Market Commentary: Markets Open Down, MS Lays-off 18K, Spooks Investors

July 17th, 2014
in Gary's blogging, market open

Written by

Opening Market Commentary For 07-17-2014

Premarkets were down almost 1 percent after Microsoft reported that 18,000 folks were going to be laid off. From that low point the futures recovered, paused at the 8:30 not-so-good financial's and rose fractionally more. Markets opened down -0.25% and started to melt up from there to close to closing numbers from yesterday.

By 10 am the averages were melting down after the very positive Philadelphia Fed came in at 23.9 expecting 16 and up from 17.8 last month. Investors are sitting on their hands this morning.


Follow up:

Volume was light at the opening and is falling off to anemic levels as investors are obviously worried about jumping on the bull train, plus the continuing scare the markets are going to correct downward at any moment.

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 11.53. I would advise caution in taking any position during this uncertain period.

Barchart.com shows a 88 % sell. (Been at 88% for the last 6 sessions, I think their meter is broken) Investing.com members' sentiments are 56 % bearish and Investors Intelligence sets the breath at 67.4 % bullish with the status at Bear Correction. (Chart Here )

StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 72.25. (Chart Here )

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

StockChart.com Consumer Discretionary ETF (XLY) is at 67.39. (Chart Here )

Do You Trust The Fed?

By Bret Jensen

My own opinion is that the Federal Reserve should have taken off the "training wheels" some time ago. The economy would have taken a short-term hit, but I think we would be much further along in our recovery by taking our lumps earlier in the cycle before the Federal Reserve expanded their balance sheet to such a massive level.

So, going forward; Do you trust the Fed? There are myriad reasons I do not and I believe rough times are ahead in the market.

Chris Ciovacco says, "As long as the consumer discretionary ETF (NYSEARCA:XLY) holds above 67.06, all things being equal, it is a good sign for stocks and the U.S. economy."

Investor Sentiment: Actions Speak Louder Than Words

Summary:

  • We would expect investors to be flocking toward stock-based investments if they were highly confident.

  • What do the facts say?

  • We can also gain some potential "bubble" insight by taking the pulse of investors in other developed, industrialized nations.

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. 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".

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 10:15 is at 17132 down 7 or -0.04%.

The SP500 is at 1979 down 3 or -0.13%.

SPY is at 197.79 down 0.14 or -0.08%.

The $RUT is at 1147 down 4 or -0.37%.

NASDAQ is at 4415 down 11 or -0.25%.

NASDAQ 100 is at 3923 down 9 or -0.23%.

$VIX 'Fear Index' is at 10.99 down 0.01 or -0.0.09%. 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 positive and the current bias is down and trending up.

How Oil Really Gets Priced

Oil stays near $101 a barrel; US gasoline prices slip to 3-month low

WTI oil is trading between 103.06 (resistance) and 101.27 (support) today. The session bias is elevated, trending down and is currently trading down at 102.45.

Brent Crude is trading between 108.22 (resistance) and 106.81 (support) today. The session bias is neutral and trending down and is currently trading down at 107.48.

Gold prices sink as worries over Europe that drove prices up last week dissipate

Gold fell from 1308.86 earlier to 1299.47 and is currently trading up at 1303.90. The current intra-session trend is sideways and very volatile.

Dr. Copper is at 3.221 rising from 3.202 earlier. Yesterday copper fell from 3.253 to the 3.202 this morning.

The US dollar is trading between 80.62 and 80.53 and is currently trading down at 80.61, the bias is currently sideways 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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