Written by Gary
Opening Market Commentary For 01-30-2014
Premarkets were up, SP500 futures was up+0.70% and NQ 100 futures was up +0.93%. Not totally unexpected as we have had several sessions of bear clawing action that is being blamed on emerging market woes.
The DOW opened up +93 points, SP500 over 15 points and the $VIX dropped from 17.50 to 16.30 all on low volume. By the 15 minute mark the averages were showing some weakness as the numbers began backing off the opening highs. By 10 am the averages were falling, the US dollar was up, gold was down along with copper and the oils were up.
The preliminary 4th quarter GDP declines to 3.2% as analyst expected, but the final 2013 GDP is 1.9%, down down 2.8% in 2012. Initial Jobs Claims are in the red missing exceptions falling back to levels of 6 months ago. Pending Home Sales dropped significantly dramatically underscoring and precieved US weakness.
Is it the emerging market woes or not-so-good US financial news that has investors concerned or maybe both that is creating some softness in today's session,
The short term indicators are leaning towards the buy side at the opening moving to hold by 10 am, but I would advise caution in taking any position during this volatile transition period. As it stands right now I do not have a clue what Mr. Market has up his sleeve as the bulls and the bears both have convincing arguments why the markets should go this way or that way.
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 new sideways channel between 1809 and 1773 for the SP500.
The latest question investors have is, 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 on how deep it can go. More likely this is the start another sideways channel that may drag on for a month baring any Black Swans.
Also, have 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.
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 couple of 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 by March 2014 certainly will - IF - the Fed's continues the taper program - so far, they are moving ahead in spite of the emerging market worries.
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 10:15 is at 15790 up 52 or 0.32%.
The SP500 is at 1786 up 11 or 0.64%.
SPY is at 178.44 up 1 or 0.63%.
The $RUT is at 1132 up 9 or 0.81%.
NASDAQ is at 4097 up 46 or 1.13%.
NASDAQ 100 is at 3511 up 43 or 1.24%.
$VIX 'Fear Index' is at 16.78 down 0.58 or -3.34%. Bullish
The longer trend is up, the past months trend is sideways, the past 5 sessions have been negative and the current bias is melting downward.
WTI oil is trading between 97.35 and 98.55 today. The session bias is positive and is currently trading up at 98.50.
Brent Crude is trading between 107.68 and 108.30 today. The session bias is positive and is currently trading down at 108.00.
Gold fell from 1270.10 earlier to 1238.36 and is currently trading down at 1243.80.
Dr. Copper is at 3.223 falling from 3.258 earlier.
The US dollar is trading between 80.62 and 81.11 and is currently trading up at 81.05, the bias is currently positive.
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Written by Gary