Written by Gary
Midday Market Commentary For 02-03-2014
The markets continue to fall off the chart as the midday session begins with all of the averages reporting more than a +1.50% decline and the $RUT down over 2.60%. Now that we are in a solid decline where will it stop? Is this a 5% or 10% correction or what?
By noon the averages had descended WAY below where I thought possible for a lot of technical reasons and it can be said we are in a bearish situation with the $VIX crossing upward into the mid 20's.
I seriously thought this morning that we would see the averages recover somewhat and close above the 1773 support level for the SP500. Now that is not a sure bet as were are descending down towards the next support of 1746 on relatively heavy volume. Crossing that line will be breathtaking for sure, but all indications at noon show the decent has slowed and may reverse.
The short term indicators are leaning towards the sell side at the midday, but I would advise caution in taking any position during this volatile transition period of Mr. Market trying to figure out which way he wants to go. It looks like down, but I have learned not to be convinced of anything in this casino market.
The latest question investors have is, will it go below the next support at (SP500) 1773 and close there and that now looks like a reality? Below that and we could be in a serious correction mode and all bets are off on how deep it can go. The next support is at 1746 and if we do not see that happening today, look for it to happen tomorrow. One thing that may indicate a reversal is at hand is that the US dollar is also falling.
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 and emerging markets are 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 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 should the employment rate suddenly start to increase. 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 15460 down 240 or -1.55%.
The SP500 is at 1753 down 30 or -1.67%.
SPY is at 175.17 down 3 or -1.66%.
The $RUT is at 1101 down 30 or -2.61%.
NASDAQ is at 4025 down 79 or -1.92%.
NASDAQ 100 is at 3465 down 59 or -1.67%.
$VIX 'Fear Index' is at 20.33 up 1.94 or 10.54%. Bearish
The longer trend is up, the past months trend is sideways, the past 5 sessions have been negative and the current bias is negative.
WTI oil is trading between 96.27 and 97.86 today. The session bias is negative and is currently trading down at 96.37.
Brent Crude is trading between 106.61 and 105.40 today. The session bias is negative and is currently trading up at 105.80.
Gold rose from 1240.54 earlier to 1265.52 and is currently trading down at 1263.30.
Dr. Copper is at 3.188 falling from 3.312 earlier.
The US dollar is trading between 81.42 and 81.08 and is currently trading up at 81.15, the bias is currently negative.
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Written by Gary