Written by Gary
Opening Market Commentary For 02-14-2014
Happy Valentine's Day - in case you forgot! After markets yesterday were quiet and non-eventful until 9:15 this morning where they suddenly started dropping over -0.20% after morning financial reports came in. Industrial Production is down -0.3%, US Manufacturing is down -0.8% and Capacity Utilization is down to 78.5% which tells me that the US remains a struggling economy.
By the opening the old adage, bad news is good news for the markets, took effect and the markets recovered enough to open flat and good deal of volatility.
By 10 am the averages held steady at flat status and low volume when the U of Michigan came in exactly what the last report was at 81.2 although better than what was expected (80.2).
The Michigan Consumer confidence is important, rated high, as it explains about 46% of the variation in US Real GDP. Today's report can have several meanings depending on how you view this half-full glass. The markets at first didn't react one way or the other and for now that appears how today's session is going to play out.
The short term indicators are leaning towards the hold side at the opening. Why 'hold', because the all important signs of reversal, up or down, have not been observed. The 50DMA, MACD, volume and a host of other studies have not turned, only a 6% correction and that is not enough for me to start shorting. 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 any idea 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 they should go down.
Several notes 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 additional weakness and market decline. The longer MACD view is starting downhill, but not convincingly signaling a continued down 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 lately is, will it go above the 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 20 points 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 10:15 is at 16058 up 30 or 0.19%.
The SP500 is at 1830 up 2 or 0.13%.
SPY is at 183.32 up 0.34 or 0.22%.
The $RUT is at 1146 down 1 or -0.13%.
NASDAQ is at 4237 down 4 or -0.09%.
NASDAQ 100 is at 3653 down 6 or -0.17%.
$VIX 'Fear Index' is at 13.77 down 0.37 or -2.55%. Bullish
The longer trend is up, the past months trend is sideways, the past 5 sessions have been positive and the current bias is volatile and sideways.
WTI oil is trading between 100.45 and 99.46 today. The session bias is negative and is currently trading up at 99.71.
Brent Crude is trading between 108.67 and 107.89 today. The session bias is negative and is currently trading up at 108.09.
Gold rose from 1300.07 earlier to 1321.19 and is currently trading up at 1319.80.
Dr. Copper is at 3.264 rising from 3.244 earlier.
The US dollar is trading between 80.30 and 80.10 and is currently trading down at 80.24, the bias is currently sideways.
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary