Written by Gary
Midday Market Commentary For 01-29-2014
After a test of the SP500's 1773 support, we can say it was defended nicely - for today anyway.
By noon the averages are still in the red and the DOW remains near the red 100 point mark as the markets continue to melt upwards. When the FNOC minutes are released I think there is going to be some wild swings, great for trading, not so good for investors. Danger Will Robinson . . .
As we wait for Dr. Ben and his henchmen to dazzle us with their financial magic here are some notes about the emerging markets.
As South Africa hiked rates this morning (whose effect on the Rand was promptly overwhelmed by the Lira collapsing back to weaker than pre-rate-hike) stock markets around the world are rapidly deteriorating and the safety of bonds and bullion is being sought aggressively.
Turkish stocks are collapsing and the Hungarian Forint is collapsing. We can't help but see the irony of this tumult and the possibility of a global financial meltdown occurring on the day of Bernanke's last FOMC meeting...
The short term indicators are leaning towards the hold (buy if you are brave) 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 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 12:15 is at 15821 down 108 or -0.68%.
The SP500 is at 1784 down 8 or -0.46%.
SPY is at 178.29 down 1 or -0.46%.
The $RUT is at 1133 down 5 or -0.48%.
NASDAQ is at 4085 down 12 or -0.30%.
NASDAQ 100 is at 3495 down 10 or -0.29%.
$VIX 'Fear Index' is at 17.12 up 1.32 or 8.35%. 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.
WTI oil is trading between 97.49 and 96.44 today. The session bias is positive and is currently trading down at 97.03.
Brent Crude is trading between 108.03 and 106.94 today. The session bias is positive and is currently trading down at 107.78.
Gold rose from 1250.68 earlier to 1268.89 and is currently trading up at 1261.80.
Dr. Copper is at 3.241 falling from 3.268 earlier.
The US dollar is trading between 80.90 and 80.52 and is currently trading down at 80.61, the bias is currently negative.
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Written by Gary