Market Commentary: DOW Closes Triple Digits Down, Small Caps Off Over 2 Percent

October 10th, 2014
in Gary's blogging, market close

Written by

Closing Market Commentary For 10-10-2014

Mixed signals and depending on which way you look at the tea-leaves today could be the end of the decline or the beginning of one deeper and more aggressive.

By 4 pm investors were not all that sure this was going to be the bottom of the 'expected' correction everyone has been waiting for over 5 years. Small caps were down over 2% and the DOW off triple digits.

Follow up:

The DOW and NASDAQ closed BELOW their 200 DMA and the SP500 came within 1 point of its 200 DMA, closing well below the 145 DMA on 'moderate' volume. The $VIX also climbed to its highest mark since June, 2012 and now scaring the bulls and running for cover.

Almost called for BTFD this afternoon, but we could see some more 'correction' before this is over. Regardless, if you did buy the dip, it will pay off before this year is out and if you have anymore cash left, better deals are around the corner. THIS IS NOT THE BIG CRASH!!!

I can 'almost' guarantee that Monday or Tuesday of next week will be a nice green day - before heading down a bit more. There has to be a relief of today's oversold conditions.

There is one more thing in that there was heavy selling at the close and 'sometimes' that does signal a bottom, but beware of a bull trap next week as I believe we have not seen the bottom. Close, but a second try at today's numbers will confirm a bottom.

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 has moved from very, very bearish to just 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 -14.16. 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. members' sentiments are 47 % Bearish (falling from 70%) and it seems to be a good sign for being bearish. The 'Sheeples' always seem to get it wrong - just saying!.

Investors Intelligence sets the breath at 46.0 % bullish with the status at Bear Confirmed. (Chart Here ) NYSE Bullish Percent Index ($BPNYA) is at 46.94. (Chart Here) Below support zone and apparently going further down. Next stop was ~57 and now it is ~44, below that is where we will most likely see the markets crash. S&P 500 Bullish Percent Index ($BPSPX) is at 55.80. (Chart Here) In support zone and falling - doesn't look good. ~62, ~57, ~45 at which the markets are in a full-blown correction. 10 Year Treasury Note Yield Index ($TNX) is at 23.07. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009. Overbought / Oversold Index ($NYMO) is at -41.30. (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. Consumer Discretionary ETF (XLY) is at 64.51. (Chart Here)

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. NYSE % of stocks above 200 DMA Index ($NYA200R) is at 38.22 %. (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 16544 down 115 or -0.69%.

The SP500 is at 1906 down 22 or -1.15%.

SPY is at 190.18 down 2.20 or -1.14%.

The $RUT is at 1053 down 15 or -1.37%.

NASDAQ is at 4276 down 102 or -2.33%.

NASDAQ 100 is at 3871 down 98 or -2.48%.

How the Popular 'VIX' Gauge Works

$VIX 'Fear Index' is at 21.24 up 2.48 or 13.22%. Bearish Movement (Highest it has been since June, 2012 and way above its 200 DMA)

(Follow Real Time Market Averages at end of this article)

The longer trend is up, the past months trend is negative, the past 5 sessions have been negative and the current bias is negative, trending down.

How Oil Really Gets Priced

WTI oil is trading between 86.25 (resistance) and 83.60 (support) today. The session bias is positive, but trending down and is currently trading down at 85.33. (Chart Here)

Brent Crude is trading between 90.43 (resistance) and 88.09 (support) today. The session bias is positive, but trending down and is currently trading down at 89.67. (Chart Here)

Why Gold Will Rise When The Dollar Falls

- 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 1217.70 earlier to 1225.81, then fell and is currently trading down at 1223.20. The current intra-session trend is neutral and volatile. (Chart Here)

Currency Corruption Weighs on Copper

Dr. Copper is at 3.037 rising from 2.989 earlier. (Chart Here)

The US dollar is trading between 86.09 and 85.52 and is currently trading down at 86.01, the bias is currently positive and 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

If you would like to get advanced buy/sell tweets, sign-up in the column to the right of this post by clicking on the 'Follow' button. Write me with suggestions and I promise not to bite.

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Written by Gary


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