Written by Gary
Opening Market Commentary For 04-10-2014
Premarkets were down -0.10% and opened the same way. The first few minutes after the opening bell were quiet, but slightly negative on low volume. By the 15 minute mark the markets made a run for the green, but were blocked by the bears.
By 10 am the averages were showing signs of being tired, but remained flat on moderate volume.
Cam Hui explains in his article below that risk appetite is rolling over.
Here is my take on the current technical position of the market. As the chart below shows, the SPX bounced off support at 1840 and rallied for two days.
However, the rally was on declining volume, which is never a good sign, and the index is approaching a couple of technical resistance levels.
One is shown by an uptrend that stretches back to early February; and the other is a well defined resistance zone at the 1874-1884 level.
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 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 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.
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. And now Another Chinese High Yield Bond Issuer Declares Bankruptcy.
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 )
If you would like to get advanced buy/sell tweets, sign-up in the column to the right of this post by clicking on the 'Follow' button. Write me with suggestions and I promise not to bite.
The DOW at 10:00 is at 16427 down 8 or -0.05%.
The SP500 is at 1868 down 4 or -0.23%.
SPY is at 186.61 down 0.45 or -0.24%.
The $RUT is at 1152 down 8 or -0.69%.
NASDAQ is at 4150 down 32 or -0.77%.
NASDAQ 100 is at 3573 down 28 or -0.76%.
$VIX 'Fear Index' is at 14.01 up 0.19 or 1.37%. Bullish 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 5 sessions have been mixed and the current bias is sideways.
WTI oil is trading between 103.79 and 103.14 today. The session bias is mixed and sideways and is currently trading up at 103.52.
Brent Crude is trading between 107.88 and 107.26 today. The session bias is mixed and is currently trading down at 107.69.
Gold rose from 1307.72 earlier to 1324.90 and is currently trading down at 1320.80. The current intra-session trend is sideways.
Dr. Copper is at 3.036 rising from 3.021 earlier.
The US dollar is trading between 79.64 and 79.48 and is currently trading down at 79.57, the bias is currently sideways.
Real Time Market Numbers
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary