Written by Gary
Opening Market Commentary For 01-16-2014
Premarkets were up slightly (+0.05%) until employment numbers came out and the DOW futures fell 33 points and the SP500 were down almost 4 points. Not sure if it was the Continuing Claims moving up 174K or the weekly jobless claims dropping 2K that sent the markets down, but down they went.
By 10 am the averages were in the red, flat and low volume sea-sawing along the opening numbers looking weaker by the minute. Remember that correction I told you about, maybe this is the start.
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. (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 10:15 is at 16428 down 53 or -0.32%.
The SP500 is at 1845 down 4 or -0.21%.
SPY is at 184.27 down 0.42 or -0.22%.
The $RUT is at 1171 down 0.60 or -0.05%.
NASDAQ is at 4212 down 2 or -0.06%.
NASDAQ 100 is at 3608 down 2 or -0.06%.
$VIX 'Fear Index' is at 12.45 up 0.17 or 1.38%. 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 negative.
WTI oil is trading between 94.78 and 93.75 today. The session bias is positive and is currently trading up at 94.34.
Brent Crude is trading between 106.40 and 105.56 today. The session bias is positive and is currently trading up at 106.14.
Gold rose from 1235.90 earlier to 1244.18 and is currently trading up at 1242.10.
Dr. Copper is at 3.349 fell from 3.369 earlier.
The US dollar is trading between 81.20 and 80.60 and is currently trading down at 80.93, the bias is currently negative.
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Written by Gary