 0.04 or 0.02%.
The $RUT is at 1157 down 0.17 or -0.01%.
NASDAQ is at 4166 up 12 or 0.30%.
NASDAQ 100 is at 3568 up 10 or 0.27%.
The longer trend is up, the past months trend is bullish, the past 10 sessions have been sideways and the current bias is sideways with a slight trending down.
WTI oil is trading between 94.18 and 92.27 today. The session bias is negative and is currently trading up at 92.56.
Brent Crude is trading between 107.94 and 107.03 today. The session bias is negative and is currently trading up at 107.38.
Gold fell from 1231.16 earlier to 1217.76 and is currently trading down at 1224.40.
Dr. Copper is at 3.340 falling from 3.376 earlier.
The US dollar is trading between 81.32 and 81.02 and is currently trading down at 81.17, the bias is currently sideways with a positive slant.
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Written by Gary