Written by Gary
Opening Market Commentary For 02-03-2014
Premarkets were up +0.10% earlier and by 9 am they were in the red as investors are still concerned with emerging markets issues that won't go away.
Markets opened -0.05% in the red on relatively light volume in what looks like a mixed market today on slightly oversold MACD indicators. By 9:40 am the averages were all reporting in the green, but just barely. Five minutes later the averages were headed to the opening numbers with the $VIX in the mid 18's (20 is the magic line). By 10 am the SP500 had drastically fallen and was testing the 1773 support, for now remaining below that demarcation. There is a serious market danger ahead of remaining below that support and continue the 'correction' or a full blown market crash.
The markets fell on the mornings financial news below and could very well fall further. However, I do expect the averages to recove this afternoon and close above the support line in the sand.
The downward revision to last month's recent record high appears to have been the warning flag but this is a disaster.
ISM Manufacturing dropped by its most since 2008; missed by its most on record; and new orders collapse at the fastest pace since 1980.
The employment sub-index also [tumbled] from 55.8 to 52.3. "Poor weather" was blamed by some respondents and still hangovers from the government shutdown but these numbers are simply unprecedented as the data came in at a 6-sigma miss to "economist" expectations.
The short term indicators are leaning towards the sell side at the opening, 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. 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. To correct or not to correct, that is the question.
There is 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 emerging market news announcements which many are pundits unsubstantiated guesses and yet can make markets move dramatically. 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 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 10:15 is at 15569 down 131 or -0.84%.
The SP500 is at 1767 down 15 or -0.83%.
SPY is at 176.71 down 1.50 or -0.84%.
The $RUT is at 1118 down 13 or -1.17%.
NASDAQ is at 4063 down 41 or -0.99%.
NASDAQ 100 is at 3492 down 29 or -0.83%.
$VIX 'Fear Index' is at 19.74 up 1.33 or 7.28%. 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 96.79 and 97.86 today. The session bias is negative and is currently trading down at 97.48.
Brent Crude is trading between 106.61 and 105.70 today. The session bias is negative and is currently trading down at 105.83.
Gold rose from 1240.54 earlier to 1263.64 and is currently trading up at 1262.71.
Dr. Copper is at 3.194 falling from 3.312 earlier.
The US dollar is trading between 81.42 and 81.11 and is currently trading up at 81.17, the bias is currently negative.
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Written by Gary