Market Commentary: Morning Small Cap Averages Suffer 1% Losses, Worst May Be Over

March 24th, 2014
in Gary's blogging, midday post

Written by

Midday Market Commentary For 03-24-2014

After the initial green opening the averages started melting downwards until 11:15 where the falling trend seems to have stabilized somewhat by the noon hour. Volume also has fallen, current direction is sideways and perhaps were have seen the worst behind us.


Follow up:

We may be coming to point of concern of a negative market very soon.

When does a Shorting Opportunity come?

Many investors are chomping at the the bit for shorting the stock market. If you think about it, it reflects a personal belief of what they expect will happen.

The big question is "How can we know there will be a severe drop, and how early can we know?"

In order to answer this question, we went back on the Super Accelerator Model and looked for the indicator events that gave us an early warning in 2008. Here is the chart and what we found ...

Note that the really big down moves only happen when the Super Accelerator moves into Contraction Territory along with the S.T. Accelerator and C-RSI being negative as well. But if we ignore the Super Accelerator and if we look for the S.T. Accelerator being at an extreme low along with the C-RSI going negative at the same time, then we can get an early warning 1 week before the down event. (A deviation from that was when the Super Accelerator was still in Quadrant 2 (a lower positive level). In that case, waiting 2 days and watching the S.T. Accelerator showed an upside turnaround like what happened in August 15 of 2007. Below is the 2007 chart that show's the timing.

Contrast this with where we are now. The Super Accelerator is in Quadrant 1, the S.T. Accelerator is dropping, but it is still in Mid-Quadrant 2 (a lower positive), and the C-RSI is still positive. The S.T. Accelerator and the C-RSI are both dropping, but they have not gone negative yet for an early warning shorting condition. So, while conditions are concerning, they haven't deteriorated to a Super Accelerator Danger level yet.

The short term indicators are leaning towards the hold side at the Midday. 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 72 % sell.

In looking at the 50 DMA the current SP500 is 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.

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. For those who are hell-bent bears, this article, 5 Reasons Your Simple Bear Market Plans Could Backfire, should be required reading.

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. Write me with suggestions and I promise not to bite.

The DOW at 12:00 is at 16247 down 55 or -0.34%.

The SP500 is at 1854 down 14 or -0.74%.

SPY is at 185.02 down 1.18 or -0.66%.

The $RUT is at 1172 down 21 or -1.79%.

NASDAQ is at 4205 down 71 or -1.67%.

NASDAQ 100 is at 3599 down 54 or -1.47%.

$VIX 'Fear Index' is at 15.73 up 0.73 or 4.87%. Bearish Movement

The longer trend is up, the past months trend is mixed, the past 5 sessions have been sideways and the current bias is down, but sideways.

Crude oil rises to above $100 a barrel amid Russia, Libya supply risks and Texas oil spill

WTI oil is trading between 100.28 and 99.05 today. The session bias is positive and is currently trading up at 99.88.

Brent Crude is trading between 106.45 and 107.49 today. The session bias is negative and is currently trading down at 107.23.

Gold fell from 1338.21 earlier to 1309.05 and is currently trading up at 1312.10. The current intra-session trend is negative.

Analysts forecast a corrosive year for copper prices

Dr. Copper is at 2.953 rising from 2.922 earlier.

The US dollar is trading between 80.45 and 80.20 and is currently trading down at 80.30, the bias is currently negative.

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

gary@econintersect.com

 

Written by Gary

 









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