Written by Gary
Closing Market Commentary For 02-04-2014
The averages sea-sawed all day generally melting upwards except for a -0.15% dip at 3:30 and then recovered nicely to close at a gain of +0.50% to +0.75%.
By 4 the volume was a bit higher than the middle of the session, but lacked that sizzle to warn the bears to stay away. The after market was hot dropping -0.15% or so which may or may not lead to further losses tomorrow. My guess is that we will see more downside before we see more upside. The caution signs are out on this 'Dead Cat Bounce' session.
Where are we in this decline compared to past corrections that averaged on the SP500, 184 points?
Back in April of 2010, the SP500 dropped 209 points in 9 weeks. In July, 2011 the 500 dropped 250 points in just 5 weeks and April 2012 it was 151 points in 9 weeks. September, 2012 the 500 fell 125 points in 9 weeks (Is nine a magic number).
So far the SP500 has fallen a measly 108 points in 3 weeks, so by those calculations (and seeing my shadow) we are going to have 6 more weeks of market doldrums and cold financial news. There you are boys and girls, go to cash and by the middle of March you snatch up the bargains. (sigh, if it were so simple)
US (and Japanese) stocks began their dead-cat bounce around the European open tracking USDJPY (once again) and rising in reverse order of yesterday's selloff as Nikkei, Trannies, Nasdaq and so on (in order) recovered around 25-35% of yesterday's losses.
For Fibonacci-watchers, S&P futures ticked 38.2% retracement and stalled and VWAP was support all day. Credit markets did not buy it and stocks caught down to them.
Silver, having underperformed since the taper, outperformed today back over $19.50 and +1.7% on the week as gold slipped modestly today (but +0.8% on the week). Treasuries sold off modestly leaving yields -2-3bps on the week. AUD stength and JPY weakness supported stocks but the USD flatlined ahead of tomorrow's ECB meeting.
MUB, the Muni ETF, was smashed lower on the Puero Rico junking (and that triggered a quick waterfall in stocks) but that was quickli BTFD'd. VIX fell an impressive 2.9 vols to 18.5%.
The short term indicators are leaning towards the hold 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. 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 is pressure to climb higher if only to test the previous Blue Chip highs, but we may see some more 'correction' before we can start counting our 'Bulls'. The latest question investors have is, will it go to the next support at (SP500) 1727 and close there? Below that and we could be in a really serious correction mode and all bets are off on how deep it can go.
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.
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 4:00 is at 15445 up 72 or 0.47%.
The SP500 is at 1755 up 13 or 0.76%.
SPY is at 175.06 up 1.22 or 0.70%.
The $RUT is at 1103 up 8 or 0.75%.
NASDAQ is at 4032 up 35 or 0.86%.
NASDAQ 100 is at 3470 up 30 or 0.86%.
$VIX 'Fear Index' is at 19.11 down 2.33 or -10.87%. Bearish
The longer trend is up, the past months trend is sideways, the past 5 sessions have been negative and the current bias is positive but falling off at the end.
WTI oil is trading between 96.37 and 97.67 today. The session bias is positive and is currently trading up at 97.52.
Brent Crude is trading between 105.48 and 106.09 today. The session bias is sideways and is currently trading down at 105.91.
Gold fell from 1260.79 earlier to 1247.56 and is currently trading up at 1254.30.
Dr. Copper is at 3.193 rising from 3.180 earlier.
The US dollar is trading between 81.07 and 81.32 and is currently trading down at 81.22, the bias is currently positive. (mimicking the SP500 chart)
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Written by Gary