Written by Gary
Opening Market Commentary For 04-02-2014
Premarkets remained around +0.05% until the opening where the SP500 edged up +0.07% marking a new historic high (1886.97) on volume that was so low it was difficult to measure. Within 60 seconds of the opening some investors got cold feet and the averages slacked off somewhat leaving the rest of us wondering if we were going to see a sell-off as the SP500 slipped below yesterday's closing numbers.
By the 15 minute volatility was in high gear sea-sawing the averages and the SP500 tested its new high and slipped up to a newer high of 1887.82 on moderate, but falling volume.
During the first half hour the small caps remained up ~0.35% and our propriety chart indicator never reached its high water mark leading us to believe we are seeing a top - at least for now.
By 10 am the averages were trading sideways at +0.04% for the large caps and ~+0.10% and then the sell-off started first easing the DOW and SP500 into the red and the small caps falling below yesterday's closing numbers. The HFT algo computers are hard at work jerking the averages around like ping pong balls most likely confusing even Mr. Market - then the markets were in the green again! By 10:15 the SP500 had tested the earlier high marks but had not crossed the historic high mark.
The short term indicators are leaning towards the hold side at the opening with a finger ready on the sell button. 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 56 % sell. (Remember this has been negative for weeks.)
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 and Russia's annexing game playing. 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 sudden 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 Japan. 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. 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 10:15 is at 16535 up 2.50 or 0.02%.
The SP500 is at 1886 up 1 or 0.05%.
SPY is at 188.34 up 0.09 or 0.05%.
The $RUT is at 1189 up 16 or 1.34%.
NASDAQ is at 4267 down 0.50 or -0.01%.
NASDAQ 100 is at 3657 down 0.35 or -0.01%.
$VIX 'Fear Index' is at 13.05 down 0.05 or -0.38%. 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 positive.
WTI oil is trading between 100.21 and 98.90 today. The session bias is negative and is currently trading down at 99.23.
Brent Crude is trading between 105.33 and 104.13 today. The session bias is negative and is currently trading down at 104.47.
Gold rose from 1278.92 earlier to 1294.63 and is currently trading down at 1292.10. The current intra-session trend is positive.
Dr. Copper is at 3.053 falling from 3.073 earlier.
The US dollar is trading between 80.13 and 80.33 and is currently trading up at 80.33, the bias is currently positive.
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Written by Gary