Written by Gary
Opening Market Commentary For 04-08-2014
Premarkets were about even, flat and directionless this morning. The negative news is that the SP500 closed below 1847 support at 1845. Should the SP500 remain below that mark today or go below 1839 we will most likely see a continuing melt-down that will exceed 10% in the ensuing days.
Large caps opened briefly in the red and within 10 minutes were melting upwards (DOW +0.05%) on low volume and the $VIX remaining in the 15's. Commodities were also seeing a negative trend at the opening. By 9:45 am the averages had tested the session lows and the BTFDers jumped in with abandon creating a momentary high volume spike reversing the fall. Then the offices Comcast internet connection died!
For 20 minutes were were in the dark, Comcast HAS to Improve their service as the outages occur at an all to frequent regularity. By 10:15 the SP500 was sea-sawing remaining below the 1847 mark on low volume.
Forward guidance has been on the weak side and alarming reports of negative corporate quarterly reports is bothering investors as earning season begins. However, some investors believe the market has now mostly priced in a lackluster earnings, so witch is it Mr. Market?
Having hit their most hopeful levels in seven years in January, small business hiring plans have collapsed at the fastest rate since Lehman in the ensuring 2 months.
Despite the headlines proclaiming the modest rise and beat in the headline NFIB data, capex spending plans dropped and hiring expectations dropped to lows seen 11 months ago.
We can only assume the small businesses are expecting more winter storms through the spring...
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 important DMA's, 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 those MA's are rolling over to indicate any permanent bear run in fact quiet the opposite. However it is a completely different story for the NASDAQ and $RUT where they have dropped down to the 145 DMA and the 50 DMA is starting to roll over.
The current downturn is currently 3 days old and modest sell-offs have occurred at regular intervals for the past year that look the same in intensity. So at this point there should be no alarming need to sell, although that could change today.
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.
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. The margin debt is very high and has been setting historic highs and as of Monday, 4-7-2014, it stands at $466 billion.
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.
Several notes of negativity is that the margin debt for stock purchases is at an all time high and investors are 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.
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 tradable. (Not in my corner.) The OEXA200R ended the week at 90%, up from 86% last weekend.
Of the three secondary indicators:
- RSI is POSITIVE (above 50).
- MACD is POSITIVE (black line above red).
- Slow STO is POSITIVE (black line above 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. One in particular will be when the Nasdaq reaches 5000, the same top as in year 2000, maybe by this June or July. I'm very surprised at how large this bubble has grown, fueled by the Fed's single-minded determination to support Wall Street. (. . . and I agree )
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The DOW at 10:30 is at 16202 down 44 or -0.27%.
The SP500 is at 1840 down 5 or -0.27%.
SPY is at 183.88 0.44 or -0.25%.
The $RUT is at 1132 down 4 or -0.31%.
NASDAQ is at 4073 down 7 or -0.17%.
NASDAQ 100 is at 3504 down 4 or -0.12%.
$VIX 'Fear Index' is at 15.89 up 0.32 or 2.12%. Bearish Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is sideways, the past 3 sessions have been negative and the current bias is sideways and lackluster.
WTI oil is trading between 100.52 and 101.48 today. The session bias is negative and is currently trading up at 101.03.
Brent Crude is trading between 105.76 and 106.54 today. The session bias is negative and is currently trading down at 106.17.
Gold fell from 1314.69 earlier to 1308.10 and is currently trading down at 1308.10. The current intra-session trend is negative.
Dr. Copper is at 3.036 falling from 3.062 earlier.
The US dollar is trading between 80.35 and 79.85 and is currently trading down at 79.90, the bias is currently negative.
Real Time Market Numbers
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Written by Gary