Written by Gary
Closing Market Commentary For 10-09-2014
Watched the large cap charts with active interest as they slowly melted down past the 100 DMA, then past the 145 DMA and reaching the previous support that held twice before. Going on beyond that support was a certain bearish signal of serious things to come and watching them retreat was a sigh of relief. But then they started down again.
By 4 pm the averages put in one of the worst losses seen in months, maybe years as I didn't check carefully. The DOW was off 335 points followed by the SP500 off 2.07%.
Twice before in 6 sessions the large caps have closed BELOW the 100 DMA and recovered nicely. Only this time the DOW and the SP500 closed below the 145 DMA and did it on low volume. If it had been on high volume that would have signaled a bottom and now I do not believe we have seen the end of this 'correction' just yet. That action had me concerned enough that I went long on a couple of reverse ETF's just before the close just in case we see more downside.
Theoretically speaking, the markets should show some green tomorrow to relieve the oversold conditions of today, but the $NYMO is just about at the unchanged line and could easily dip back down with room to slide further (which it will, but I mean waaaay down), Meaning the averages could continue their losses tomorrow, hence the reverse ETF's as a hedge.
Read at dailyfx.com, "If the HFTs want to atone for their sins, [then they] can all hit the offer and finally trigger the healthy correction we need to find value."
Our medium term indicators are leaning towards the hold to lighten portfolio of non-performers at the close and the short-term market direction meter is very, very bearish. However, we remain mostly, at best, slightly negative and conservatively bullish. The important DMA's, volume and a host of other studies have are now turning and that is still not enough for me to seriously start shorting, but now I am getting very concerned the current downtrend will get more aggressive. The SP500 MACD has turned down, but remains below zero at -10.56. I would advise caution in taking any position during this uncertain period except to return your 'dogs' to the pound. Having some cash on hand now is not a bad strategy.
Investing.com members' sentiments are 48 % Bearish (falling from 70%) and it seems to be a good sign for being bearish. The 'Sheeples' always seem to get it wrong.
StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 49.49. (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 ($TNX) is at 23.27. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009.
StockChart.com Overbought / Oversold Index ($NYMO) is at -6.31. (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 65.00 (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 44.92 %. (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 DOW at 4:00 is at 16659 down 335 or -1.97%.
The SP500 is at 1928 down 41 or -2.07%.
SPY is at 192.90 down 4 or -1.98%.
The $RUT is at 1068 down 29 or -2.66%.
NASDAQ is at 4378 down 90 or -2.02%.
NASDAQ 100 is at 3969 down 72 or -1.78%.
$VIX 'Fear Index' is at 18.76 up 3.65 or 24.16%. Bearish 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 net negative and the current bias is negative.
WTI oil is trading between 87.93 (resistance) and 84.89 (support) today. The session bias is negative and is currently trading down at 84.89. (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 rose from 1219.45 earlier to 1233.76 and is currently trading up at 1224.60. The current intra-session trend is neutral and trending sideways. (Chart Here)
Dr. Copper is at 3.033 falling from 3.058 earlier. (Chart Here)
The US dollar is trading between 85.77 and 85.01 (remaining above support) and is currently trading up at 85.66, the bias is currently positive. (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