Written by Gary
Closing Market Commentary For 01-22-2014
A very boring session today, but it may be the windup pitch that will knock the ball right out of the park or caught by the out fielder. I am still looking for the test of the recent highs that will confirm what the bullish pundits are predicting or what the bearish financial scholars are calling for.
By 4 pm the markets ended the session with a big yawn and a lot of investors was glad it was over. There were several faux moves that everyone watched intently, but they turned out to be a bust but they at least kept everyone awake.
The averages generally closed near the earlier morning highs and the SP500 nudged beyond and then closed at +1.06 points up. The DOW has sucked all day closing -40.58 and analyst are blaming IBM for the DOW's poor showing.
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 sideways 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. Today marks the 20 session of sideways movement and it could be over any at any moment. The question is which way will it be, up or down?
Laura Mandaro wrote: "One of the permanent themes of the nearly five-year-old bull market is wondering when a correction will happen. Everyone wants one, a wee one, to prevent a bigger crash and also to pick up a few goodies on the cheap."
Gary Thayer, chief macro strategist at Wells Fargo Advisors, dusted off the question on Tuesday with a note entitled "Is a stock market correction overdue?" In a word, YES.
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 16374 down 41 or -0.25%.
The SP500 is at 1845 up 0.12 or 0.06%.
SPY is at 184.32 up 0.10 or 0.07%.
The $RUT is at 1181 up 6 or 0.47%.
NASDAQ is at 4243 up 17 or 0.41%. (Closes at highest point since July 2000)
NASDAQ 100 is at 3628 up 10 or 0.28%.
$VIX 'Fear Index' is at 12.85 down 0.02 or -0.16%. Neutral
The longer trend is up, the past months trend is bullish, the past 5 sessions have been sideways and the current bias is sideways.
WTI oil is trading between 95.13 and 96.88 today. The session bias is positive and is currently trading up at 96.83.
Brent Crude is trading between 106.81 and 108.32 today. The session bias is positive and is currently trading up at 108.27.
Gold fell from 1243.40 earlier to 1235.87 and is currently trading up at 1236.50.
Dr. Copper is at 3.327 falling from 3.354 earlier.
The US dollar is trading between 81.09 and 81.33 and is currently trading up at 81.31, the bias is currently positive.
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Written by Gary