Market Commentary: Averages Slide Sideways In A Volatile Session

April 17th, 2014
in Gary's blogging, midday post

Written by

Midday Market Commentary For 04-17-2014

By noon some of the averages were in the green, but flat and directionless. The DOW was in the red at -0.07% down and the NASDAQ was up +0.12%. Morning volume was moderate to heavy, the $VIX has remained below 13.70 and investors are wary of Mr. Market pulling the rug out from underneath them.

Follow up:

We are all watching this quarters earning season and many haven't noticed that some companies haven't done well. This trend is a constant worry for investors as they plan their portfolios.

Q1 Earnings Season Summary: More Than Half Have Missed Revenues

As it turns out, in their euphoria to lower EPS estimates, the sellside lemmings forgot all about revenues.

Oops. Because according to the Deutsche Bank Q1 earnings tracker, while two thirds may have beat earnings, a stunning 51%, or a majority of the reporting companies have missed Q1 revenue estimates.

Also, I have mentioned (every morning) margin debt is VERY high and needs watching.

This morning, I did some research on the relationship between the NYSE Margin Debt levels and the end of Bull markets.

If you think about it, Bull markets end with greed and exuberance at an extreme ... and coinciding with the greed and exuberance would be the inclination to borrow more in order to fulfill the perception of making more on the underlying amount invested.

If that makes logical sense, then you would expect the NYSE Margin Debt to rise and up trend higher as the Bull market rises. And then ... a pull back on Margin Debt would coincide with a pull back in the stock market. We won't delve into the possible reasons for a pull back in Margin Debt other than to say it could be because of a change in margin requirements, an out of control over-exuberance that scares the Fed, or a myriad of other reasons which could include an "event crisis" that unsettles and scares market participants.

In any case, let's just look at monthly data and trending of the NYSE's Margin Debt from 1997 to February 2014 which is shown on the top part of the graph.

If you look at that part of the graph, the red line depicts the actual amount of margin debt incurred as of the end of each running month. (The blue line is an eight month, moving average that is weighted which makes it easier to observe the up and down trending.)

The first observation one could make is that the margin debt levels are now on a fast upward trending trajectory which was getting very close to resistance at the end of February. (February was the last NYSE data available.)

The second observation one could make, is that the NYSE Index couldn't make it as high as the previous rise, even with more money (margin debt). From a longer term perspective, this is an unhealthy condition. (Do remember that this data is monthly data and it is therefore not reflective of the short term action in the market.)

The conclusion one could draw from the Margin Debt levels is that he Bull market is definitely closer to the end rather than the beginning.

Now, let's look at the bottom graph which shows a 21 month setting on a Stochastic RSI Indicator. During the past two Bull market peaks, the stock market peaked after the Stochastic RSI went negative (below 50) along with the Margin Debt starting to fall ... or when the Stochastic RSI was down trending and very close to going negative along with the Margin Debt peaking or pulling back.

Currently, the Stochastic RSI Indicator was not near a negative level at the end of February, nor was it down trending. Without the March data, we don't know if that changed last month, but as of the end of February, the market trending was still up for March.

The short term indicators are leaning towards the hold side at the midday. 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 on the large caps have not turned, only a past 6% correction (and recovery) and that is not enough for me to start shorting. The MACD (NASDAQ) has turned down slightly and is at -53.08. 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.)

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 12:15 is at 16413 down 11 or -0.07%.

The SP500 is at 1863 down 1 or -0.06%.

SPY is at 186.23 up 0.94 or 0.06%.

The $RUT is at 1135 up 3 or 0.28%.

NASDAQ is at 4091 up 5 or 0.12%.

NASDAQ 100 is at 3531 down 0.67 or -0.02%.

$VIX 'Fear Index' is at 13.51 down 0.66 or -4.65%. 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 positive and the current bias is sideways and volatile.

Risk On for Oil

WTI oil is trading between 104.75 (resistance) and 103.56 (support) today. The session bias is positive and is currently trading down at 104.64.

Brent Crude is trading between 110.16 (resistance) and 108.07 (support) today. The session bias is positive and is currently trading down at 110.00.

Gold fell from 1304.34 earlier to 1288.10 and is currently trading down at 1299.10. The current intra-session trend is negative.

Analysts forecast a corrosive year for copper prices

Dr. Copper is at 3.039 rising from 3.022 earlier.

The US dollar is trading between 79.92 and 79.65 and is currently trading up at 79.87, the bias is currently positive.

Real Time Market Numbers



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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:


Written by Gary


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