Market Commentary: SP500 Opens Above 1847 Resistance, But Is Trending Down

April 16th, 2014
in Gary's blogging, market open

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Opening Market Commentary For 04-16-2014

Premarkets were up +0.60% this morning in light of 'not-so-good' financial reporting. The markets opened at the same level and slowly began to melt off the opening high with falling volume to match. The SP500 closed above 1839 and opened above the now support line in the sand 1847. Previously, going below 1839 was suppose to be the death knell for the SP500, apparently not, perhaps a stay of execution.

By 10 am the SP500 was sneaking down to the 1847 support on low volume. Generally, the averages were showing signs of stress as investors rethinking their positions. Again, caution is the theme of the day.

Follow up:

Something to think about as the bull and bear pundits argue which way the markets are going to go.

Over 40% Of The S&P 500 Is In Correction Mode

The S&P 500 is down around 4% from its highs (outperforming the high-beta hangovers of Nasdaq and Russell 2000 that were down almost 10% from their highs at today's lows).

But under the surface, the S&P is ugly with the 500 index members down 10.5% on average. 213 members of the S&P 500 are down over 10% (in correction mode).

Only 72 member of the 500-stock index are 'beating' the index... this is not just a small-cap growth-hype selloff... it's spreading...

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 past 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 shows a 48 % sell. (Remember this has been negative for weeks.)

In looking at the 50 DMA, the current SP500 opened opened that line, but way above the 200 DMA and the small caps remain below the 145 DMA. I can not see, as of right now where those MA's are rolling over to indicate any permanent bear run but the failing small caps are a real worry.

We have seen similar action at the beginning of Feb, 2014 when the SP500 went below the 100 DMA and actually touched the 145 DMA and then rebounded to set new historic highs in the beginning of this month.

Bottom line here is that I have not seen any serious bears jumping out of the woods just yet, although I am VERY concerned that this correction could turn nasty in a heart beat.

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 Un-tradable. The OEXA200R ended the week at 72%, down from 90% last weekend.

Of the three secondary indicators:

  • RSI is POSITIVE (below 50).
  • MACD is POSITIVE (black line below red).
  • Slow STO is POSITIVE (black line below red).

Is the Bull finally over? That's what a lot of traders are beginning to ask themselves right now. Two Bull / Bear indicators that I keep an eye on are the bank index (represented by $BKX) and NYSE Margin Debt, both shown below.

When people start missing payments on car loans and mortgages it indicates a serious underlying problem with the economy. Twice in the recent past, Feb. 5, 2007 and Jan. 31, 2011, a drop by the banks preceded a significant drop in the S&P by several months. The same occurred with Margin Debt in March 2000 and July 2007 (the caveat here is that Margin Debt data is always a month old).

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 10:15 is at 16347 up 88 or 0.54%.

The SP500 is at 1850 up 7 or 0.39%.

SPY is at 184.97 up 7 or 0.41%.

The $RUT is at 1125 up 6 or 0.51%.

NASDAQ is at 4054 up 20 or 0.50%.

NASDAQ 100 is at 3505 up 17 or 0.49%.

$VIX 'Fear Index' is at 15.20 down 0.40 or -2.56%. 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 4 sessions have been positive and the current bias is elevated, but trading sideways.

How Oil Really Gets Priced

WTI oil is trading between 104.97 (resistance) and 103.68 (support) today. The session bias is elevated, but trending down and is currently trading up at 104.54.

Brent Crude is trading between 110.33 (resistance) and 109.00 (support) today. The session bias is elevated and trading sideways and is currently trading up at 110.16.

Gold rose from 1293.79 earlier to 1306.97 and is currently trading down at 1300.70. The current intra-session trend is mixed, but trending upwards.

Analysts forecast a corrosive year for copper prices

Dr. Copper is at 3.044 rising from 2.981 earlier.

The US dollar is trading between 79.91 and 79.72 and is currently trading up at 79.87, the bias is currently mixed and volatile.

Real Time Market Numbers



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Written by Gary


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