Written by Gary
Midday Market Commentary For 02-11-2014
The SP500 is tantalizing investors as it has slipped above the resistance at 1808 (and the 50 DMA) and has not slowed its accent. The $VIX has dropped to the mid 14's, volume remains low and the HFT computers are helping the push upwards. All that is stopping the averages moving higher is the historic highs set on January 15, 2014.
By noon, one would normally expect the averages to explode upwards after piercing the last resistance before reaching for the gold ring, but it hasn't charged ahead because of continuing investors worries about approaching market highs, emerging market woes and an US economy dragging its financial feet. Mr. Market is tantalizing investors with market candy.
One economist has stated that the highs have been made and WILL NOT be tested. Today's advancement marks the high water mark for the markets and the bear market has indeed started. Personally, I am going to hold out throwing in the towel for another week at least.
The short term indicators are leaning towards the hold side at the midday, 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. One note is that the daily volume is very low matching the period of historical highs a few weeks ago and that could set the stage for addition weakness.
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 today is, will it go above the resistance at (SP500) 1808 and close there? It has crossed that threshold, but can it stay?
In looking at the 50 DMA the SP500 is just above that line, but way above the 200 DMA and on 02-06-14 crossed above the 100. I can not see, as of right now where the MA's are rolling over to indicate any permanent bear run. The 50 DMA has flattening out, but not descending which is always the first sign the bears are smacking their lips in anticipation of a medium rare steak.
The longer 6 month outlook is now 40-60 sell and will remain slightly bearish until we can see what the effects are in the game of the Fed's 'Tapering'. By the end of 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 February should, may, perhaps be the end of the recent correction.
For now, I am continuing to expect weak to sideways 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 lessor degree of reliability for the time being and watch what the Janet Yellen's 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. What is currently causing problems for the Emerging Markets is directly related to the tapering and most investors are considering this factor too.
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 inner instincts tell me there is a possibility 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 12:00 is at 15944 up 142 or 0.90%.
The SP500 is at 1814 up 15 or 0.81%.
SPY is at 181.49 up 1.47 or 0.81%.
The $RUT is at 1122 up 3 or 0.26%.
NASDAQ is at 4177 up 29 or 0.71%.
NASDAQ 100 is at 3608 up 25 or 0.71%.
$VIX 'Fear Index' is at 14.40 down 0.87 or -5.70%. Bullish
The longer trend is up, the past months trend is sideways, the past 5 sessions have been positive and the current bias is positive.
WTI oil is trading between 100.48 and 99.61 today. The session bias is negative and is currently trading sideways with a negative slant at 99.98.
Brent Crude is trading between 108.56 and 107.95 today. The session bias is sideways with a negative slant and is currently trading down at 108.29.
Gold fell from 1288.14 earlier to 1276.25 and then rebounding to previous levels and is currently trading up at 1290.20.
Dr. Copper is at 3.213 falling from 3.227 earlier.
The US dollar is trading between 80.51 and 80.74 and is currently trading up at 80.64, the bias is currently positive. (Watch out for the volatility swings)
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Written by Gary