Written by Gary
Closing Market Commentary For 02-28-2014
Our first panic sell of the year but BTFDers got it right this time. There may have been some minor technical damage done to the markets, but it isn't going to change the market significantly - right now anyway. Around 2:30 we got wind of the Ruskies invading the Ukraine and it was downhill from there with the 500 losing 16.70 points before recovering.
By 4 pm everything was quiet and in the green except the small caps which are like little children running for cover. The volume was significant and indicates how concerned investors really are - and should be! The main point is that the SP500 closed above its previous high, marking a new historical closing high which is significant.
The after-market is pushing higher and whether or not this translates into a positive Monday or not remains to be seen. The SP500 was already on shaky ground when the Russian thing happened and thus demonstrated the obvious market weakness. I mentioned earlier to be alert for sharp reversals and you got one this afternoon.
Ukraine Acting President Says Russia Has Invaded Ukraine, As 2000 Russian Troops, Military Jets Arrive
Here we go:
2,000 RUSSIAN SOLDIERS LAND IN CRIMEA IN ARMED INVASION, KIEV OFFICIAL SAYS -- AFP
UKRAINE ACTING PRESIDENT TURCHYNOV STARTS BRIEFING UKRAINE LEADER SAYS RUSSIA STARTS AGGRESSION AGAINST COUNTRY
UKRAINE SAYS RUSSIA INVADED UKRAINE UNDER GUISE OF EXERCISE
At the same time, Ukraine Pravda is reporting that Russian military planes are now landing in the Crimea
Barchart.com is showing its indicators are 96% sell short term. I repeat, it is at this point in time I would be most cautious of a reversal.
The short term indicators are leaning towards the sell side at the close. The all important signs of reversal, up or down, have not been observed so we are mostly at best neutral and conservatively at hold. The 50DMA, MACD, volume and a host of other studies have not turned, only a 6% correction (and recovery) and that is not enough for me to start shorting. I would advise caution in taking any position during this volatile transition period.
Several notes of negativity are that the daily volume is very low matching the period of historical highs in the past which could set the stage for addition weakness and market decline. The longer MACD view is starting uphill, but not convincingly signaling a continued up trend as it is very weak. Lastly, the markets are oversold.
I still believe that Mr. Market is STILL not through playing with us and even newer historical highs are a distinct possibility beyond what we have seen mainly because the amount of bond buying the Fed still does on a monthly basis. The session on 02-27-2014 is a very important reminder of what QE has done in the past and remains a continuing and very powerful stimulus to the financial markets.
It is its ending that worries me the most as the financial institution can not continue to push upwards without the Fed's 'Market Viagra'. The debt stands at 4 trillion and will be at 5 trillion by the time the taper is completed and that is one hell of a debt that 'someone' has to pay.
There is continuing pressure to climb higher, 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 'new' resistance at 1854 and close there?
The old historical closing high at 1848 is no longer and there are many serious doubts that the SP500 can go higher much higher, but of course, that is what they were saying last week. I am not saying it can't go higher but that it will be tough sledging in light of prevailing financial winds. Agreed the current level of bond buying by the Feds is keeping markets becalmed, but at some point the trend will reverse.
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 in fact quiet the opposite. The 50 DMA is climbing slightly, but not descending which is always the first sign the bears are smacking their lips in anticipation of a medium rare steak.
Now more than ever, I am really afraid of a 'Black Swan' popping up and watching the resultant market start falling like an over inflated tire with a nail in it and undoubtedly the beginning of a bear market. This 'house of cards' the Fed has built with QE 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.
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. All she did in the February testimony to a Senate panel is flap her lips but the charts and other technical indicators completely failed us this time around.
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 April 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 Chinese Banking woes. All along we have assumed the Fed's will continue the taper program - so far, they are moving ahead and a lot of 'sheeples' are jumping on board what I think is a sinking ship of fools.
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. After hearing Ms. Yellen speak 2-27-2014, I am more sure of it happening. 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 4:00 is at 16322 up 49 or 0.30%.
The SP500 is at 1859 up 5 or 0.28%.
SPY is at 186.51 up 0.47 or 0.25%.
The $RUT is at 1183 down 5 or -0.41%.
NASDAQ is at 4308 down 11 or -0.25%.
NASDAQ 100 is at 3696 down 4 or -0.10%.
$VIX 'Fear Index' is at 14.00 down 0.04 or -0.28%. neutral movement
The longer trend is up, the past months trend is sideways, the past 5 sessions have been up and the current bias is positive.
WTI oil is trading between 102.93 and 101.88 today. The session bias is positive and is currently trading up at 102.53.
Brent Crude is trading between 109.30 and 108.41 today. The session bias is positive and is currently trading up at 109.03.
Gold fell from 1333.23 earlier to 1320.04 and is currently trading up at 1326.10. The current intra-session trend is neutral.
Dr. Copper is at 3.186 falling from 3.206 earlier.
The US dollar is trading between 80.33 and 79.71 and is currently trading down at 79.78, the bias is currently sideways.
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Written by Gary