Written by Gary
Opening Market Commentary For 03-27-2014
Premarkets were down ~0.12% on the average and made a dip when the it was reported the US Economy grew at an annual rate of 2.6% and US Jobless Benefits fell slightly.
Markets opened flat and in the red as mediocre volume signaled that investors were unsure what to do next. Within 5 minutes the SP500 was testing the 1847 support but above the all-important 1839 support. By 10 am the Large Caps has eased back above the support levels while the small caps (NASDAQ) remained solidly below its support (now resistance).
The small caps are trending down as can be seen in this daily NASDAQ chart. The blue line is the 50 DMA and the red line is the 200 DMA.
The Q4 GDP actually misses expectations and the Initial Jobless Claims drop to a 4 month low, but the markets are looking at good news as bad news.
WASHINGTON (AP) - The U.S. economy grew at a 2.6 percent annual rate in the October-December quarter, slightly more than previously estimated, as consumer spending rose at the fastest pace in three years.
The Commerce Department says the fourth-quarter growth rate was a bit stronger than its 2.4 percent estimate made last month. The revision reflected stronger consumer spending, which rose at an annual rate of 3.3 percent - its best quarterly pace since 2010.
Even with the upward revision, growth in the overall economy slowed from a 4.1 percent pace in the July-September quarter. Analysts think growth has slowed even more in the current January-March period to around a 2 percent annual rate. A harsh winter has disrupted factory production and kept people away from shopping malls.
WASHINGTON (AP) - The number of people seeking U.S. unemployment benefits fell 10,000 last week to a seasonally adjusted 311,000, the lowest since late November and a hopeful sign hiring could pick up.
The Labor Department says the four-week average of applications, a less volatile measure, fell 9,500 to 317,750. That is the fourth straight drop and the lowest level in six months.
It brings applications in line with pre-recession levels. The sustained decline suggests companies are confident enough about future growth to keep their staffs. Applications are a proxy for layoffs. Greater business confidence can also lead to more hiring. About 3.3 million people received benefits in the week ending March 8, the latest data available. That was about 43,000 fewer than the previous week.
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 88 % 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. However, the NASDAQ has gone below the 50 DMA and is a few point away from crossing the 200 DMA.
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.
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The DOW at 10:15 is at 16269 up 1.35 or 0.01%.
The SP500 is at 1852 down 0.25 or -0.02%.
SPY is at 184.95 down 0.01 or 0.00%.
The $RUT is at 1158 up 2.30 or 0.19%.
NASDAQ is at 4167 down 6 or -0.14%.
NASDAQ 100 is at 3576 down 7 or -0.19%.
$VIX 'Fear Index' is at 14.80 down 0.12 or -0.80%. Neutral Movement
The longer trend is up, the past months trend is positive, the past 5 sessions have been mixed and the current bias is positive - sorta.
WTI oil is trading between 100.03 and 101.56 today. The session bias is positive and is currently trading up at 101.45.
Brent Crude is trading between 106.77 and 107.75 today. The session bias is positive and is currently trading up at 107.67.
Gold fell from 1307.52 earlier to 1292.05 and is currently trading down at 1296.60. The current intra-session trend is negative.
Dr. Copper is at 2.996 rising from 2.962 earlier.
The US dollar is trading between 80.31 and 80.17 and is currently trading up at 80.20, the bias is currently negative.
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Written by Gary