Written by Gary
Midday Market Commentary For 01-14-2014
Markets continued to melt up from the mornings opening, but on falling volume which is not sitting well with traders. Difficult to speculate at this juncture if the markets are going to rest on this support zone, decline for a small correction or resume its upward pace to eventually test the Blue Chip highs set on December 31st. Brent, gold and copper all fell this morning while short-term indicators are still on 'hold'.
By noon the averages were leveling off with a slight negative slant on anemic volume.
Follow up:The problem facing traders lately is that the trading range requires too much money to be put on the table just to get back meager gains. Even the swings have been narrow confusing traders and investors alike with faux bull and bear moves.
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. Also, watch for QE5 when Obamacare starts drags the economy down into trouble later on in the year.
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 10:15 is at 16337 up 78 or 0.48%.
The SP500 is at 1835 up 16 or 0.86%.
SPY is at 183.31 up 2 or 0.90%.
The $RUT is at 1160 up 12 or 1.05%.
NASDAQ is at 4174 up 61 or 1.47%.
NASDAQ 100 is at 3574 up 61 or 1.73%.
$VIX 'Fear Index' is at 111.99 down 1.29 or -9.71%. Bullish
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 91.65 and 93.07 today. The session bias is mixed and is currently trading up at 93.00.
Brent Crude is trading between 105.31 and 106.30 today. The session bias is negative and is currently trading down at 105.61.
Gold fell from 1253.80 earlier to 1241.41 and is currently trading down at 1243.90.
Dr. Copper is at 3.329 falling from 3.350 earlier.
The US dollar is trading between 80.54 and 80.79 and is currently trading up at 80.66, the bias is currently sideways.
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Written by Gary