Written by Gary
Opening Market Commentary For 04-23-2014
Premarkets were off -0.06% prior to the opening and little financial reporting except from China that was disappointing (see more below).
Markets opened with a 'pump-n-dump' action on low to moderate volume, first falling -0.06% and then the SP500 rose to yesterday's closing numbers. By the 15 minute mark the averages were solidly in the red and descending where the DOW was -0.11% and the NASDAQ was down -0.50%.
By 10 am the negative US financial news pushed the averages further down. As the red volume inched up investors became increasing worried regarding future advances.
Financial news from China earlier was not in the best interest of investors looking for more strength coming from the BRICS. The US financial news is all red this morning with the Manufacturing PMI falling to 55.4 from 55.5 and the US New Home Sales falling to -14.5% from -4.5%.
U.S. stock futures barely budged in pre-market trading Wednesday as positive earnings news from U.S. companies was offset by a disappointing economic report from China.
KEEPING SCORE: Standard & Poor's 500 index futures eased two points, or 0.1 percent, to 1,872 as of 9:11 a.m. Eastern time. Dow Jones industrial average futures edged up one point to 16,459.
Nasdaq composite futures eased five points, or 0.2 percent, to 3,579.
FLYING HIGHER: Delta Air Lines rose $1.80, or 5.2 percent, to $36.75. Its first-quarter earnings climbed after it filled more seats on its planes and paid less for fuel.
Boeing rose $3.25, or 2.5 percent, to $130.80. The company's quarterly earnings beat expectations as it boosted airplane production.
CHINA: A preliminary survey of Chinese manufacturers by HSBC showed slight improvements in prices and demand, but contractions in new export orders and employment in April.
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 up, but remains above zero at 3.22. I would advise caution in taking any position during this volatile transition period although Barchart.com shows a 48 % buy. (Remember this has been negative for weeks.) Investing.com members' sentiments are 65% bearish.
In looking at the 50 DMA, the current SP500 opened well above that line and the small caps remain above the 100 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 ANY 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. Just can not buy the optimism of the bullish pundits when it comes to politicians and our economy. We may never know how 'dark' our shadow banking is and there are too many lurking 'Black Swans' on the horizon to be as confident as some are.
The Best Stock Market Indicator Update says the market is Un-tradable. The OEXA200R is well above 65%, currently at 75%. However, all three secondary indicators are negative:
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 16495 down 20 or -0.13%.
The SP500 is at 1876 down 3 or -0.18%.
SPY is at 187.49 down 0.35 or -0.18%.
The $RUT is at 1150 down 5 or -0.48%.
NASDAQ is at 4134 down 27 or -0.66%.
NASDAQ 100 is at 3564 down 24 or -0.67%.
$VIX 'Fear Index' is at 13.58 up 0.39 or 2.96%. 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 negative.
WTI oil is trading between 102.05 (resistance) and 101.20 (support) today. The session bias is positive and is currently trading up at 102.00.
Brent Crude is trading between 108.52 (resistance) and 108.07 (support) today. The session bias is sideways and is currently trading up at 109.44.
Gold fell from 1288.94 earlier to 1283.60 and is currently trading down at 1284.20. The current intra-session trend is sideways.
Dr. Copper is at 3.045 falling from 3.063 earlier.
The US dollar is trading between 80.00 and 79.77 and is currently trading up at 79.90, the bias is currently stalled.
Real Time Market Numbers
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary