Written by Gary
Opening Market Commentary For 10-09-2014
Premarkets were down -0.2% and remained the same after a 'good' initial US jobs claims this morning. Markets opened at the same level on low volume underlying investors cautious approach to jump in or jump ship.
By 10 am the markets were sliding, volume was holding at low and the large caps had crept below the 100 DMA. Having a down day following a explosive rally is to be expected. What happens next is the big question as we sit at the cross-road yet again.
The volatile swings of the past several session have investors worried about market direction and today could be a pivot point - maybe. Savvy investors know the trend is down and are aware major averages, such as the SP500 and NASDAQ, are below their 50 DMA's and are currently testing the 100 DMA. All of which is very bearish, but have we seen the bottom of this correction as some pundits claim?
It is possible this correction has run its course as current indicators show the bull markets still have steam left in the boilers. I say 'might' as most indicators are NOT leading statistics and therefore require confirmation to be valid and then it is too late. So many questions and so few concrete answers.
Our medium term indicators are leaning towards the hold to lighten portfolio of non-performers at the opening and the short-term market direction meter is 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 -8.11. 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 ($BPNYA) is at 50.69. (Chart Here) Below support zone and apparently going further down. Next stop was ~57 and now it is ~44, below that is where we will most likely see the markets crash.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 23.11. (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.
Eric Parnell, in his timely article below points out the obvious and we may very well see the starting of it right now.
A primary worry among many stock investors today is that the long running bull market may soon come to an end.
At the heart of their concern is the worry that the subsequent decline into the next bear market could quickly become swift and severe.
History has shown that the transition from a bull market to a bear market is a process filled with rallies and correction that plays out over an extended period of time.
Bull markets die long slow deaths, and it is this prolonged dying process that causes so many investors to find themselves unwittingly trapped in the next bear market.
A primary worry among many stock investors today is that the long running bull market may soon come to an end. At the heart of their concern is exactly what lies beyond the bull market peak, as many worry that the subsequent decline into the next bear market could quickly become swift and severe.
But history has shown that the transition from a bull market to a bear market is often a gradual and drawn out process filled with rallies and correction that plays out over an extended period of time. In short, bull markets die long slow deaths, and it is this prolonged dying process that causes so many investors to find themselves unwittingly trapped in the next bear market long before they even realize it.
It is still possible that Mr. Market is not through playing with the averages and even newer historical highs are a distinct possibility. Historically, accordingly to Eric Parnell, "major bull markets have almost never reached their final peak in a sideways grinding pattern. Instead, they have almost always peaked with flourish including one final crescendo toward a new all-time high before finally rolling over and succumbing to the forces of the new bear market".
The DOW at 10:00 is at 16912 down 81 or -0.47%.
The SP500 is at 1958 down 11 or -0.54%.
SPY is at 195.62 down 1 or -0.54%.
The $RUT is at 1084 down 13 or -1.18%.
NASDAQ is at 4437 down 31 or -0.69%.
NASDAQ 100 is at 4023 down 18 or -0.44%.
$VIX 'Fear Index' is at 15.93 up 0.83 or 5.49%. 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 86.50 (support) today. The session bias is negative and is currently trading down at 86.61. (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 1227.10. The current intra-session trend is neutral. (Chart Here)
Dr. Copper is at 3.041 falling from 3.048 earlier. (Chart Here)
The US dollar is trading between 85.48 and 85.01 (remaining above support) and is currently trading down at 85.37, 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