Written by Gary
Opening Market Commentary For 07-09-2014
Premarkets were up +0.30% with higher than usual volume ticks. The markets opened up validating the down two-day rule of past sessions by melting to +0.35% before pausing at the 15 minute mark. Opening volume was low to moderate but not enough to keep opening high water levels. By 10 am the markets started to slide downward to mixed and flat.
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 down, but remains above zero at 13.73. I would advise caution in taking any position during this volatile period.
* Closing Prices.
The Dow Jones has set a new record above 17,000.
The NFP came out with a stronger than expected number of 288,000 new jobs for June.
Wage growth remains low, well below the level the Fed would like to see.
The U.S. economic recovery is not on sure footing yet. There are foundation issues, especially in the housing market and with wages. The Fed should take into account these problems before raising rates. The Fed is in the middle of tapering its massive bond buying program, hoping to end it by end of October 2014. They have continued to keep short term rates near zero, amid speculation they will raise them soon. The Fed is correct in keeping them as is. It is still too early to raise rates. While 200K new jobs a month is a good thing, a print of 300K would point to a stronger economic recovery.
There are reasons to be concerned. While there is a feeling of euphoria over the Dow Jones hitting 17,000 and closing above it, do not expect it to stay at this level. There is no real economic growth supporting it.
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".
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.
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.
Charts and other technical tea reading exercises are, for the most part, not worth the effort to discern directions now that the Fed has refilled the sand box with gravel, rocks and old beer cans. That is just my view, but they have completely thrown a monkey wrench into the works and no one knows anything anymore with certainty.
Also, the margin debt has been very high and as of Monday, 2-7-2014, it stood at $466 billion. (Read More at Securities Market Credit) (It has since gone down slightly, but remains higher than previous years. (See current chart here.)
The markets are still susceptible to climbing on 'Bernankellen' vapor, use caution!
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The DOW at 10:15 is at 16923 up 17 or 0.10%.
The SP500 is at 1966 up 2 or 0.10%.
SPY is at 196.42 up 0.17 or 0.09%.
The $RUT is at 1171 down 2 or -0.14%.
NASDAQ is at 3391 down 0.33 or -0.01%.
NASDAQ 100 is at 3866 up 1 or 0.04%.
$VIX 'Fear Index' is at 12.02 up 0.04 or 0.33%. Neutral 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 elevated, but trending down.
WTI oil is trading between 103.58 (resistance) and 102.52 (support) today. The session bias is negative and volatile and is currently trading down at 102.59.
Brent Crude is trading between 109.02 (resistance) and 108.28 (support) today. The session bias is negative and volatile and is currently trading down at 108.28.
Maybe I'm Wrong - Justifying $2,000+ Gold by Jeffrey Dow Jones
Gold rose from 1318.82 earlier to 1328.35, reversed direction and is currently trading down at 1323.80. The current intra-session trend is net sideways.
Dr. Copper is at 3.255 falling from 3.274 earlier.
The US dollar is trading between 80.27 and 80.14 and is currently trading down at 80.18, the bias is currently negative and volatile. 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
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Written by Gary