Written by Gary
Closing Market Commentary For 01-10-2014
As I predicted earlier today, the averages would melt up from the morning lows and post at least a flat close. The $RUT was at +0.53% and the DOW moved up to -0.05% before the closing bell. This market will probably show a positive side next week, but do not expect much as it will most likely stay in the sideways channel it has been in for 13 sessions.
By 4 pm the 'normal' end of day sell-off melted the averages down from their morning low recovery somewhat but saved at the very last moment. This time there was NOT an elevated red volume sell-off during the last minute but a heavy green one.
The short term indicators are leaning towards the buy side at the closing, but I would advise caution in taking any position during this volatile transition period. There will be pressure to climb higher if only to test the previous Blue Chip highs, therefore I do not foresee the markets descending below the sideways channel they are currently in until AFTER those highs are tested.
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, watch for QE5 when Obamacare starts drags the economy down into trouble.
While excess risk-taking and broken markets likely dominate their thinking, the 'real economic recovery' meme the Fed is using to enable them to 'taper' their excesses.
However, investors remain assured that if things get worse once again then the Fed will crank the presses and save the assets. It seems they have found their new excuse - no matter what...
*LACKER EXPECTS 'A LOT OF TURMOIL' IN HEALTH CARE INDUSTRY
*LACKER SAYS FED WILL BE WATCHING HEALTHCARE CLOSELY IN NEXT FEW YEARS
So, despite admitting asset-bubbles, fears over stock-multiples and excessively easy lending; the Fed will launch QE5 when Obamacare drags the US economy into trouble...
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.
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The DOW at 4:00 is at 16437 down 8 or -0.05%.
The SP500 is at 1842 up 4 or 0.23%.
SPY is at 184.11 up 0.46 or 0.25%.
The $RUT is at 1164 up 6 or 0.53%.
NASDAQ is at 4175 up 18 or 0.44%.
NASDAQ 100 is at 3565 up 12 or 0.35%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been sideways and the current bias is positive.
WTI oil is trading between 93.31 and 91.99 today. The session bias is positive and is currently trading up at 92.80.
Brent Crude is trading between 107.49 and 106.08 today. The session bias is positive and is currently trading up at 107.47.
Gold rose from 1226.90 earlier to 1248.04 and is currently trading down at 1245.70.
Dr. Copper is at 3.343 rising from 3.289 earlier.
The US dollar is trading between 81.26 and 80.62 and is currently trading down at 80.74, the bias is currently sideways.
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Written by Gary