Written by Gary
Opening Market Commentary For 04-04-2014
Premarkets were sailing along at +0.05% until the 'not-so-good' March Payroll and Unemployment came in as a miss. The 'Taper the Taper' advocates jumped in and drove the premarkets up in the +0.55% area.
The opening bell saw fireworks driving the DOW and the SP500 up again setting new historic highs at 16629.90 and 1897.28 respectively. The small caps were also up but began to fall within the first 5 minutes along with the large caps. Another Pump-and-Dump opening and the 'Sheeples' get the shaft again.
By 10 am the averages fallen off the morning highs with the large caps in the green and the small caps floundering near the red. The volume (and volatility) was all over the charts and should be a productive session for the brave traders.
As much as the Keynesian fundamentalists would love to see the Fed taper slowed, I do not it will as the Yellen run Fed will stick to their guns and continue the taper for a number of reasons.
The unemployment rate was unchanged at 6.7%, and above the 6.6% expected. The participation rate rose modestly from 63.0% to 63.2% as the labor force rose by 500K to 156,226 while the people not in the labor force declined by over 300K to 91,030.
Manufacturing jobs had the largest drop since July. The number of unemployed rose 27K to 10,486K.
Conclusion: it snowed in March too, but judging by the perfectly expected stock reaction, it snowed in a good way.
The first column is what was reported this morning. The second column is what was expected and the third is the last report.
Private payrolls and hourly earnings also took a hit reporting 'not-so-good' numbers.
Bad news is the best news this morning.
A higher unemployment rate and worse than expected job creation is the new mother's milk for stocks which kneejerked instantly to new record highs.
Bond yields are tumbling and gold is surging (back over $1300) as 'investors' believe this will signal an un-taper (because QE did so much good for so long) or lower-for-longer chatter (so more buybacks?).
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 % buy. (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 seriously 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. 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 10:15 is at 16608 up 35 or 0.21%.
The SP500 is at 1895 up 6 or 0.31%.
SPY is at 189.25 up 0.61 or 0.33%.
The $RUT is at 1186 up 5 or 0.43%.
NASDAQ is at 4239 up 1 or 0.03%.
NASDAQ 100 is at 3632 down 6 or -0.13%.
$VIX 'Fear Index' is at 12.97 down 0.40 or -2.99%. Bullish 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 positive.
WTI oil is trading between 100.30 and 101.37 today. The session bias is positive and is currently trading up at 101.24.
Brent Crude is trading between 105.66 and 106.88 today. The session bias is positive and is currently trading up at 106.86.
Gold rose from 1284.52 earlier to 1303.23 and is currently trading down at 1296.90. The current intra-session trend is negative.
Dr. Copper is at 3.035 falling from 3.060 earlier.
The US dollar is trading between 80.48 and 80.76 and is currently trading down at 80.58, the bias is currently mixed and volatile.
Real Time Market Numbers
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Written by Gary