Written by Gary
Closing Market Commentary For 02-03-2014
Good news and bad news. First the good news, the DOW only dropped 326 points. The bad news is that the next support for the SP500 was broken and closed below 1746 which is now a resistance.
By 4 pm the $VIX climbed above the magic number of 20 to over 21 under very heavy volume while the averages were reporting loses exceeding 2%. The $RUT reported losses over 3.20% and after market action was very heavy both on the buy and sell side. Janet Yellen starts her first week with the worst February start in 32 years, but that's OK, just blame on the past administration.
I opined Friday that today was probably going to be an up day, boy did I guess that wrong. My conception of the markets continuing upwards is still a distinct possibility, but as I have mentioned, now is not a good time to making financial decisions. It is either too late to sell and right now may be the wrong time to go short.
The Nasdaq plunged by the most in over 8 months today and broke all the way back to unchanged from the December taper decision of the Fed.
All major US equity indices are now negative from the time the Fed decided to slow its flow of free money.
The Dow closed below its 200DMA for the first time since December 2012. The S&P 500 closed the furthest below its 100DMA since QE3 started. USDJPY was in charge and everything was higher or lower beta off of that as it broke 102 early then 101 later in the day (with the Nikkei -700 points from the day's highs).
Treasuries rallied around 5bps to fresh 7-month low yields for 30Y. Gold and Silver surged, adding 1% on the day as the USD lost 0.25% on the day (led by the 1% strength in the JPY).
VIX smashed to 14 month highs over 21%. Credit deteriorated but stocks are catching down.
The short term indicators are leaning towards the sell side at the closing, 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 it did? 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 1726 and if we do not see that happening today, look for it to happen tomorrow.
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 will 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 but that all depends if you are shorting or not.
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 as we have seen over the past several sessions.
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.
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 4:00 is at 15373 down 326 or -2.08%.
The SP500 is at 1742 down 41 or -2.28%.
SPY is at 173.90 down 4 or -2.25%.
The $RUT is at 1095 down 36 or -3.21%.
NASDAQ is at 3997 down 107 or -2.61%.
NASDAQ 100 is at 3441 down 81 or -2.31%.
$VIX 'Fear Index' is at 21.44 up 3.03 or 16.46%. 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 sideways and is currently trading up at 96.64.
Brent Crude is trading between 106.70 and 105.40 today. The session bias is mixed and is currently trading up at 106.08.
Gold rose from 1240.54 earlier to 1265.52 and is currently trading down at 1256.60.
Dr. Copper is at 3.179 falling from 3.312 earlier.
The US dollar is trading between 81.42 and 81.08 and is currently trading up at 81.13, the bias is currently negative.
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Written by Gary