Written by Gary
Opening Market Commentary For 02-07-2014
Premarket volatility had unusually wide swings being at +0.50% at one point and then fall to a negative -0.40% after the mixed, mostly negative US financial reports were posted this morning. Within minutes the premarket shot back up to +0.40% mostly due to HFT computers and what some believe to be insider trading.
Markets opened +0.50%, gaping up and above the 500's resistance at 1773 concerning some investors of the validly of the move on low to moderate volume and a weak monthly jobs report. By 10 am the averages were trading mostly sideways enjoying the fact of penetrating the resistance and climbing higher.
Bullish investors, praying for more QE, helped send the averages higher mostly on hope the dismal job report would end up tapering the taper. Global markets hold gains after weak US jobs data raise possibility Fed may delay stimulus cut.
If today's volatility reflects anything it would be the manipulation going on behind closed doors and HFT computers at work. This report below reflects that there are some serious 'leaks' and insider trading going on.
In the 30 seconds before this morning's jobs report was released to the general public, Gold prices dropped and USDJPY jumped from its relative stasis going in.
Obviously it is not clear if anyone knew anything but following the knee-jerk reactions, these were rightly positioned moves for where the market is now.
Obviously political when the goal posts are being moved by the BLS during the game to reflect a more 'rosy' economy to the 'sheeples'. This apparent attempt to fool the 'idiots-of -the-world' probably will only have a short lived life for the movers and shakers of the financial world. If the markets are destined to fall, they will indeed fall and Fed Chair Yellen will be powerless to hold off the inevitable forever.
With the HFT brigade selling then buying, and trying to goalseek an explanation of why this happened after the fact, one key aspect of today's release that was ignored is that the BLS just revised its Establishment Survey data, in the process changing all historical job numbers.
To wit: "Establishment survey data have been revised as a result of the annual benchmarking process and the updating of seasonal adjustment factors. Also, household survey data for January 2014 reflect updated population estimates."
As a result of this revision, while the monthly changes were not that dramatic, what happened is that the "stock" level of jobs as reflected in the Establishment Survey rose by half a million as of December 31, from 136,877 to 137,386.
And so all key historic data - from GDP in early 2013 to jobs - has now been revised to reflect a more rosy economy, and instill consumers with even more confidence in hopes they will spend, spend, spend.
The short term indicators are 'slightly' leaning towards the buy 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. Remember, corrections during a pronounced negative market movements are to be expected regardless of the overall trend.
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.
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 is being 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 10:00 is at 15694 up 66 or 0.44%.
The SP500 is at 1785 up 11 or 0.64%.
SPY is at 178.46 up 1 or 0.54%.
The $RUT is at 1112 up 8 or 0.76%.
NASDAQ is at 4087 up 30 or 0.74%.
NASDAQ 100 is at 3522 up 24 or 0.67%.
$VIX 'Fear Index' is at 15.83 down 1.38 or -8.01%. Bullish
The longer trend is up, the past months trend is sideways, the past 4 sessions have been positive and the current bias is positive.
WTI oil is trading between 97.13 and 98.40 today. The session bias is positive and is currently trading down at 98.35.
Brent Crude is trading between 106.90 and 107.84 today. The session bias is positive and is currently trading down at 107.78.
Gold fell from 1271.59 earlier to 1256.41 and is currently trading up at 1258.80.
Dr. Copper is at 3.242 rising from 3.222 earlier.
The US dollar is trading between 81.09 and 80.64 and is currently trading up at 80.94, the bias is currently sideways with a positive slant.
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Written by Gary