Written by Gary
Opening Market Commentary For 04-03-2014
Premarkets were mostly flat and then jumped to +0.16% just before the opening bell. Markets opened in the green as the DOW and SP500 again set new historical highs at 16604.15 and1893.80.
By 10 am the averages were elevated and trading sideways on moderate volume. The $VIX rose from 12.98 to 13.45 and the markets are volatile and investors need to look for sudden reversals.
This morning the initial jobs claims rose the most in 10 weeks missing expectations and the widening trade deficit which will surly tumble the GDP. A 'bad' claims data is great news for tapering the taper and the bulls were let down by Draghi, now we need Friday's payroll data to be truly dismal.
WASHINGTON (AP) - The U.S. trade deficit climbed to the highest level in five months in February as demand for American exports fell while imports increased slightly.
The deficit increased to $42.3 billion, which was 7.7 percent above the January imbalance of $39.3 billion, the Commerce Department reported Thursday. U.S. exports slipped 1.1 percent to $190.4 billion as sales of commercial aircraft, computers and farm goods fell.
Imports edged up 0.4 percent to $232.7 billion, reflecting gains in imports of autos and clothing which offset a drop in crude oil that fell to the lowest level in more than three years.
A higher trade deficit acts as a drag on economic growth because it means U.S. companies are making less overseas than their foreign competitors are earning in U.S. sales.
WASHINGTON (AP) - The number of people seeking U.S. unemployment benefits rose 16,000 last week to a seasonally adjusted 326,000. Despite the increase, the number remains close to pre-recession levels and points to stable hiring.
The Labor Department said Thursday that the four-week average of applications, a less volatile measure, inched up 250 to 319,500. Applications are a proxy for layoffs.
They have fallen back to roughly pre-recession levels, an indication that companies are letting go of fewer workers and expect solid economic growth in the months ahead. The low level of applications for benefits has boosted optimism about how many jobs employers added in March.
Weekly claims for unemployment aid have reached a level that is typically consistent with monthly job gains of more than 200,000.
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 40 % 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.
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The DOW at 10:10 is at 16580 up 7 or 0.04%.
The SP500 is at 1892 up 0.50 or 0.03%.
SPY is at 188.92 up 0.03 or 0.02%.
The $RUT is at 1192 down 1 or -0.10%.
NASDAQ is at 4277 down 0.61 or -0.02%.
NASDAQ 100 is at 3667 up 1 or 0.03%.
$VIX 'Fear Index' is at 13.28 up 0.19 or 1.45%. Bullish Bearish Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is positive, the past 5 sessions have been positive and the current bias is flat.
WTI oil is trading between 99.07 and 99.73 today. The session bias is mixed and volatile and is currently trading up at 99.59.
Brent Crude is trading between 104.45 and 105.40 today. The session bias is elevated and sideways and is currently trading up at 105.14.
Gold fell from 1294.15 earlier to 1281.90 and is currently trading down at 1283.50. The current intra-session trend is negative.
Dr. Copper is at 3.031 falling from 3.050 earlier.
The US dollar is trading between 80.25 and 80.66 and is currently trading up at 80.63, the bias is currently elevated and volatile.
Real Time Market Numbers
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Written by Gary
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