Opening Market Commentary For 04-11-2014
Premarkets were down -0.50% on good financial reports, must be the "want more QE folks' were unhappy.
Markets opened down as expected and gradually started melting up somewhat but remaining in the red on moderate to heavy volume. The $VIX shot up to 16.69, but not high enough to signal a bear run. A correction is in progress, but it might be a good time to buy into the dip. CAUTION, Mr. Market may not be done correcting just yet!
Now everyone is talking bear. Just last week everyone was singing bull.
"We can't help thinking that as it becomes ever clearer that the Fed is pretty much fixed in its determination to stop QE late this year, the oxygen that has fueled the 5 year bull market is slowly draining out of the market.
Clearly the Fed is still buying a significant amount of bonds and thus providing a lot of liquidity but clearly only for a few more months." - Deutsche Bank
The short term indicators are leaning towards the sell 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 8 % buy. (Remember this has been negative for weeks.)
In looking at the 100 DMA, the current SP500 opened below 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 below the 145 DMA and the 50 DMA is starting to flatten out.
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.
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 10:15 is at 16071 down 100 or -0.59%.
The SP500 is at 1824 down 9 or -0.51%.
SPY is at 182.20 down 1 or -0.52%.
The $RUT is at 1121 down 7 or -0.63%.
NASDAQ is at 4022 down 33 or -0.82%.
NASDAQ 100 is at 3459 down 28 or -0.81%.
$VIX 'Fear Index' is at 16.76 up 0.87 or 5.41%. 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 negative and the current bias is depressed, but trading sideways.
WTI oil is trading between 103.98 (resistance) and 103.02 (support) today. The session bias is positive and is currently trading up at 103.93.
Brent Crude is trading between 107.76 (resistance) and 106.99 (support) today. The session bias is positive and is currently trading up at 107.70.
Gold fell from 1324.17 earlier to 1317.12 and is currently trading down at 1318.70. The current intra-session trend is negative.
Dr. Copper is at 3.037 falling from 3.078 earlier.
The US dollar is trading between 79.63 and 79.43 and is currently trading down at 79.50, the bias is currently negative.
Real Time Market Numbers
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary