Market Commentary: Markets Gap Up, DOW Sets New High, Volume Falling Off

July 14th, 2014
in Gary's blogging, market open

Written by

Opening Market Commentary For 07-14-2014

Premarkets were up a half a point with some measurable volume extending the hopes of many investors this bull run was going to continue. The markets opened with the SP500 climbing 9 points and the DOW up 91 points on low to moderate volume.

Markets gaped up at the opening and then leveled off for sideways trading. The DOW managed to set a new high of 17085. the $VIX dropped to 11.40 and the volume was falling off fast by 10 am.


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 down, but remains above zero at 12.28. I would advise caution in taking any position during this volatile period.

Barchart.com shows a 88 % buy. (Been at 88% for the last 5 sessions, I think their meter is broken) Investing.com members' sentiments are 61 % bearish and Investors Intelligence sets the breath at 67.7 % bullish with the status at Bear Correction. (Chart Here *)

StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 72.61. (Chart Here *)

StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 84.00. (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.

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 as the DOW did this morning. 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.

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 10:30 is at 17072 up 127 or 0.75%.

The SP500 is at 1978 up 10 or 0.51%.

SPY is at 197.63 up 1 or 0.52%.

The $RUT is at 1164 up 4 or 0.37%.

NASDAQ is at 4437 up 21 or 0.48%.

NASDAQ 100 is at 3925 up 20 or 0.52%.

$VIX 'Fear Index' is at 11.55 down 0.53 or -4.39%. Bullish 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 netural and the current bias is elevated and sideways.

How Oil Really Gets Priced

WTI oil is trading between 100.91 (resistance) and 100.26 (support) today. The session bias is negative, volatile and is currently trading down at 100.53.

Brent Crude is trading between 108.10 (resistance) and 106.30 (support) today. The session bias is elevated and is currently trading down at 107.63. (Note: there is a 32 cent gap at 106.62 that needs to be filled. Occurred at 11:30 am on 7-13-2014)

Gold fell from 1340.57 earlier to 1304.11 and is currently trading down at 1307.80. The current intra-session trend is negative.

Dr. Copper is at 3.251 falling from 3.294 earlier.

The US dollar is trading between 80.28 and 80.11 and is currently trading down at 80.22, the bias is currently neutral 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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