Written by Gary
Opening Market Commentary For 01-14-2014
Premarkets were up +0.30% and didn't move after this mornings financial reporting that retail sales top forecasts. Don't worry, these numbers will be revised lower next time around.
Markets opened about +0.33% higher on moderately green volume remaining just above the mid December support. It remains to be seen if the bears can pull the averages below this line and start a correction. By 10 am the averages were sea-sawing in a tight narrow trading range.
It is nice to know that others are seeing the same thing I am witnessing. There is little more to guess except when.
In July 2011, just before the market lost nearly 20% (but also the last time it corrected materially), I observed "Like Wile E. Coyote holding an anvil just past the edge of a cliff, here we are, looking down below as if there is much question about what happens next."
In my view, the stock market is hovering in what has a good chance of being seen in hindsight as the complacent lull before a period of steep losses.
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 opening, 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 16306 up 48 or 0.29%.
The SP500 is at 1827 up 8 or 0.41%.
SPY is at 182.50 up 0.81 or 0.44%.
The $RUT is at 1155 up 7 or 0.59%.
NASDAQ is at 4141 up 28 or 0.67%.
NASDAQ 100 is at 3540 up 27 or 0.78%.
$VIX 'Fear Index' is at 12.38 down 0.90 or -6.85%. 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 93.00 today. The session bias is positive and is currently trading up at 92.81.
Brent Crude is trading between 105.59 and 106.30 today. The session bias is neutral and is currently trading up at 105.88.
Gold fell from 1253.80 earlier to 1246.60 and is currently trading up at 1251.20.
Dr. Copper is at 3.339 falling from 3.350 earlier.
The US dollar is trading between 80.54 and 80.79 and is currently trading up at 80.70, the bias is currently sideways.
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary