Written by Gary
Closing Market Commentary For 08-20-2014
The Fed's minutes that were released this afternoon produced some negative and volatile moments for a short time and sent the averages mostly down. The SP500 regained composure and climbed to its historical closing high (1988) three times before fractionally losing some ground on light volume.
By 4 pm the SP500 lost a bit of ground a closed BELOW its historic close on low red volume. The question is where are the averages going to go next?
Our short term market direction meter shows a positive trend, but reduced fractionally from this morning reading. The Fed's minutes this afternoon was met with a lot of skepticism with some FOMC participants uncomfortable with forward guidance pushing the averages down temporally. Proponents of additional Fed meddling were obviously disappointed.
Members of the Federal Reserve's policy-setting board honed their strategy for eventually hiking interest rates and reducing the central bank's massive balance sheet at the late-July meeting, minutes show.
Without providing specific timing, officials said they would probably target a federal funds rate in the range of 0.25 percentage point "at the time of liftoff and for some time thereafter." The officials also agreed the Fed's balance sheet "should be reduced gradually and predictably."
Many members say a range of labor market indicators had improved more in recent months than they had earlier anticipated, according to the minutes of the late July FOMC meeting. "The characterization of labor market underutilization might have to change before long, particularly if progress in the labor market continued to be faster than anticipated."
The committee voted 9-1 to maintain the taper and reiterate its commitment to keep rates lower than normal for longer. Dissenting was Philadelphia Fed boss Charles Plosser, who argued the others are underplaying the improvement in the labor market and the march of inflation towards the 2% target.
The Wall Street Journal's Jon Hilsenrath unleashed an instantaneous reaction to today's FOMC minutes and the message is clear - markets are much less uncertain than the Fed about the timing (sooner rather than later) of the first rate-hike. The minutes of the meeting, Hilsy notes, provide fresh evidence of an intensifying debate inside the central bank about when to respond to a surprisingly swift descent in the unemployment rate and rising consumer prices.
The medium term indicators are leaning towards the hold side at the close. 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 up, but remains above zero at +3.18. I would advise caution in taking any position during this uncertain period although some technical indicators have starting to turn bearish.
Investing.com members' sentiments are 48 % bearish and when it switches over to bullish, as it did on Tuesday 8-5, watch for the market bottom to fall out some are saying as the markets usually go against 'Sheeple' buying high and selling low.
StockChart.com Overbought / Oversold Index ($NYMO) is at 58.24. (Chart Here) (Need to type in $NYMO) It is now around the area where it turns and start to descend, but any thing below -30 / -40 is a concern. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. Today, 8-20-2014, $NYMO 58.24 also might mean a reversal in our near future.
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." (Actually the support looks to be in the 66.88 range) We have entered an area that concerns me should the XLY drops any further. This chart clearly shows that dropping below 65.50 should be of a great concern to bullish investors. Today, 8-20-2014, XLY went up to 68.68 and that is another notch in the gun signaling that we might have another reversal very soon - at least to cover the gap. Protect thyself!
The DOW at 4:00 is at 16979 up 60 or 0.35%.
The SP500 is at 1987 up 5 or 0.25%.
SPY is at 198.89 up 0.50 or 0.25%.
The $RUT is at 1158 down 5 or -0.43%.
NASDAQ is at 4526 down 1 or -0.02%.
NASDAQ 100 is at 4041 up 0.57 or 0.01%.
$VIX 'Fear Index' is at 11.78 down 0.43 or -3.52%. Bullish Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is net positive, the past 5 sessions have been positive and the current bias is elevated and sideways.
WTI oil is trading between 93.54 (resistance) and 92.73 (support) today. The session bias is positive and is currently trading up at 93.41. (Chart Here) There is a very large gap at 97.06 and these types of gaps are usually filled sooner rather than later. It would not surprise me to see the oils move back up in the very near future. (Chart Here) (Look at the 60 minute time scale.)
Brent Crude is trading between 102.36 (resistance) and 101.45 (support) today. The session bias is positive and is currently trading up at 102.27. (Chart Here)
Gold is trading from 1298.87 to 1288.96 and is currently trading up at 1292.20. The current intra-session trend is depressed and very volatile. (Chart Here)
Dr. Copper is at 3.169 rising from 3.083 earlier. (Chart Here)
The US dollar is trading between 82.32 and 81.92 and is currently trading down at 82.29, the bias is positive and quiet. (Chart Here)
The markets are still susceptible to climbing on 'Bernankellen' vapor, use caution!
"Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation inequities, they should try to be fearful when others are greedy and greedy only when others are fearful." - Warren Buffett
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Written by Gary