Market Commentary: Markets Open Higher Then trend Lower On Positive Durable Data

March 26th, 2014
in Gary's blogging, market open

Written by

Opening Market Commentary For 03-26-2014

Premarkets were up +0.45% and had a momentary +0.05% gain when the US Durable Goods for February came in at 2.2% versus the 0.8% expected and -1.3% prior, but fell back. The DOW Futures were also trading +0.55% higher prior to the opening along with the NASDAQ at +0.20%. The oils and the US dollar were trading higher while gold and copper were trading lower.

Markets opened up as expected reflecting premarket trading and began to decline sharply during the first 5 minutes on moderate volume, opps, back up again. By 10 am the averages were sea-sawing within a narrow range generally trending down off the opening highs on low volume in spite of improved PMI data.


Follow up:

DailyFX reports that the US Markit Services PMI for March came in at 55.5 versus the 54.0 expected and 53.3 prior. Composite PMI came in at 55.8 versus 54.1 prior.

The short term indicators are leaning towards the hold side at the opening. 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, 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. The MACD has turned down slightly, but remains above zero. I would advise caution in taking any position during this volatile transition period although Barchart.com shows a 16 % 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.

Chris Puplava writes, "As shown below, the long-term outlook for the S&P 1500 is clearly bullish as 77.0% of the 1500 stocks in the index have bullish long-term trends."

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

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 35-65 sell and will remain 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. 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?"

Several notes of negativity are that the daily volume is very low which could set the stage for addition weakness and market decline. The margin debt for stock purchases are at an all time high and investors are also worried about issues directly related to the Fed's tapering. They are considering this factor along with the Argentine Peso, South African Rand and the Yen. And of course, China's defaulting businesses are dropping like flies.

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. One of the many issues investors face is that a Reuters article suggests that tensions in Eastern Europe/Central Asia aren't going away as Russian posturing persists in spite of Russian Propaganda.

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.

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 Best Stock Market Indicator Update says the market is tradable. The OEXA200R ended the week at 84%, up from 80% last weekend.

Of the three secondary indicators:

  • RSI is POSITIVE (above 50).
  • MACD is POSITIVE (black line above red).
  • Slow STO is POSITIVE (black line above red).

My feeling is that we're entering the final euphoria phase of the five-year stock market bull, and I'll be watching warily for major resistance points in the coming months.

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 10:15 is at 16429 up 56 or 0.34%.

The SP500 is at 1873 up 7 or 0.36%.

SPY is at 186.91 up 0.58 or 0.30%.

The $RUT is at 1180 up 2 or 0.16%.

NASDAQ is at 4249 up 15 or 0.36%.

NASDAQ 100 is at 3644 up 14 or 0.39%.

$VIX 'Fear Index' is at 13.90 down 0.10 or -0.71%. Bullish Movement

The longer trend is up, the past months trend is positive, the past 5 sessions have been sideways and the current bias is elevated, but trading sideways.

How Oil Really Gets Priced

WTI oil is trading between 99.03 and 100.01 today. The session bias is positive and is currently trading up at 99.98.

Brent Crude is trading between 106.82 and 107.32 today. The session bias is sideways and is currently trading up at 107.25.

Gold fell from 1316.88 earlier to 1308.89 and is currently trading up at 1311.50. The current intra-session trend is negative.

Analysts forecast a corrosive year for copper prices

Dr. Copper is at 2.982 falling from 3.012 earlier.

The US dollar is trading between 80.00 and 80.29 and is currently trading up at 80.24, the bias is currently positive.

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

gary@econintersect.com

 

Written by Gary

 









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