Market Commentary: Weakness Prevails, Sending Bearish Signals To Investors

February 12th, 2014
in Gary's blogging, midday post

Written by

Midday Market Commentary For 02-12-2014

Interestingly, when the Feds buy their bonds around 10:30 the markets usually respond by melting upwards to 3:30 where they fall off a bit. Not today as the markets started to descend around 10 am and have been going down since then leaving the blue chips solidly in the red and the small caps flat as a pancake.

By noon the averages mixed and trading on low volume sending bearish signals to investors that more decline is just around the corner.

Follow up:

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 and market decline.

There is pressure to climb higher if only to test the previous Blue Chip historical highs and we are seeing that now. The latest question investors have lately is, will it go above the solid resistance at (SP500) 1850 and close there? This is the historical high and there are many doubts that the SP500 can go higher.

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.

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.

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.

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.

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.

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 12:00 is at 15955 down 40 or -0.25%.

The SP500 is at 1819 down 1 or -0.06%.

SPY is at 182.02 up 0.04 or 0.01%.

The $RUT is at 1131 up 2 or 0.15%.

NASDAQ is at 4196 up 5 or 0.13%.

NASDAQ 100 is at 3623 up 3 or 0.07%.

$VIX 'Fear Index' is at 14.49 down 0.02 or -0.14%. Neutral

The longer trend is up, the past months trend is sideways, the past 5 sessions have been positive and the current bias is negative.

How Oil Really Gets Priced

WTI oil is trading between 100.22 and 101.35 today. The session bias is negative and is currently trading down at 100.66.

Brent Crude is trading between 108.15 and 108.98 today. The session bias is negative and is currently trading down at 108.28.

Gold rose from 1284.10 earlier to 1294.97 and is currently trading up at 1293.20.

Analysts forecast a corrosive year for copper prices

Dr. Copper is at 3.357 rising from 3.221 earlier.

The US dollar is trading between 80.57 and 80.91 and is currently trading up at 80.78, the bias is currently positive.

To contact me with questions, comments or constructive criticism is always encouraged and appreciated:


Written by Gary


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