Written by Gary
Opening Market Commentary For 01-17-2014
Premarkets were done -0.15% all morning and the not-so-good economic numbers this morning didn't move the futures one way or another.
Markets opened down -0.10% and with a feeble attempt to melt-up but the BTFDers could not hold down the bear slide the averages further down to -0.25% for the large caps and -0.40% for the small caps. By 10 am the bulls an dears were pulling against each other, not sure who will win today.
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? 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 16426 up 9 or 0.05%.
The SP500 is at 1842 down 3 or -0.18%.
SPY is at 184.06 down 0.36 or -0.19%.
The $RUT is at 1171 down 2 or -0.19%.
NASDAQ is at 4207 down 11 or -0.27%.
NASDAQ 100 is at 3598 down 13 or -0.36%.
$VIX 'Fear Index' is at 12.23 down 0.30 or -2.39%. 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 94.09 today. The session bias is negative and is currently trading down at 64.31.
Brent Crude is trading between 105.45 and 106.62 today. The session bias is positive and is currently trading up at 106.33.
Gold rose from 1237.40 earlier to 1250.32 and is currently trading down at 1247.80.
Dr. Copper is at 3.357 rising from 3.326 earlier.
The US dollar is trading between 80.99 and 81.22 and is currently trading up at 81.19, the bias is currently positive.
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Written by Gary