Written by Gary
Opening Market Commentary For 09-02-2014
Guessed incorrectly for today's opening as the premarkets were up +0.10% this morning and opened same. Within a few minutes the bears marched in and snatched the SP500's new high away (2006.12) and started to trend down. At the 15 minute mark the averages looked dismal as the volume was low, but heaver than normal.
By 10 am the bears were growling and the bull were cowering as the averages were sea-sawing back and forth Friday's closing numbers.
The DOW has been in the red since the opening and it is difficult to determine where we are going today. Our first guess yesterday was down and it remains to be seen is that actually happens. The US morning financial's are in the 'just-OK' to 'not-so-good' column and that is playing a large part in this morning sessions investors indecisions.
The first column is what was reported this morning. The second column is what was expected and the third is the last report.
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, but now I am very concerned. The SP500 MACD has turned flat, but remains above zero at 13.28. 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 58 % 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 10 Year Treasury Note Yield Index ($TNX) is at 23.90. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009.
StockChart.com Overbought / Oversold Index ($NYMO) is at 40.93. (Chart Here) (Need to type in $NYMO) It is now around the area where it turns and starts 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. Wednesday, 8-20-2014, $NYMO climbed to 58.24 is signaling a market 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) This chart clearly shows that dropping below 65.50 should be of a great concern to bullish investors. Today, 9-2-2014, XLY edged up to 69.17 and that is another notch in the gun signaling that we might have another reversal very soon - at least to cover the gap below at 67.85. Protect thyself!
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.
Investors are currently unhappy, unenthusiastic, skittish and ready to jump ship every time it nudges against a small financial iceberg. They remain long for now unable to afford to sell and live off cash savings that have negative real rates thanks to the Feds. They feel in their guts, correctly, that a real 'correction' is coming and can't do anything about it until it is too late. Greed rules the day and investors should be very cautious.
One thing to keep in mind is that stocks may not be setting up for a fearsome bear market. History shows that there are two types of corrections -- sharp, brutal downturns that clear the air fairly quickly and prolonged periods of backing-and-filling that gradually remedy built-up imbalances. Time will tell which one lies ahead.
Eric Parnell, in his timely article below points out the obvious and we may very well see the starting of it right now.
A primary worry among many stock investors today is that the long running bull market may soon come to an end.
At the heart of their concern is the worry that the subsequent decline into the next bear market could quickly become swift and severe.
History has shown that the transition from a bull market to a bear market is a process filled with rallies and correction that plays out over an extended period of time.
Bull markets die long slow deaths, and it is this prolonged dying process that causes so many investors to find themselves unwittingly trapped in the next bear market.
A primary worry among many stock investors today is that the long running bull market may soon come to an end. At the heart of their concern is exactly what lies beyond the bull market peak, as many worry that the subsequent decline into the next bear market could quickly become swift and severe.
But history has shown that the transition from a bull market to a bear market is often a gradual and drawn out process filled with rallies and correction that plays out over an extended period of time. In short, bull markets die long slow deaths, and it is this prolonged dying process that causes so many investors to find themselves unwittingly trapped in the next bear market long before they even realize 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.
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 game plan, Russia's annexing game playing and of course the World's newest player Iraq, ISIS and Israel. 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 DOW at 10:15 is at 17080 down 16 or -0.09%.
The SP500 is at 2004 up 0.55 or 0.03%.
SPY is at 200.75 up 0.04 or 0.01%.
The $RUT is at 1179 up 4 or 0.37%.
NASDAQ is at 4594 up 14.31 or 0.30%.
NASDAQ 100 is at 4092 up 9 or 0.23%.
$VIX 'Fear Index' is at 12.72 up 0.74 or 6.09%. Bearish 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 neutral and the current bias is flat and sideways.
WTI oil is trading between 95.87 (resistance) and 94.53 (support) today. The session bias is negative and is currently trading up at 94.64. (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 5H time scale.)
Brent Crude is trading between 102.86 (resistance) and 101.52 (support) today. The session bias is negative and is currently trading down at 101.75. (Chart Here)
Gold fell from 1288.10 earlier to 1266.07 and is currently trading down at 1266.92. The current intra-session trend is negative. (Chart Here)
Dr. Copper is at 3.166 rising from 3.139 earlier. (Chart Here)
The US dollar is trading between 83.05 and 82.78 and is currently trading up at 83.03, the bias is currently positive. (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