Written by Gary
Opening Market Commentary For 10-14-2014
The premarkets were up +0.3% and moved up to +0.4% after Wells Fargo, Johnson and Johnson, JB Hunt and Citigroup revenue expectations were positive. The markets opened up with the large caps up 0.6% and the small caps up 0.8% sea-sawing on relatively moderate to heavy volume meaning the bulls and bears were in a tug-a-war and going nowhere.
By 10 am the averages were beginning to show weakness as they trended down fractionally, but that could just be part of the sea-sawing action and not a ultimate direction.
The important stats from yesterday have not changed. The SP500, DOW and the NASDAQ are still below their 200 DMA's, plus all three are in and testing important support levels. Today's session, in itself, will not be a conformation of direction, but more of a rest period before moving on. It would be unwise to read anything into these negative stats just yet. This 'correction' has been expected and it may mostly be overreaction. It could end today or go on down for several more sessions. I do believe that buying this dip will be a good decision on the part of investors, mostly traders. The really 'Big Dip' is still off in the future.
Our medium term indicators are leaning towards the sell to lighten portfolio of non-performers at the opening and the short-term market direction meter is fractionally bullish. 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 -22.57. I would advise caution in taking any position during this uncertain period and I hope you have returned your 'dogs' to the pound. Having some cash on hand now is not a bad strategy.
Investing.com 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.
StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 43.19. (Chart Here) Below support zone and apparently going further down. Next stop was ~57 and now it is ~44, below that is where we will most likely see the markets crash. We are there and need a reversal pronto.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 22.17. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009.
StockChart.com Overbought / Oversold Index ($NYMO) is at -67.70. (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 / 62.75 (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 29.34 %. (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 arrows in the chart below show levels that have acted as support and resistance since 2006. The two blue lines intersect near 10,301. As long as 10,301 holds, the odds of a rally taking place will be higher. If 10,301 fails to attract support from buyers, then the bullish push higher in early 2014 could be classified as a "failed breakout", which would increase the odds of bad things happening in the weeks ahead.
Sooner or later brighter skies will return over the market. Until then, investors should employ the first thing one learns while in a foxhole; keep their head down.
The longer 6 month outlook is now 30-70 sell (probably should be 20-80 sell) and will remain bearish until we can see what the effects are in the Fed's game plan.
The DOW at 10:15 is at 16377 up 55 or 0.34%.
The SP500 is at 1882 up 7 or 0.38%.
SPY is at 188.04 up 0.52 or 0.28%.
The $RUT is at 1061 up 12 or 1.15%.
NASDAQ is at 4227 up 14 or 0.32%.
NASDAQ 100 is at 3815 up 7 or 0.18%.
$VIX 'Fear Index' is at 23.69 down 0.95 or -3.81%. Bearish to Neutral 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 flat and sea-sawing.
Saudi Arabia has reportedly been telling oil-market investors and analysts that it is ready to accept oil prices below $90 per barrel, and even as low as $80, for up to a year or two. If true, it would represent a major change in policy for Riyadh, which may be looking to slow the expansion of rivals such as the U.S. Oil was -1.45% at $84.57 at the time of writing.
WTI oil is trading between 85.59 (resistance) and 83.99 (support) today. The session bias is negative and is currently trading down at 84.03. (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 1231.99 earlier to 1238.50 and is currently trading up at 1234.60. The current intra-session trend is neutral. (Chart Here)
Dr. Copper is at 3.071 rising from 3.031 earlier. (Chart Here)
The US dollar is trading between 85.93 and 85.20 and is currently trading down at 85.81, the bias is currently elevated and sideways. (Chart Here) Resistance made in Aug., 2013 (85.00) has been broken and now is support.
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