Written by Gary
Midday Market Commentary For 01-16-2014
Low volume, little interest and tight trading zone. The averages remain in the red and the small caps are just about to turn green. The oils, gold and the US dollar are trading sideways as traders are unsure what to do next. Several pundits are saying the markets are going to start trading sideways without much movement either up or down and that is a possibility.
By noon the averages were still flat and lackluster with the small caps down -0.05% and the large caps down -0.20% to -0.40%. Caution should be the watchword for this session.
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. (Yesterday wasn't a test)
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? What I am afraid of is that if a serious 'Black Swan' pops 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 in 2015.
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 16412 down 71 or -0.43%.
The SP500 is at 1844 down 4 or -0.22%.
SPY is at 184.24 down 0.42 or -0.23%.
The $RUT is at 1171 down 0.41 or -0.04%.
NASDAQ is at 4213 down 1 or -0.03%.
NASDAQ 100 is at 3608 down 1 or -0.04%.
$VIX 'Fear Index' is at 12.46 up 0.18 or 1.47%. Bearish
The longer trend is up, the past months trend is bullish, the past 5 sessions have been mixed and sideways and the current bias is sideways.
WTI oil is trading between 94.78 and 93.75 today. The session bias is positive and is currently trading up at 94.30.
Brent Crude is trading between 106.40 and 105.56 today. The session bias is positive and is currently trading up at 106.06.
Gold rose from 1235.90 earlier to 1244.18 and is currently trading up at 1242.10.
Dr. Copper is at 3.339 fell from 3.369 earlier.
The US dollar is trading between 81.20 and 80.60 and is currently trading up at 81.11, the bias is currently negative.
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Written by Gary