Written by Gary
Closing Market Commentary For 10-08-2014
DOW closed above the 50 DMA and the SP500 and NASDAQ closed, again, below the 50 DMA and the trend remains down. Tomorrow and early next week will clarify this situation , hopefully, whether or not this market is going to rise or continuing to fall. Today's rise was nice, but didn't reverse the downtrend and the low volume didn't help.
By 4 pm the averages shot up nicely with the large caps up 1.7% and the small caps up 2%. Volume is low suggesting we may see a red session tomorrow to 'correct' today's exuberant rise without human participation.
In other words, most of today's rise was caused by the HFT algo computers. The markets are expected to factor in earnings along with Fed guidance in the coming weeks and volatility should become a factor.
Sectors slated to report the highest earnings growth rate for the quarter include telecom, materials, and health care.
Wednesday marks the unofficial start of the September quarter's earnings season with aluminum-maker Alcoa (AA) releasing its results after the closing bell.
Investors obviously like what the FOMC minutes had to say as the markets reacted favorably gaining over one percent. Alcoa Inc. AA, +1.74% late Wednesday said it earned $149 million, or 12 cents a share, in the third quarter, compared with $24 million, or 2 cents a share, a year ago.
Minutes from the Federal Reserve's September policy meeting show central bankers remain cautious in their approach toward raising interest rates and normalizing monetary policy. Committee members saw economic activity expanding at a moderate pace in the third quarter, "somewhat better than expected," while members expressed differing views on the extent of slack in the labor market. The policy-setting committee also said it plans to raise its target interest rate sometime next year, while debate continued over the timing and trajectory.
The medium term indicators are leaning towards the hold to lighten portfolio of non-performers at the close and the short-term market direction meter is fractionally bearish. We remain mostly, at best, slightly negative and conservatively bullish. The important DMA's, volume and a host of other studies have are now turning and that is still not enough for me to start shorting, but now I am getting very concerned the current downtrend will get more aggressive. The SP500 MACD has turned down, but remains below zero at -8.10. I would advise caution in taking any position during this uncertain period except to return your 'dogs' to the pound. Having some cash on hand now is not a bad strategy.
Investing.com members' sentiments are 51 % Bearish (falling from 70%) and it seems to be a good sign for being bearish. The 'Sheeples' always seem to get it wrong.
StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 50.63. (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 ($TNX) is at 23.30. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009.
StockChart.com Overbought / Oversold Index ($NYMO) is at -44.60. (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 (and staying there) should be of a great concern to bullish investors.
This $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages.
Today it represents the lowest levels seen since the beginning of the October, 2011 rally. Eric Parnell says, ' If nothing else, given that relatively fewer stocks are trading above their 200-day moving average at a time when the market is just off of its all-time highs suggests that an increasingly narrowing group of stocks is driving the rally at this stage, which does not bode well for the future sustainability of the uptrend." It also strongly suggests there has been a 'stealth bear market' underway in recent months.
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) is at 40.30 %. (Chart Here) Unless this downward trend reverses itself soon, we are going to see further downside. The next support is ~37.00 and ~25.00 below that.
The longer 6 month outlook is now 30-70 sell (probably should be 20-80 sell) and will remain bearish until we can see what the effects are in the Fed's game plan.
The DOW at 4:00 is at 16994 up 275 or 1.64%.
The SP500 is at 1969 up 34 or 1.75%.
SPY is at 196.76 up 3.38 or 1.75%.
The $RUT is at 1097 up 21 or 1.93%.
NASDAQ is at 4469 up 83 or 1.90%.
NASDAQ 100 is at 4041 up 83 or 2.08%.
$VIX 'Fear Index' is at 15.03 down 2.17 or -12.56%. bullish 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 positive.
WTI oil is trading between 88.63 (resistance) and 86.93 (support) today. The session bias is sideways and is currently trading up at 87.66. (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 1221.03 earlier to 1223.73 and is currently trading up at 1223.30. The current intra-session trend is positive and volatile. (Chart Here)
Dr. Copper is at 3.032 rising from 2.997 earlier. (Chart Here)
The US dollar is trading between 86.02 and 85.28 and is currently trading up at 85.36, the bias is currently negative and VERY volatile. (Chart Here) Resistance made in Aug., 2013 (85.00) 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