Written by Gary
Opening Market Commentary For 04-01-2014
Premarkets have crashed and futures are down 5% O.K., April Fools.
Premarkets were actually up again this morning by +0.20% and Asia is not looking very good, especially China with its second bond default.
Markets opened up, should say, gaped up leaving room to fall and cover later. The DOW and the SP500 opened up at +0.40% with on low volume which is not comforting. I would expect more investor participation on such a bullish move if it were real. By 10 am the SP500 was on its way to a new historical high at 1884.60 beating the old mark by $0.63. What does this mean?
I am going to call this a failed test for now. If the Sp500 closes above it old closing high of 1877.04 then that will be bullish. Below that and we have a double top scenario which in the past has been a bearish indicator - stay tuned this session is far from over.
The US ISM Manufacturing report this morning was 53.7 while expecting 54.0 up from the last report of 53.2. The oils immediately declined while gold, copper and the US dollar remained relatively stable.
The 2nd class data point, that quickly became the darling of the algo pumpers when it beat expectations by a record last month, has tumbled back to a less exuberant reality and missed expectations by the most in 7 months.
Printing at 55.5 (vs 56.0 exp.) the index is still in expansion mode but factory jobs and factory orders sub-indices both fell...
The first column is what was reported this morning. The second column is what the consensus expected and the third is the last reporting.
Following the big plunge in January, the world's extrapolators have been exuberant over the snap-back from weather-driven anomalies... today, ISM dashed those hopes to some extent as the pace of the v-shaped recovery slowed notably and ISM missed expectations for the 3rd of the last 4 months.
While new orders rose, employment fell to its lowest in 9 months. Of course this bad news is just what the doctor ordered and those oh-so-not-front-running algos just lifted stocks to a new all-time record high... imagine if it had missed by even more!!
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 80 % sell. (Remember this has been negative for days.)
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. And now the Second Chinese Bond Company Defaults, First High Yield Bond Issuer.
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 Untradeable. The OEXA200R is well above 65%, currently at 75%. However, all three secondary indicators are negative:
- RSI is NEGATIVE (below 50)
- Slow STO is NEGATIVE (black line below red)
- MACD is NEGATIVE (black line below 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.
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The DOW at 10:30 is at 16552 up 95 or 0.58%.
The SP500 is at 1883 up 11 or 0.59%.
SPY is at 188.06 up 1 or 0.57%.
The $RUT is (Not reporting)
NASDAQ is at 4250 up 51 or 1.22%.
NASDAQ 100 is at 3643 up 47 or 1.30%.
$VIX 'Fear Index' is at 13.35 down 0.53 or -3.82%. 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 sideways.
WTI oil is trading between 101.45 and 100.66 today. The session bias is negative and is currently trading down at 100.73.
Brent Crude is trading between 107.81 and 107.08 today. The session bias is negative and is currently trading down at 107.14.
Gold rose from 1278.33 earlier to 1288.37 and has reversed course and currently trading down at 1280.50. The current intra-session trend is negative.
Dr. Copper is at 3.039 rising from 3.018 earlier. (Prices are volatile and swinging between 3.018 and 3.040)
The US dollar is trading between 80.13 and 80.28 and is currently trading down at 80.23, the bias is currently positive, but volatile.
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Written by Gary