Market Commentary: Market Opening Turns Into Bull Trap After Averages Melt Down

October 13th, 2014
in Gary's blogging, market open

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Opening Market Commentary For 10-13-2014

Premarkets were up 0.1% and were quiet up to the opening where a bull trap formed almost immediately pushing the averages up 0.4% indicating an up day, which would not have been unexpected. But all good things must come to pass and the averages slipped down fractionally into the red.

By 10 am the averages were starting the all familiar sea-sawing around the unchanged line becoming mixed, trending down on sometimes moderate volume.

Follow up:

The SP500 is testing a support at 1897, but rebounded as did the DOW at ~16510. The NASDAQ did the same thing at 4123 and it remains to be seen if the markets go below these lines in the sand and REMAIN there.

The good news is that we may be forming a bottom from the looks of it, but a lot of market gyrations need to be played out first. The up trend has been broken, however it has happened once before in October, 2011 and recovered. We are VERY early in this 'correction' and not much can be drawn from the previous weeks sessions as to ultimate direction, BUT this is NOT the BIG ONE.

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 -17.21. 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 39 % Bearish (falling from 70%) and it seems to be a good sign for being bearish. The 'Sheeples' always seem to get it wrong.

Investors Intelligence sets the breath at 43.3 % bullish with the status at Bear Confirmed. (Chart Here ) NYSE Bullish Percent Index ($BPNYA) is at 45.22. (Chart Here) Below support zone and apparently going further down. Next stop was ~57 and now it is ~44, below that is where we will most likely see the markets crash. S&P 500 Bullish Percent Index ($BPSPX) is at 52.60. (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 ($TNX) is at 22.86. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009. Overbought / Oversold Index ($NYMO) is at -61.58. (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 64.10. (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 33.64 %. (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 10:30 is at 16493 down 52 or -0.32%.

The SP500 is at 1895 down 11 or -0.58%.

SPY is at 189.36 down 1 or -0.60%.

The $RUT is at 1050 down 3 or -0.32%.

NASDAQ is at 4236 down 39 or -0.92%.

NASDAQ 100 is at 3834 down 37 or -0.95%.

How the Popular 'VIX' Gauge Works

$VIX 'Fear Index' is at 22.23 up 0.99 or 4.66%. Bearish Movement

(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.

How Oil Really Gets Priced

WTI oil is trading between 85.25 (resistance) and 84.07 (support) today. The session bias is neutral and is currently trading down at 84.83. (Chart Here)

Brent Crude is trading between 89.73 (resistance) and 88.41 (support) today. The session bias is neutral, trending down and is currently trading down at 88.96. (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 fell from 1237.96 earlier to 1225.32 and is currently trading down at 1229.90. The current intra-session trend is neutral and volatile. (Chart Here)

Currency Corruption Weighs on Copper

Dr. Copper is at 3.022 falling from 3.047 earlier. (Chart Here)

The US dollar is trading between 58.82 and 85.54 and is currently trading down at 85.57, the bias is currently neutral. (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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