Written by Gary
Closing Market Commentary For 10-01-2014
Looks like we are going to have our 10% dip as the DOW and the SP500 closed below their respected 100 DMA's suggesting in the strongest terms the 'dip' isn't finished. And yes, when the large caps close below the 100 DMA, that is a big deal. It will be a bigger deal if this 'correction' goes on below 10%.
By 4 pm many investors were getting rid of their dogs and preparing for the bottom they believe is not far away. Technical's concur with their analysis, but red flags are waving.
There is a 60% chance tomorrow's session will be a positive one during the morning hours.
The good news is that any decline will offset a market crash happening until sometime down the road, but you can count on it happening anyway, maybe not this week.
We should not get too excited just yet as we have been here before, just not as far down the charts as before. Four times, just in 2014, the markets dipped and the BTFDers jumped in and the averages continued on their merry way. With that bit of information, may I point out that the bottom trend line (blue) is at 1960 for the SP500 and we are below that now by 15 points! Is this going to be a 10% dip where we can all make some tidy profits or as some indicators suggest this is the memo that things are going to get worse.
In short, it appears that traders have seen this movie before. They've seen this scenario play out over and over and over again in the last few years. And by now, pretty much everyone knows that the hero doesn't die in the end. And everyone also knows that the battle cry to making money in this market is to "just buy the freaking dip!"
Take a look at the chart below. From a technical perspective, that trend channel is a thing of beauty, is it not?
The problem is that this type of trading behavior can't last forever. At some point, perhaps soon, something will come along to scare traders out of the #BTFD mentality. Something will become a catalyst. Something will change the game.
The good news is that fewer companies have issued fewer profit warnings or is this too little to late?
For a third straight quarter, fewer companies in the S&P 500 have issued profit warnings.
More bad news. The Russell 2000 just broke crucial primary support from the 2009 lows to become the first of the major indices to do so, but the others are not far behind.
The medium term indicators are leaning towards the hold side at the close and the short-term market direction meter is strongly bearish. 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 below zero at -3.73. 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 69 % 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 ($BPNYA) is at 55.05. (Chart Here) Below support zone and apparently going further down. Next stop was ~57 and now it is ~44, below that is where we will most likely see the markets crash.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 24.03. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009.
StockChart.com Overbought / Oversold Index ($NYMO) is at -50.64. (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 $NYA200R 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." It also strongly suggests there has been a 'stealth bear market' underway in recent months.
The DOW at 4:00 is at 16805 down 238 or -1.40%.
The SP500 is at 1946 down 26 or -1.36%.
SPY is at 194.64 down 2.67 or -1.36%.
The $RUT is at 1085 down 16 or -1.48%.
NASDAQ is at 4422 down 71 or -1.59%.
NASDAQ 100 is at 3985 down 65 or -1.60%.
$VIX 'Fear Index' is at 16.72 up 0.41 or 2.51%. Neutral Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is net negative, the past 5 sessions have been negative and the current bias is negative.
WTI oil is trading between 92.94 (resistance) and 90.56 (support) today. The session bias negative and is currently trading up at 90.84. (Chart Here)
- and -
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 rose from 1205.28 earlier to 1219.87 and is currently trading up at 1215.10. The current intra-session trend is elevated and sideways. (Chart Here)
Dr. Copper is at 3.027 falling from 3.048 earlier. (Chart Here)
The US dollar is trading between 86.29 and 85.88 and is currently trading down at 86.00, the bias is currently negative and quiet. (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