Written by Gary
Opening Market Commentary For 02-06-2014
Premarkets were up +0.35% early this morning and fell on mixed financial news. Continuing and jobless claims were in the green, the US trade balance was in the red and the UD dollar made a unusual 0.51 cent swing downward. By 9 am the futures had fallen to flat status, then slid into the red and within a few minutes the futures were back up +0.20%. Volatility is becoming more pronounced as the markets deal with the latest correction and making investors cautious. Investors are waiting for a surge of buying to indicate the bears are tired and the bulls are in charges, but that hasn't happened and everyone is waiting.
Markets opened up +0.25% and quickly shot up to premarket highs on relatively high volume. The 500 eased up to 1762 during the opening minutes and ran out of volume by 9:45. I would be cautious, at this point, on guessing where the markets is going to go next.
But if you have to guess, then further down would be my bet as the past 2 sessions are just correcting the oversold market and not winding up for a bull run. The HFT computers are pushing the averages up at the moment and that might not bode well for any 'sheeples' jumping in right now.
Lance Roberts writes his opinion of the markets current behavior below and it follows my sentiments as well. I also agree that acting with out knowledge will generally lead to poor outcomes.
As the Fed continues to extract liquidity from the financial markets, it is likely that we will continue to see increased volatility in the markets.
However, despite the ever bullish calls by the mainstream analysts, the current market rout has awoken many overly complacent, excessively bullish, investors.
While the headlines make statements like "the worst start to a year since...," or "biggest one day dive since...," it is crucially important to retain some perspective.
First of all, I have written multiple articles (see here, here and here) discussing the excessive extensions in the markets and that a correction of some magnitude was likely to occur this year. However, the correction to date, is not "one of magnitude" as of yet, but rather a "dip" within the ongoing uptrend.
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 much in what Mr. Market has up his sleeve as the bulls and the bears both have convincing arguments why the markets should go up or that the markets should go down.
There is pressure to climb higher if only to test the previous Blue Chip highs, but we may have to see some more 'correction' before we can start counting our 'Bulls'. The latest question investors have is, will it go below the next support at (SP500) 1743 and close there? Granted that the 1743 support is a weak one and swinging back and forth across that demarcation may not mean a whole lot. But below 1727 would be an indication that 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 rumors which 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 is now 30-70 sell and will remain bearish until we can see what the effects are in the game of the Fed's 'Tapering'. 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 further downward. The middle of March should, may, perhaps be the end of any correction.
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 really afraid of is that if a serious 'Black Swan' pops up, the resultant market decent would wipe out a lot of profits and undoubtedly be the start of a bear market. 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 to 20 billion from the bond buying program each month isn't going to do much in reducing the QE program at first, but if it can be cut in half by the end of March 2014 certainly will. We are assuming the Fed's will continue 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 or expand the program later in the year - especially should the employment rate suddenly start to increase. Also, watch for QE5 when Obamacare starts drags the economy down into trouble in 2015.
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The DOW at 10:15 is at 15572 up 131 or 0.85%.
The SP500 is at 1765 up 14 or 0.78%.
SPY is at 176.53 up 1.36 or 0.75%.
The $RUT is at 1102 up 9 or 0.80%.
NASDAQ is at 4047 up 36 or 0.90%.
NASDAQ 100 is at 3488 up 34 or 0.98%.
$VIX 'Fear Index' is at 18.02 down 1.93 or -9.67%. Bullish 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.
WTI oil is trading between 97.20 and 98.82 today. The session bias is positive and is currently trading up at 98.50.
Brent Crude is trading between 106.16 and 107.28 today. The session bias is sideways with a negative slant and is currently trading up at 107.03.
Gold fell from 1266.45 earlier to 1253.58 and is currently trading up at 1255.50.
Dr. Copper is at 3.216 rising from 3.190 earlier.
The US dollar is trading between 81.33 and 80.81 and is currently trading down at 80.86, the bias is currently negative.
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Written by Gary