Market Commentary: Markets Open Lower, Perhaps Consolidating Before Moving Higher

July 7th, 2014
in Gary's blogging, market open

Written by

Opening Market Commentary For 07-07-2014

Premarkets were down -0.30% and opened the same way. The SP500 was down -0.35% by the 15 minute mark on moderate volume. The $VIX jumped from 10.27 to 11.25 during the same time period as market weakness prevails.

By 10 am the markets remained depressed and trading sideways on low volume heading towards anemic status. This could be just a consolidating phase for an oversold market before moving upwards again.


Follow up:

The medium 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 flat, but remains above zero at 16.31. I would advise caution in taking any position during this volatile period.

Barchart.com shows a 88 % buy. Investing.com members' sentiments are 61 % bearish and Investors Intelligence sets the breath at 69.6 % bullish with the status at Bear Correction. (Chart Here)

StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 74.64. (Chart Here)

StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 84.40. (Chart Here)

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 daily 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. There hasn't been a 10% correction in several years and some investors are becoming increasingly concerned an imminent correction is on the way.

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".

It is the 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 factors of the Argentine economy, South African Rand and Japan. And of course, China's defaulting businesses are dropping like flies. Now the Second Chinese Bond Company Defaults, First High Yield Bond Issuer and Another Chinese High Yield Bond Issuer Declares Bankruptcy. Iraq Anxiety Pushes Oil to Three-Month High is just another notch in the bears gun.

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 17005 down 64 or -0.37%.

The SP500 is at 1979 down 7 or -0.33%.

SPY is at 197.64 down 0.55 or -0.28%.

The $RUT is at 1198 down 10 or -0.86%.

NASDAQ is at 4470 down 15 or -0.34%.

NASDAQ 100 is at 3917 down 5 or -0.14%.

$VIX 'Fear Index' is at 11.28 up 0.96 or 9.30%. 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 positive and the current bias is down and trading sideways.

How Oil Really Gets Priced

WTI oil is trading between 104.04 (resistance) and 103.36 (support) today. The session bias is negative and is currently trading up at 103.47.

Brent Crude is trading between 110.92 (resistance) and 110.44 (support) today. The session bias is negative and is currently trading up at 110.50.

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

Gold fell from 1317.87 earlier to 1313.20 and is currently trading down at 1313.70. The current intra-session trend is down and sideways. (There is a gap at 1320.46 and I expect gold to climb back up shortly to close this gap.)

Analysts forecast a corrosive year for copper prices

Dr. Copper is at 3.260 rising from 3.237 earlier.

The US dollar is trading between 80.40 and 80.27 and is currently trading up at 80.31, the bias is currently down and sideways. There is a gap that will be filled in sooner than later that requires the Dollar to retrace its numbers back down to 80.10.

Real Time Market Numbers

 

 

Leading Stock Quotes powered by Investing.com

 

 

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

gary@econintersect.com

 

Written by Gary

 









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