Written by Gary
Opening Market Commentary For 01-08-2014
Premarkets were negative and flat as the ADP 'good' news of adding 238K jobs in December and appears to confirm a higher probability of the $10 billion taper this month.
Markets opened confused as the DOW registered a loss and the small caps were flat, but in the green during the first 15 minutes on moderate volume. At the opening the markets looked stressed, weak and looking to melt downward but the BTFDers tried to keep thing at least even.
By 10 am the averages were mixed with the Blue Chips in the red and the small caps hanging on to the green side. The $VIX remains in the low 13's and volume is moderate, but falling. The bear is letting the bulls know he is around and waiting.
Today is the FOMC meeting and not much change in previous discussions is expected.
The minutes of the December FOMC meeting will be released at 2 PM ET on Wednesday, January 8.
As BofAML notes, the minutes give a platform to those outside the voting majority on the FOMC to express their disagreements with the current policy stance. T
ypically, that has meant that the minutes sound more hawkish than the FOMC statement or speeches by the voters.
Also remember that much of the discussion in the minutes is based on old news: the US economy has shown mostly stronger data since the December 18th FOMC decision to taper by $10 bn as of January 1.
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.
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 10:15 is at 16463 down 69 or -0.43%.
The SP500 is at 1836 down 2 or -0.12%.
SPY is at 183.33 down 0.15 or -0.08%.
The $RUT is at 1555 down 2 or -0.19%.
NASDAQ is at 4157 up 4 or 0.10%.
NASDAQ 100 is at 3562 up 5 or 0.14%.
The longer trend is up, the past months trend is bullish, the past 10 sessions have been sideways and the current bias is sideways.
WTI oil is trading between 94.18 and 93.39 today. The session bias is negative and is currently trading up at 93.49.
Brent Crude is trading between 107.94 and 107.37 today. The session bias is negative and is currently trading up at 107.52.
Gold fell from 1231.16 earlier to 1218.81 and is currently trading up at 1223.70.
Dr. Copper is at 3.358 falling from 3.376 earlier.
The US dollar is trading between 81.27 and 81.02 and is currently trading down at 81.05, the bias is currently negative.
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary