Written by Gary
Opening Market Commentary For 01-28-2014
After markets fell -0.25% yesterday after the close and rose early this morning +0.25%, but started to fall off their high marks as soon as the morning 'not-so-good' US financial's started coming in. The US Durable Goods fell -4.3% and so did the premarket down to 'flat status'.
Markets opened with the Blue Chips in the green and the small caps solidly in the red, a really mixed market with investors still concerned with negative news from the emerging markets. Bad news has pushed the markets upwards in the past because of QE diehards hoping for less taper and appears to be the case today.
By 10 am the averages were all in the green and the $VIX falling.
The short term indicators are leaning towards the buy side at the opening, 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.
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 10:00 is at 15939 up 101 or 0.63%.
The SP500 is at 1792 up 11 or 0.63%.
SPY is at 179.18 up 1 or 0.68%.
The $RUT is at 1136 up 8 or 0.72%.
NASDAQ is at 4095 up 11 or 0.27%.
NASDAQ 100 is at 3504 down 5 or -0.14%.
$VIX 'Fear Index' is at 16.19 down 1.25 or -7.18%. Bullish
The longer trend is up, the past months trend is sideways, the past 5 sessions have been negative and the current bias is positive.
WTI oil is trading between 95.63 and 97.43 today. The session bias is positive and is currently trading up at 97.20.
Brent Crude is trading between 106.76 and 107.47 today. The session bias is positive and is currently trading down at 107.33.
Gold rose from 1252.81 earlier to 1261.26 and is currently trading down at 1255.50.
Dr. Copper is at 3.264 falling from 3.272 earlier.
The US dollar is trading between 80.47 and 80.84 and is currently trading up at 80.61, the bias is currently negative.
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Written by Gary