Written by Gary
Midday Market Commentary For 01-28-2014
By 11:30 the averages had leveled out with a slight negative divergence as the volume also fell to low and anemic at times.
By noon the averages took a small dip scaring some investors, but the volume remained low indicating HFT computers at work. New Levels do not instil confidence in investors.
You would think the markets would decline on this news, but they haven't. This could also be a test by leaking this information before the FMOC meeting, just to see what the markets would do. So much manipulation and so little time.
FOMC seen making further cuts to QE. The FOMC is due to start the first day of a two-day policy meeting today, with WSJ Fed watcher Jon Hilsenrath believing that the bank will ignore the recent turmoil in emerging markets and cut its bond-buying program by another $10B a month to $65B.
It's not clear that the sharp declines in Turkey's lira and Argentina's peso, for example, are due to the Fed's tapering, Hilsenrath says, nor that the overseas rout is a problem for the U.S. economy, which is what the Fed is mandated to consider.
The short term indicators are leaning towards the hold side at the midday, 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.
(NOTE: The sideways channel downside was penetrated (1-24-2014) and that technical theory has to be thrown out the window, but will it go below the next support at (SP500) 1773 and close there? Below that and we could be in a serious correction mode and all bets are off. More likely we will start another sideways channel between the 2 SP500 supports of ~1409 and ~1773.
Got to watch out for these overnight negative World news announcements which are usually rumors and make sure you have stops in place if you are not in a position to monitor the markets.
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.
The Best Stock Market Indicator Update says the market is untradable.
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. (Note: It will be interesting if the Feds take out another 10b on top of the proposed 10b for this FMOC meeting.)
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 12:00 is at 15882 up 41 or 0.26%.
The SP500 is at 1787 up 5 or 0.29%.
SPY is at 178.53 up 0.52 or 0.29%.
The $RUT is at 1132 up 4 or 0.37%.
NASDAQ is at 3490 down 4 or -0.10%.
NASDAQ 100 is at 3490 down 18 or -0.51%.
$VIX 'Fear Index' is at 16.37 down 1.05 or -6.08%. Neutral
The longer trend is up, the past months trend is sideways, the past 5 sessions have been negative and the current bias is sideways.
WTI oil is trading between 95.63 and 97.60 today. The session bias is positive and is currently trading down at 97.26.
Brent Crude is trading between 106.76 and 107.77 today. The session bias is negative and is currently trading down at 107.31.
Gold fell from 1261.26 earlier to 1249.22 and is currently trading down at 1252.20.
Dr. Copper is at 3.250 falling from 3.272 earlier.
The US dollar is trading between 80.47 and 80.84 and is currently trading up at 80.68, the bias is currently neytral.
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Written by Gary