Market Commentary: Large Caps Open Down, Small Caps Solidly In Green

July 11th, 2014
in Gary's blogging, market open

Written by

Opening Market Commentary For 07-11-2014

Premarkets were flat prior to the opening evidently backing off from yesterday's Portugal insolvency bank scare. Markets opened flat and green with the small caps up+0.30% on moderate green volume. By the 15 minute mark the NASDAQ dipped into the red following the large caps which were already off -0.25%.

By 10 am the markets were generally in the red, $NDX @ +0.12%, volume falling off and Friday 'session blues' starting to set in and the weekend is coming.


Follow up:

US stocks slip in early trading and are heading for their biggest weekly loss since April

NEW YORK (AP) - U.S. stocks are opening lower and are headed for their biggest weekly loss since April. The Dow Jones industrial average fell 40 points, or 0.2 percent, to 16,873 in the first few minutes of trading Friday.

The Standard & Poor's 500 index lost four points, or 0.2 percent, to 1,960. The Nasdaq composite fell four points, or 0.1 percent, to 4,391. Investors were assessing company earnings.

Fastenal, which makes industrial fasteners, fell 5 percent after reporting revenue that fell short of analysts' estimates.

The S&P 500 index is poised for its biggest weekly loss since April after closing out the previous week at a record high. It's down 1.2 percent so far this week.

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 11.79. I would advise caution in taking any position during this volatile period.

Barchart.com shows a 88 % buy. ( At 88% for the last 4 sessions - meter broken?) Investing.com members' sentiments are 58 % bearish and Investors Intelligence sets the breath at 68.0 % bullish with the status at Bear Correction. (Chart Here *)

StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 72.72. (Chart Here *)

StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 83.80. (Chart Here *)

* Closing Prices.

Why You Should Not Be Comfortable With The Level Of The Stock Markets

Summary

  • 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.

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.)

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 16874 down 40 or -0.24%.

The SP500 is at 1961 down 4 or -0.18%.

SPY is at 196.02 down 0.31 or -0.15%.

The $RUT is at 1158 down 4 or -0.31%.

NASDAQ is at 4399 up 3 or 0.07%.

NASDAQ 100 is at 3889 up 10 or 0.25%.

$VIX 'Fear Index' is at 12.52 down 0.08 or -0.64%. 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 down and trading sideways.

How Oil Really Gets Priced

WTI oil is trading between 102.91 (resistance) and 101.80 (support) today. The session bias is negative and is currently trading down at 101.88.

Brent Crude is trading between 108.74 (resistance) and 107.32 (support) today. The session bias is negative and is currently trading down at 107.45.

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

Gold fell from 1340.29 earlier to 1334.91 and is currently trading down at 1336.80. The current intra-session trend is negative.

Analysts forecast a corrosive year for copper prices

Dr. Copper is at 3.248 falling from 3.274 earlier.

The US dollar is trading between 80.27 and 80.06 and is currently trading up at 80.21, the bias is currently elevated and quiet.

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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