Written by Gary
Closing Market Commentary For 03-19-2014
The afternoon session was chaotic after the FOMC minutes were released with the DOW falling 180 points but saved as the BTFDers jumped in and brought it back up to a minus 114. Volume was relatively heavy as investors on both sides took a stance. The bull made a nice recovery, but is it enough for tomorrow.
By 4 pm the markets were still not settled and we can probably expect volatile action tomorrow am. Is the sinking ship many are talking about?
It seems that the weather is the cause of all our problems lately. So very glad Ms. Yellen pointed that out - I would have never guessed. She probably needs to come up with a better excuse as it isn't original and it is getting old.
In case you misunderstood and judged the market's reaction to Janet Yellen's first FOMC statement, the ultimate Fed mouthpiece is out with a few clarifying words (well 712 words posted in under 4 minutes).
The Wall Street Journal's Jon Hilsenrath clarifies "The Fed stressed it has not changed its plan to keep interest rates low long after the bond-buying program ends," and added further that "the Fed said explicitly for the first time that it likely would keep short-term rates lower than normal, even after inflation and employment return to their longer-run trends."
While noting a bigger consensus of members around a 2015 rate 'liftoff', Hilsenrath is careful to point out that the Fed also blamed the weather for not having a clue.
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 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 100 % sell.
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 to turn downhill, but not convincingly signaling a down trend as it is very weak. Lastly, the markets are oversold and the margin debt for stock purchases are at an all time high.
It is its ending of QE that worries me the most as many financial institution and emerging markets can not continue to push forward or upwards without the Fed's 'Market Viagra'. Even if the Fed reduces its purchases by $10 billion every month for the rest of 2014, the Fed will have acquired $320 billion more for its portfolio. Note, that in 2013, the Fed added more than $1.0 trillion in securities to its portfolio. 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.
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 Fed's 'Tapering' game plan. 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. Read at DailyFX, "wouldn't it be easier if the Fed would just announce the proper level for the S&P and spare us all the policy announcements and market gyrations?"
Today 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 and the Yen. What is Ms. Yellen going to do today?
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The DOW at 4:00 is at 16222 down 114 or -0.70%.
The SP500 is at 1861 down 11.48 or -0.61%.
SPY is at 186.59 down 1.00 or -0.53%.
The $RUT is at 1196 down 9 or -0.78%.
NASDAQ is at 4308 down 26 or -0.59%.
NASDAQ 100 is at 3683 down 24 or -0.64%.
$VIX 'Fear Index' is at 15.02 up 0.50 or 3.44%. 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 off the lows and melting up.
WTI oil is trading between 98.35 and 99.22 today. The session bias is mixed with a positive slant and still fluctuating. Currently trading down at 99.09.
Brent Crude is trading between 106.87 and 105.71 today. The session bias is sideways and is currently trading up at 105.91.
Gold fell from 1360.27 earlier to 1328.35 and is currently trading down at 1329.50. The current intra-session trend is negative.
Dr. Copper is at 2.979 rising from 2.877 earlier.
The US dollar is trading between 80.24 and 79.48 and is currently trading up at 80.15, the bias is currently positive.
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Written by Gary