Written by Gary
Midday Market Commentary For 10-09-2014
Morning opening doldrums became worse as markets tumbled further taking the DOW down over 200 points again while the %RUT leads the way down. I mentioned yesterday that I expected a down day today, but NOT like this.
By noon the markets had melted down significantly from the opening, but am I worried?
No, not really, because this is the time in corrections where the lucky BTFDers jump in, wait and then reap nice profits as the markets move back up the bullish ladder. We have seen this very scenario 10 times in the past 5 years and why should this time be any different? However, what we know for certain is the upward trend still holds, weakness is to be bought and the Fed is behind the market.
This is the time where the markets might actually be in an up trend, Yes the markets have been a obvious downtrend, but looking at if from an 'already at the bottom', the trend is actually moving up. We have had a double bottom where the averages tried to penetrate a support and failed. Another session or two will probably sort this out.
One thing to think about is what if the markets continued to fall, say 50%? Have you prepared your portfolio for a BIG correction and are prepared to jump ship?
On Tuesday, the Dow fell 272 points. No big deal, of course - we rebounded the most in 3 years yesterday. But what if it continued? Just six years ago it fell 51%. It could easily do so again - back down to, say, 8,000. There would be nothing unusual about it. 50% corrections are normal.
You know what would happen, don't you? Ever since the "Black Monday" stock market crash in 1987 it has been standard procedure for the Fed to react quickly.
But what if Yellen & Co. got out the party favors... set up the booze on the counter... laid out some dishes with pretzels and olives... and nobody came?
What if the stock market stayed down for 30 years, as it has in Japan?
Our medium term indicators are leaning towards the hold to lighten portfolio of non-performers at the midday and the short-term market direction meter is very 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 -9.40. 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 ($BPNYA) is at 50.45. (Chart Here) Below support zone and apparently going further down. Next stop was ~57 and now it is ~44, below that is where we will most likely see the markets crash.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 23.28. (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 65.50 (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 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 12:15 is at 16745 down 250 or -1.48%.
The SP500 is at 1941 down 28 or -1.42%.
SPY is at 194.06 down 3 or -1.30%.
The $RUT is at 1074 down 23 or -2.108%.
NASDAQ is at 4411 down 57 or -1.27%.
NASDAQ 100 is at 4001 down 40 or -0.99%.
$VIX 'Fear Index' is at 17.03 up 1.92 or 12.71%. 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 85.99 (support) today. The session bias is negative and is currently trading down at 86.03. (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 1219.45 earlier to 1233.76 and is currently trading up at 1223.90. The current intra-session trend is neutral, but trending down. (Chart Here)
Dr. Copper is at 3.038 falling from 3.058 earlier. (Chart Here)
The US dollar is trading between 85.74 and 85.01 (remaining above support) and is currently trading up at 85.69, 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