Written by Gary
Closing Market Commentary For 03-18-2014
Markets trended upward throughout the afternoon and volume was less than it has been and had great difficulty going above today's resistance at 1873 for the 500 and 16360 for the DOW.
By 4 pm the averages closed up a half point for the large caps and over 1.25% for the small caps ending up where we were March 11th. Baring a bad news day we may see another up day tomorrow.
We are still at that point where the hopefuls believe new highs will be made and the pessimists are looking down. Many are beginning to believe the bull is tired.
For five long years, we have pursued the fantasy that we could return to "growth" without having to fix or change anything.
The core policy of the fantasy is the consensus of "serious economists," i.e. those accepted into the priesthood of PhD economists protected by academic tenure or state positions: what we suffered in 2009 was not the collapse of leveraged crony-state financialization but a temporary decline of "aggregate demand" and productive capacity.
The five-year fantasy that free money would fix all the distortions and systemic problems is drawing to a close. Why can't the fantasy run forever? The two-word answer: diminishing returns.
Handing out subprime auto loans works at first because it pulls demand forward: anyone who wants or needs a new car buys one now, rather than put the purchase off a year or two.
Eventually the marginal buyers default and demand falls off, and the distortions cause an even greater collapse in demand and auto loan quality.
The short term indicators are leaning towards the hold 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 holding. 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 although Barchart.com shows a 0 % hold.
If the Russian President Putin stops at annexing Crimea, the markets may alleviate current weakness and the bull run will continue as some bullish pundits seem to indicate. It is also possible that this is simply a pause where Putin will take the slack time to consider his next global conquest. It makes sense, in my opinion for Putin to stop at Crimea and all the bulls then can breath a sigh of relief. Having said all of that, again in my opinion, the markets are long overdue for a substantial correction, say 40%.
One needs to understand that the Ukraine/Crimea issue is just another bad flu and not the car wreck that many are trying to make it out to be. The real story behind the current weakness is the US weak housing, layoffs and poor employment data, inventory reductions and soft economic outlook including a mediocre sales outlook.
Investors are also worried about issues directly related to the Fed's tapering and are considering this factor along with the Argentine Peso, South African Rand, the Yen and now the US Freezes Diplomatic Relations With Syria, Orders Non-US Personnel To Leave Country.
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The DOW at 4:00 is at 16336 up 89 or 0.55%.
The SP500 is at 1872 up 13 or 0.72%.
SPY is at 187.63 up 1.33 or 0.71%.
The $RUT is at 1205 up 17 or 1.41%.
NASDAQ is at 4333 up 53 or 1.25%.
NASDAQ 100 is at 3707 up 44 or 1.20%.
$VIX 'Fear Index' is at 14.53 down 1.11 or -7.10%. Bullish Movement
The longer trend is up, the past months trend is positive, the past 5 sessions have been mixed and the current bias is elevated.
WTI oil is trading between 97.28 and 98.97 today. The session bias is positive and is currently trading down at 98.71.
Brent Crude is trading between 106.89 and 106.82 today. The session bias is mixed and is currently trading down at 106.63.
Gold fell from 1367.89 earlier to 1351.44 and is currently trading down at 1356.00. The current intra-session trend is negative.
Dr. Copper is at 2.953 falling from 2.992 earlier.
The US dollar is trading between 79.43 and 79.66 and is currently trading down at 79.52, the bias is currently mixed.
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Written by Gary