Market Commentary: Markets Showing Strength On Low Volume, Investors Worried Of Bull Trap

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

Written by

Opening Market Commentary For 06-16-2014

The DAX, CAC and FTSE across the 'Pond' are all running negative with the Nikkei closing at -1.09% US Premarkets were down solidly -0.20% and by 9 am they had moved up to flat status on zero volume - methinks this is going to be an interesting opening. Markets did open down -0.15% on relatively low volume and slowly picked up steam melting further down where the DOW was off -0.30% at on point. By the 10 minute mark everything except the DOW was flat, but in the green on low to moderate volume mostly because of the BTFDers.

By 10 am the averages had climbed into the green on low to very low volume, but worrying investors of a reversal. This morning rise could be a bull trap.

Follow up:

Interestingly the IMF isn't being politicized painting a rosy picture of negative US growth. The IMF said that weather played a big factor, of course it did and we wouldn't have it any other way. And by the way, US wages and Employment still suck. Seriously, who would have ever guessed at that? But wait, next month these figures will be modified, but who cares, they are fabricated anyway.

IMF lowers its estimate of US growth in 2014 to 2 percent from previous 2.7 percent forecast

WASHINGTON (AP) - The International Monetary Fund foresees the U.S. economy growing a modest 2 percent this year, below its previous estimate of 2.7 percent. That would be nearly identical to the economy's 1.9 percent growth in 2013.

A brutal winter and a slowing housing recovery caused the economy to shrink during the first three months of 2014, the IMF noted in a report released Monday. Recent figures suggest that a "meaningful rebound" will propel growth the rest of 2014, the IMF said.

Still, that will only partly offset what many analysts think was a contraction of up to 2 percent last quarter. The unemployment rate has tumbled to 6.3 percent from 7.5 percent in 12 months.

But the IMF warns that U.S. wages remain stagnant and the rate of long-term unemployment high.

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 and that is not enough for me to start shorting. The SP500 MACD has turned down, but remains above zero at 15.15. I would advise caution in taking any position during this volatile transition period although shows a 0 % hold. members' sentiments are 67 % bearish and Investors Intelligence sets the breath at 67.3 % bullish with the status at Bear Correction.

Here is the John Carlucci weekly update on his best stock market indicator.

Click to viewBest Stock Market Indicator Ever: Weekly Update

The $OEXA200R Monthly (the percentage of S&P 100 stocks above their 200 DMA) is a technical indicator available on used to find the "sweet spot" time period in the market when you have the best chance of making money.

According to this system, the market is now Tradable. The OEXA200R ended the week at 88%, down from 94% last week.

All three secondary indicators are positive.


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 minor correction could turn nasty in a heart beat. One significant signal would be losses in any of the major averages that go over the 'magic' 3 % and then you need to pay close attention to risk-off tactics. Any market correction over 6% would be an additional signal and I can't see having one without the other.

In Lance Roberts article he asks, Is The Market Consolidating Or Topping?

There are two ways to look at stagnation in the markets. It is either a consolidation process that works off an overbought condition which leads to further advances, OR it is a topping process that leads to a market decline. Discerning which process is currently "in play" is critical for investor decision making.

Let me be clear. I am not stating that the current consolidation process will absolutely collapse into a sharp correction in the months ahead. However, I am stating that the current environment is more similar to past markets which did correct, than not.

While it is certainly possible that the markets could ratchet higher from here due to the "psychological momentum" that currently exists, the likelihood of a runaway bull market from here is remote.

It is still possible that Mr. Market is not through playing with the averages and even newer historical highs are a distinct possibility. Historically, accordingly to Eric Parnell, "major bull markets have almost never reached their final peak in a sideways grinding pattern. Instead, they have almost always peaked with flourish including one final crescendo toward a new all-time high before finally rolling over and succumbing to the forces of the new bear market".

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, Russia's annexing game playing and of course the World's newest player Iraq. 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. Also, the margin debt has been very high and as of Monday, 4-7-2014, it stood at $466 billion. (Read More at NYSE Statistics Archive) (It has since gone down slightly, but remains high.)

It is its final 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 additional notes of negativity where investors are worried about issues directly related to the Fed's tapering, Putin's annexing and Iraq's ISIS. They are considering these factors 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 and Iraq Anxiety Pushes Oil to Three-Month High.

The markets are still susceptible to climbing on 'Bernankellen' vapor, use caution!

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 16782 up 6 or 0.04%.

The SP500 is at 1940 up 4 or 0.20%.

SPY is at 194.52 up 0.40 or 0.21%.

The $RUT is at 1166 up 3 or 0.25%.

NASDAQ is at 4321 up 11 or 0.25%.

NASDAQ 100 is at 3784 up 9 or 0.23%.

$VIX 'Fear Index' is at 12.33 up 0.15 or 1.23%. Bearish Movement

(Follow Real Time Market Averages at end of this article)

The longer trend is up, the past months trend is positive, the past 5 sessions have been net negative and the current bias is positive.

How Oil Really Gets Priced

WTI oil is trading between 107.01 (resistance) and 106.05 (support) today. The session bias is trending down and is currently trading up at 106.33.

Brent Crude is trading between 113.21 (resistance) and 112.23 (support) today. The session bias is trending down and is currently trading up at 112.62.

Maybe I'm Wrong - Justifying $2,000+ Gold by Jeffrey Dow Jones

Gold Rebounds, And It Just Might Continue by Tim Iacono

Gold fell from 1285.11 earlier to 1274.06 and is currently trading up at 1276.40. The current intra-session trend is negative.

Analysts forecast a corrosive year for copper prices

Dr. Copper is at 3.050 rising from 3.024 earlier.

The US dollar is trading between 80.81 and 80.58 and is currently trading down at 80.59, the bias is currently negative.

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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