Written by Gary
Closing Market Commentary For 01-17-2014
Markets closed down below the early morning low, but certainly not far enough to say we are in the start of a correction. Just another day in the sideways channel that was started 17 sessions ago and that is a long time for the markets to continue in such a narrow trading zone. Today it was disappointing earnings that apparently weakened the markets.
By 4 pm the volume climbed a bit higher from anemic to low thus saving the day with some help from the BTFDers. I would not expect this channel to go on forever and the odds of it being broken on the downside are greater than the upside.
The excuse for today's weakness was poor earnings.
NEW YORK (AP) - Weak earnings from big U.S. companies are nudging the stock market lower. United Parcel Service, General Electric and others issued disappointing results or forecasts.
The Standard & Poor's 500 index fell seven points, or 0.4 percent, to close at 1,838 Friday. The Nasdaq fell 21 points, or 0.5 percent, to 4,197. The Dow Jones industrial average rose, but mostly because of large gains in American Express and Visa.
The short term indicators are leaning towards the hold 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? 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 4:00 is at 16459 up 42 or 0.25%.
The SP500 is at 1839 down 7 or -0.39%.
SPY is at 183.83 down 0.79 or -0.43%.
The $RUT is at 1168 down 5 or -0.40%.
NASDAQ is at 4198 down 21 or -0.50%.
NASDAQ 100 is at 3591 down 20 or -0.55%.
$VIX 'Fear Index' is at 12.44 down 0.09 or -0.72%. Bullish
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 95.06 and 94.07 today. The session bias is negative and is currently trading up at 94.33.
Brent Crude is trading between 105.46 and 106.91 today. The session bias is negative and is currently trading up at 106.31.
Gold rose from 1237.40 earlier to 1254.57 and is currently trading down at 1252.70.
Dr. Copper is at 3.343 falling from 3.363 earlier.
The US dollar is trading between 80.99 and 81.41 and is currently trading down at 81.35, the bias is currently sideways.
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Written by Gary