Market Commentary: Averages Make Brief Appearance Above Resistance Before Giving Up Gains

February 25th, 2014
in Gary's blogging, midday post

Written by

Midday Market Commentary For 02-25-2014

The Fed's bond buying this morning at 10:30 elevated the averages back to mixed and flat and the SP500 moved up to 1847 and then slide downwards. The US Consumer Confidence Index came down from 79.4 to 78.1 and the Richmond Fed Manufacturing Index also fell to MINUS 6 dropping from 12.

By noon the averages were once again headed below the resistance line leaving the markets in the green but looking to head into the red shortly. The cellar door is open - be careful where you step.

Follow up:

The not-so-good news was good for the averages by bolstering the numbers up to the 'Holy Grail' resistance line and everyone held their breath as the SP500 eased over 1848 then up to 1852 on falling volume thanks to the algo trading machines. The HFT computers need to be outlawed as they do nothing for the market except jerk the averages around unnaturally.

The short term indicators are leaning towards the hold side at the midday. 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.

On the other hand, there is pressure to climb higher if only to test the previous Blue Chip highs, 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 1848/50 and close there? This is the historical closing high and there are many doubts that the SP500 can go higher for a fourth try. (It did at 11:30 am but on low volume, does that count? Or is this just another failed test?)

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 35-65 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 later in the year. 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.

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. It happened again yesterday (02-24-2014) and many are looking for confirmation today.

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The DOW at 12:00 is at 16216 up 11 or 0.07%.

The SP500 is at 1849 up 2 or 0.08%.

SPY is at 185.16 up 0.24 or 0.13%.

The $RUT is at 1178 up 3 or 0.26%.

NASDAQ is at 4200 up 7 or 0.15%.

NASDAQ 100 is at 3689 up 3 or 0.08%.

$VIX 'Fear Index' is at 14.16 down 0.07 or -0.49%. 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 negative.

How Oil Really Gets Priced

WTI oil is trading between 102.87 and 101.06 today. The session bias is negative and is currently trading down at 101.58.

Brent Crude is trading between 110.70 and 109.60 today. The session bias is negative and is currently trading down at 109.67.

Gold rose from 1331.61 earlier to 1342.40 and is currently trading up at 1342.40. The current intra-session trend is positive.

Analysts forecast a corrosive year for copper prices

Dr. Copper is at 3.227 falling from 3.253 earlier.

The US dollar is trading between 80.27 and 80.06 and is currently trading up at 80.14, the bias is currently sideways.

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


Written by Gary


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