Written by Gary
Closing Market Commentary For 02-24-2014
Interesting close this afternoon. If the SP500 closed above the previous high mark closing numbers (1848.36 and 1848.38) then we would have a conversation of record breaking numbers and piercing the upper resistance barriers and moving on to an advancing market.
Yes, we saw new historical highs for the 500 at 1858.71, some 7.87 points higher than the last high, but it fell off during the last few minutes of today's session and therein lies the crucial danger sign of inherent market weakness coming down the pike because it closed BELOW the last closing high.
By 4 pm the dark clouds were once again forming in the minds of concerned investors wondering if the bears really are going to have steaks for dinner. Again we have another possible shooting star (without volume) or a dark cloud to end the session. The last time it was not confirmed the next day, so you can bet tomorrow 's action will be closely monitored for confirmation.
The candle for 02-19-2014 SP500 could be interpreted as a shooting star or a Dark Cloud, but the volume wasn't very convincing and 02-21-2014 action does not wholly confirm it, but today is the third attempt. I'll let you draw your own conclusions.
In reflection, today's rise is a product of the 65 billion Fed bonds, dumb bullish 'sheeple' and HFT computers pushing the numbers up and it couldn't push any higher. It ran out of steam and it is doubtful we will see any 'significant' new highs for a while.
US equities tagged new highs early in the day-session sparked by USDJPY ignition and rotating to support from AUDJPY as stops were run and exuberance over shitty data reigned.
"Most shorted" stocks dramatically outperformed early on providing the sacrifice required but while bond yields rose from their open last night, they end the day practically unchanged (10Y +1bps); The USD rallied into the open but EUR and AUD strength cracked it back to practically unchanged by the close.
Copper flailed (on slowing China construction fears) but oil, silver, and gold all rallied around 1% on the day (though rolled over in the afternoon). VIX dropped but held 14% and remains notably divergent. Credit rallied but remains a laggard compared to equity exuberance.
Stocks tanked into the close; catching down to VIX, credit, and USDJPY - what a "market" with the S&P losing its highs and closing red for 2014 once again.
The short term indicators are still leaning towards the hold side at the close. 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 why they should go down. Several notes of negativity are 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. The longer MACD view is starting downhill, but not convincingly signaling a continued down trend. And today the 500 closed below previous high marks.
On the other hand, there is pressure to climb higher if only to test the previous Blue Chip highs again, but we may have to see some more 'consolidation' or sideways trading before we can start counting our 'Bulls'. The latest question investors have lately is, will the SP500 go above the resistance at 1848 and close there? This is the historical closing high and there are many doubts that the SP500 can go higher than it did today.
In looking at the 50 DMA the current SP500 is somewhat 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.
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. The OEXA200R ended the week at 79%, down from 83% last weekend.
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 along with the emerging market woes.
We are assuming the Fed's will continue the taper program - so far, they are moving ahead in spite of the emerging market issues.
My inner instincts tell me there is also 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 late 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 4:00 is at 16207 up 104 or 0.64%.
The SP500 is at 1848 up 11 or 0.62%.
SPY is at 185.45 up 1 or 0.55%.
The $RUT is at 1175 up 10 or 0.85%.
NASDAQ is at 4293 up 30 or 0.69%.
NASDAQ 100 is at 3686 up 23 or 0.63%.
$VIX 'Fear Index' is at 14.23 down 0.45 or -3.07%. Neutral Movement
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 101.97 and 103.42 today. The session bias is negative and is currently trading down at 103.26.
Brent Crude is trading between 109.50 and 110.63 today. The session bias is positive and is currently trading up at 110.56.
Gold rose from 1319.08 earlier to 1339.04 is currently trading down at 1337.00. The current intra-session trend is neutral.
Dr. Copper is at 3.236 falling from 3.290 earlier.
The US dollar is trading between 80.12 and 80.40 and is currently trading up at 80.25, the bias is currently neutral.
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary