Written by Gary
Closing Market Commentary For 01-21-2014
The averages melted back out of the noon-time doldrums where the markets, including the DOW, were mostly in the red
By 4 pm the averages were showing a nice advance in spite of not posting new highs (e.g. SP500). Difficult to prognosticate what Mr. Market has in store for us tomorrow, but is unlikely the averages will bet on fire.
More and pundits are looking at 2014 in a more distinct negative fashion.
"It looks like this year's economic horse will pull up lame," warns Bloomberg's Richard Yamarone, adding that the Bloomberg Orange Book Sentiment Index - a proxy for the overall state of economic affairs in the U.S. - has been running below 50 for 49 consecutive weeks, which implies a stagnant growth rate in GDP in the 2-to-2.5% range.
The driving theme behind this sub-par, sluggish recovery, Yamarone points out, is the lack of desirable growth in real disposable personal incomes, which grew at just 0.6% during the 12 months ending in November.
The short term indicators are still 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.
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 16414 down 44 or -0.27%.
The SP500 is at 1844 up 5 or -0.28%.
SPY is at 184.21 up 0.56 or 0.30%.
The $RUT is at 1176 up 7 or 0.62%.
NASDAQ is at 4226 up 28 or 0.67%.
NASDAQ 100 is at 3618 up 26 or 0.74%.
$VIX 'Fear Index' is at 12.86 up 0.42 or 3.38%. Bearish
The longer trend is up, the past months trend is bullish, the past 5 sessions have been mixed in a sideways channel and the current bias is negative.
WTI oil is trading between 93.93 and 95.44 today. The session bias is positive and is currently trading up at 95.25.
Brent Crude is trading between 106.23 and 108.00 today. The session bias is negative and is currently trading down at 106.84.
Gold fell from 1255.50 earlier to 1235.60 and is currently trading up at 1241.50.
Dr. Copper is at 3.346 rising from 3.315 earlier.
The US dollar is trading between 81.16 and 81.53 and is currently trading down at 81.22, the bias is currently sideways.
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Written by Gary