Written by Gary
Closing Market Commentary For 01-23-2014
The averages dipped into the lower support around 2:30 and clawed its way back out around 3 pm. The was some BTFDer action and volume picked up towards the close. For now I will view this as bullish action and we will have to play the game day by day for the time being.
By 4 pm the bulls and bears were battling it out, but on low volume and probably doesn't mean much until the big players jump in. By 4 all of the Savvy investors were headed for home and can't blame them.
I looks like the BTFDers are still plentiful and saved today's session from going to far into the support, but watch out, the correction is coming.
"In the past year markets got used to buyers who came in and bought the dip, preventing a serious pullback. If investors do not buy the dip this time, markets will experience a correction, which is long overdue," says Quincy Krosby.
More on the Chinese debacle and this could become a sore point with investors in the next few weeks.
SEC administrative law judge Cameron Elliot has barred the Chinese units of the Big-4 accounting firms - KPMG, Deloitte, PwC, and Ernst & Young - from auditing U.S.-listed companies for six months.
Elliot declares the accounting firms "willfully" chose to withhold audit work papers from U.S. regulators for Chinese companies being investigated for accounted fraud. The firms have been worried about violating Chinese privacy laws by turning over the papers, and have argued the dispute needs to be resolved politically.
Though the firms plan to appeal and say they can continue serving Chinese clients for now, shares of Chinese Web and solar names aren't handling the news well. Soft Chinese PMI data could be worsening matters.
Qihoo (QIHU -4.6%) has joined the selloff in spite of a BrightWire report stating Alibaba (ABABA) has reached a deal to acquire a stake in the company. Marbridge Consulting reported two weeks ago Qihoo and Alibaba were in talks about a possible investment.
The short term indicators are still leaning towards the buy side at the close, but I would advise caution in taking any position during this volatile transition period. (and this morning proves my point) 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 16201 down 173 or -1.05%.
The SP500 is at 1829 down 16 or -0.88%.
SPY is at 182.80 down 1.49 or -0.81%.
The $RUT is at 1172 down 9 or -0.76%.
NASDAQ is at 4219 down 24 or -0.57%.
NASDAQ 100 is at 3614 down 14 or -0.38%.
$VIX 'Fear Index' is at 13.76 up 0.92 or 7.55%. Neutral
The longer trend is up, the past months trend is bullish, the past 5 sessions have been sideways and mixed and the current bias is positive.
WTI oil is trading between 96.42 and 97.82 today. The session bias is now negative and is currently trading down at 97.22.
Brent Crude is trading between 107.37 and 108.28 today. The session bias is negative and is currently trading up at 107.51.
Gold rose from 1231.30 earlier to 1265.33 and is currently trading down at 1261.80.
Dr. Copper is at 3.279 crashing from 3.338 earlier.
The US dollar is trading between 81.40 and 80.50 and is currently trading down at 80.52, the bias is currently sideways.
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Written by Gary