Written by Gary
Opening Market Commentary For 02-04-2014
Premarkets were up +0.50% this morning after yesterday's horrific fall, but not unexpected. There is a lot of negative emerging market and EU corruption news this morning along with a forecast of US factory orders to be negative.
Markets gaped up at the opening where the SP500 was up +0.50% in the first few minutes testing the now resistance at 1747and the $VIX dropped from 21.45 to 19.85. From there is was a sea-saw back and forth along the 1747 resistance line on low volume. By 10 am the averages were solidly in the green appearing to maybe, perchance, perhaps signal the end of the correction. I would remain cautious.
Even the Bank Of America Warns: "Too Few Bears Out There", "Investors Not Prepared" For Selloff as Fed Jeffrey Lacker slams his cohorts below.
Unlike the other Fed presidents who are all too happy to lie in order to instill some confidence not realizing that by doing so they hurt their own credibility, non-voting member Jeffrey Lacker and president of the Richmond Fed has a different approach - telling the truth.
Which is why we read his just released speech this morning with interest since once again, it contains far more truth and honesty than anything else the FOMC releases. Sure enough, it has enough fire and brimstone to put even fringe bloggers to shame.
Also this morning, the US Factory Orders came in at -1.5% versus -1.8% expected and 1.5% prior (revised lower from 1.8%).
The short term indicators are leaning towards the hold 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.
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 support of 1703 for the SP500 and ending the 'correction'. The latest question investors have is, will it go below the next support at (SP500) 1703 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.
If you would like to get advanced buy/sell tweets, sign-up in the column to the right of this post by clicking on the 'Follow' button.
The DOW at 10:15 is at 15433 up 61 or 0.40%.
The SP500 is at 1752 up 10 or 0.60%.
SPY is at 175.04 up 10 or 0.56%.
The $RUT is at 1102 up 8 or 0.69%.
NASDAQ is at 4022 up 24 or 0.61%.
NASDAQ 100 is at 3462 up 23 or 0.66%.
$VIX 'Fear Index' is at 19.33 down 2.16 or -10.07%. Bullish
The longer trend is up, the past months trend is sideways, the past 5 sessions have been negative and the current bias is sideways with a positive slant.
WTI oil is trading between 96.37 and 97.59 today. The session bias is positive and is currently trading up at 97.31.
Brent Crude is trading between 105.48 and 106.09 today. The session bias is positive and is currently trading up at 106.09.
Gold fell from 1260.79 earlier to 1247.56 and is currently trading up at 1250.20.
Dr. Copper is at 3.194 rising from 3.180 earlier.
The US dollar is trading between 81.07 and 81.29 and is currently trading up at 81.26, the bias is currently positive.
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary