Written by Gary
Closing Market Commentary For 09-26-2014
Interesting session today as the SP500 opened below its 50 DMA and then closed above it (50 DMA@1976.78). The DOW opened above the same mark, also closing above it. A remarkable similar pattern between the Nasdaq and $NDX paved the way for the bulls to be in a party mode this weekend.
By 4 pm, the averages closed in the green on very low volume. Session volatility was 90% contributing by the HFT algo computers. In other words, the humans had little to do with this rise.
The last time the divergence between low volume and volatility, like today, was when the market had bottomed the session before (8-18-2014) and marched back up to make new highs.
But not so fast. The charts, if you can believe in them anymore, show a distinctive trend in the $VIX, just like the one this last August were the markets fell +3%. The difference this time is that what is seen as increased volatility may play a significant role in driving the markets even lower next week.
That is not all. The SP500 may have closed above its 50 DMA, it did NOT punch trough the resistance right above where it closed. Before this market can go anywhere, that resistance (@1987) HAS to be pierced and closed above that mark. Some analysts believe this bull market still has legs and we will see again another new historical high, but my thinking is it isn't going to be next week. There are way too many negative issues, 'Grey Swans', on the table that need to be resolved and a nice 6% to 10% correction will most likely be the answer.
Please read my weekend article tomorrow morning on how to predict recessions.
The medium term indicators are leaning towards the hold side at the close and the short-term market direction meter is bullish. We remain mostly, at best, neutral and conservatively holding. The important DMA's, volume and a host of other studies have not turned significantly and that is not enough for me to start shorting, but now I am getting very concerned. The SP500 MACD has turned down, but remains above zero at +1.85. I would advise caution in taking any position during this uncertain period although some technical indicators have starting to turn bearish.
Investing.com members' sentiments are 72 % Bearish and it seems to be a good sign for being bullish. The 'Sheeples' always seem to get it wrong.
StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 59.90. (Chart Here) Below support zone and apparently going further down. Next stop ~57 and then ~44, below that is where we see the markets crash.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 25.35. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009.
StockChart.com Overbought / Oversold Index ($NYMO) is at -77.86. (Chart Here) But anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold.
Chris Ciovacco says, "As long as the consumer discretionary ETF (NYSEARCA:XLY) holds above [66.88], all things being equal, it is a good sign for stocks and the U.S. economy." This chart clearly shows that dropping below 65.50 should be of a great concern to bullish investors.
This chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages.
Today it represents the lowest levels seen since the beginning of the October, 2011 rally. Eric Parnell says, ' If nothing else, given that relatively fewer stocks are trading above their 200-day moving average at a time when the market is just off of its all-time highs suggests that an increasingly narrowing group of stocks is driving the rally at this stage, which does not bode well for the future sustainability of the uptrend."
The DOW at 4:00 is at 17113 up 167 or 0.99%.
The SP500 is at 1983 up 17 or 0.86%.
SPY is at 198.08 up 1.56 or 0.79%.
The $RUT is at 1119 up 9 or 0.82%.
NASDAQ is at 4512 up 45 or 1.02%.
NASDAQ 100 is at 4054 up 46 or 1.15%.
$VIX 'Fear Index' is at 14.87 down 0.77 or -4.92%. Bullish Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is even, the past 5 sessions have been negative and the current bias is elevated and sideways.
WTI oil is trading between 93.84 (resistance) and 92.23 (support) today. The session bias is positive and is currently trading down at 93.39. (Chart Here)
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The general consensus is that gold prices will actually fall in the next twelve months (Sept to Aug. 2015). Goldman Sachs estimates that gold will fall to $1,050 an ounce, a drop of nearly 19%.
Gold fell from 1231.66 earlier to 1212.98 and is currently trading up at 1218.20. The current intra-session trend is negative, now trending up. (Chart Here)
Dr. Copper is at 3.038 falling from 3.052 earlier. (Chart Here)
The US dollar is trading between 85.80 and 85.23 and is currently trading down at 85.75, the bias is currently positive, trading sideways. (Chart Here) Resistance made in Aug., 2013 has been broken.
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