Written by Gary
Midday Market Commentary For 01-23-2014
Technically speaking, the averages slipped down to the bottom of the sideways channel the markets have been in for 21 sessions and bounced off. That is a bullish signal, but the volume is anemic by the noon-time mark, so we may not have seen the bottom just yet.
The $VIX reached 14.15 earlier and remains in the high 13's. My suspicion is that the averages will slowly melt up during the remainder of today's session but remain in the red. By noon the averages were trading sideways with a small positive slant and no further hints of breaking down through the support today, however do not ignore the obvious red flags.
The short term indicators are still leaning towards the hold side at the midday, 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 12:15 is at 16194 down 179 or -1.09%.
The SP500 is at 1827 down 18 or -0.97%.
SPY is at 182.52 down 2 or -0.97%.
The $RUT is at 1170 down 11 or -0.94%.
NASDAQ is at 4204 down 39 or -0.91%.
NASDAQ 100 is at 3598 down 29 or -0.81%.
$VIX 'Fear Index' is at 13.86 up 1.01 or 7.87%. Bearish
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 sideways.
WTI oil is trading between 96.42 and 97.73 today. The session bias is positive and is currently trading down at 97.58.
Brent Crude is trading between 107.39 and 108.28 today. The session bias is neutral to negative and is currently trading down at 107.91.
Gold rose from 1231.30 earlier to 1265.33 and is currently trading up at 1261.70.
Dr. Copper is at 3.288 falling from 3.338 earlier.
The US dollar is trading between 81.40 and 80.63 and is currently trading down at 80.67, the bias is currently sideways.
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Written by Gary