Written by Gary
Midday Market Commentary For 01-13-2014
Surprisingly the market volumes have remained low but active as the averages continued to melt up just above Friday's close pushing most of the major averages into the green except $RUT and SPY.
By noon the averages fell to the opening numbers, paused and resumed their melting up again mostly remaining in the red. The 'tea leaves' indicate a possible 'in-the-red' closing today, but nothing on the wild side which is not good news for the traders.
Barclays has an opinion, don't we all, about the recent gains in this precious metals market.
Gold prices drifted a little lower on Monday, with so far no big signs of followup after last week's surge triggered by a downbeat reading on U.S. jobs growth. But analysts at Barclays say investors shouldn't get fooled into believing these gains are going to stick and should be prepared to sell into any rallies this year.
The short term indicators are leaning towards the hold side at the midday, 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. The dismal jobs report last Friday certainly puts Janet Yellen into a quandary. The report will force the Yellen Fed to at least consider the possibility the economy is still on shaky ground and perhaps slow the tapering process.
Also, watch for QE5 when Obamacare is expected to drag the economy down 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 12:00 is at 16419 down 18 or -0.11%.
The SP500 is at 1841 down 1 or -0.05%.
SPY is at 183.93 down 0.19 or -0.11%.
The $RUT is at 1163 down 2 or -0.16%.
NASDAQ is at 4177 up 3 or 0.06%.
NASDAQ 100 is at 3571 up 5 or 0.15%.
$VIX 'Fear Index' is at 11.87 down 0.27 or -2.22%. Bullish
The longer trend is up, the past months trend is bullish, the past 5 sessions have been positive, but sideways and the current bias is sideways.
WTI oil is trading between 93.08 and 91.90 today. The session bias is negative and is currently trading down at 92.23.
Brent Crude is trading between 106.95 and 105.99 today. The session bias is negative and is currently trading down at 106.16.
Gold fell from 1254.00 earlier to 1243.29 and is currently trading down at 1250.30.
Dr. Copper is at 3.344 falling from 3.366 earlier.
The US dollar is trading between 80.56 and 80.85 and is currently trading up at 80.79, the bias is currently positive.
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Written by Gary