Written by Gary
Closing Market Commentary For 01-13-2014
I was right about the market ending in the red, but incorrect about how much red there would be. The good news for the bulls is that the upward pressure to test the recent highs is still there. Plus the fact the averages low point didn't 'completely' pierce the major support which delineates the lower portion of the channel the averages have been in for 14 sessions. Maybe tomorrow, but I believe the time is running out for the bulls.
By 4 pm the averages slowed down their decent and paused just on top of the support created in mid December, 2013.
Short term indicators indicate the averages are set for a least a small correction tomorrow am, but will it stay that way? No, I did not take any position as I have never been good at guessing.
The following is not meant to be political, but the US Supreme Court actions against the POTUS could mean unintended consequences to the stock markets too as investors become increasingly edgy.
It would appear that there is even a limit for the Supreme Court as to what they will allow President Obama to get away with:
*OBAMA'S RECESS APPOINTMENTS QUESTIONED BY U.S. SUPREME COURT
As Bloomberg reports, justices across the ideological spectrum questioned whether President Barack Obama complied with the Constitution when he appointed three members of the National Labor Relations Board during a Senate break.
"It really is the Senate's job" to determine whether the chamber is in recess, said Justice Elena Kagan, one of Obama's two appointees to the high court.
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. 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 4:00 is at 16258 down 179 or -1.09%.
The SP500 is at 1819 down 23 or -1.26%.
SPY is at 181.65 down 2.46 or -1.33%.
The $RUT is at 1148 down 16 or -1.41%.
NASDAQ is at 4113 down 61 or -1.47%.
NASDAQ 100 is at 3513 down 52 or -1.47%.
$VIX 'Fear Index' is at 13.41 up 1.27 or 10.46%. Bearish
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 seriously negative.
WTI oil is trading between 93.08 and 91.65 today. The session bias is negative and is currently trading up at 91.84.
Brent Crude is trading between 106.95 and 105.71 today. The session bias is negative and is currently trading down at 105.73.
Gold rose from 1243.29 earlier to 1254.52 and is currently trading down at 1254.40.
Dr. Copper is at 3.340 falling from 3.366 earlier.
The US dollar is trading between 80.56 and 80.85 and is currently trading down at 80.61, the bias is currently negative.
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Written by Gary