Market Commentary: Markets Gap Down On Continuing Emerging Market Worries

January 29th, 2014
in Gary's blogging, market open

Written by

Opening Market Commentary For 01-29-2014

The after markets climbed higher (+0.15%) and fell on the opening of the premarkets this morning where the SP500 futures were down almost a point.

Markets gaped down on the opening (-0.80%) and the $VIX shot up to 17.84 in the first minutes of the opening bell. The US dollar fell 0.38 cents, the WTI oil fell over a point and gold rose over 18 points.

By 10 am the averages had recovered +0.20% of the premarket decline but didn't especially strong as the SP500 approaches the 1773 support.

Follow up:

These emerging market players are not the Black Swan scenarios I have written about, but goes to show you that this 'House of Cards' the Fed built is on, and has been, on shaky ground and it wouldn't take much to make it crumble. Some folks are going to get hurt playing this casino market - very scary at times. However having said that, I see today's decline more of a shot across the bow, a warning if you will, of worse things to come on the horizon.

Interesting statistics on Presidential State of the Union address on the markets the next day.

Which president did the Dow like best on the day after the State of the Union?

The State of the Union speech typically has a minimal impact on markets. And it only has fleeting effects on specific market sectors, as Bill Watts notes here.

However, markets do pay attention for shifts in tone on economic issues, and the state of Washington's dysfunction.

Looking back to the beginning of the Kennedy administration the Dow Jones Industrial Average has averaged a decline of 0.03% on the next trading day after the big speech.

Since 1961, the Dow Jones Industrial Average has averaged a gain of 0.0026% on days after a Republican address and a loss of 0.07% on trading days after a Democrat address.

Monday's news, but it is the thought that counts and definitely someone to watch.

Equities sell off continues despite positive remarks from FOMC member Narayana Kocherlakota

The sell-off in global equities persisted on Monday, with the S&P dropping by another 0.49% as investors continued to trim long-exposure to high-yielding assets after new homes sales in the US for November came in on the soggy side of expectations.

Equities reacted positively to comments from FOMC voting member and President of the Minneapolis Fed, Narayana Kocherlakota, when he stated the Fed should do more to stimulate the economy as unemployment remains at elevated levels, but faded into the close as stocks were unable to sustain the rebound. Read the rest of the article Equities sell off continues despite positive remarks from FOMC member Narayana Kocherlakota

The short term indicators are leaning towards the hold (buy if you are brave) 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 has been penetrated 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 ~1809 and ~1773.

Got to watch out for these overnight negative World news announcements which many are 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.

Again, 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 10:00 is at 15823 down 100 or -0.63%.

The SP500 is at 1783 down 10 or -0.56%.

SPY is at 178.08 down 1 or -0.50%.

The $RUT is at 1131 down 7 or -0.59%.

NASDAQ is at 4076 down 22 or -0.52%.

NASDAQ 100 is at 3489 down 16 or -0.47%.

$VIX 'Fear Index' is at 17.56 up 7.76 or 11.14%. Bearish

The longer trend is up, the past months trend is sideways, the past 5 sessions have been negative and the current bias is down but positive.

How Oil Really Gets Priced

WTI oil is trading between 97.49 and 96.44 today. The session bias is negative and is currently trading up at 96.68.

Brent Crude is trading between 108.03 and 106.94 today. The session bias is negative and is currently trading down at 107.20.

Gold rose from 1250.68 earlier to 1268.89 and is currently trading up at 1265.70.

Analysts forecast a corrosive year for copper prices

Dr. Copper is at 3.243 falling from 3.268 earlier.

The US dollar is trading between 80.90 and 80.52 and is currently trading down at 80.56, the bias is currently negative.

To contact me with questions, comments or constructive criticism is always encouraged and appreciated:


Written by Gary


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