Written by Gary
Midday Market Commentary For 10-15-2014
The midday trend is melting lower as I type. The U.S. Budget Deficit report this morning fell to its lowest since 2008 and zero difference to averages as they continue to fall.
By noon the averages were down over 1.5% and melting down fractionally. It would appear we have further to go, but be ready for sudden reversals.
As it stands now equities are due for a reflex bounce and yesterday I thought today was going to be the day. The Doji candlestick indicated indecision and a possible trend reversal which we could still have in a possible scenario below with Doji 'A' representing yesterdays session.
There will be a corrective move upward shortly, but is that going to mark the bottom of this correction or just a pause before another decline to Doji 'B'? As for the Ebola factor, I am having a really tough time believing this phenomena has anything to do with this current correction. This correction has been in the making for years and Ebola is simply coincidental.
Looking at the weekly charts it appears we have another 5% to 7% more to go before we hit the up-trend line from 2009. The DOW is currently at 16100 and the intersecting up-trend is at 15685 (and rising), the SP500 still has a way to go at 160 points, NASDAQ at 624 points and the $RUT has 36 points to go. Just a couple of serious down session would mark a good point for a reversal.
Our medium term indicators are leaning towards sell non-performers at the midday and the short-term market direction meter is very bearish. We remain mostly negative and conservatively bullish. The important DMA's, volume and a host of other studies have now turned and that may be enough to start shorting. But now I am getting very concerned the current downtrend will get more aggressive. The SP500 MACD has turned down, but remains below zero at -27.04. I would advise caution in taking any position during this uncertain period and I hope you have returned your 'dogs' to the pound. Having some cash on hand now is not a bad strategy.
Investing.com members' sentiments are 34 % Bearish (falling from 70%) and it seems to be a good sign for being bearish. The 'Sheeples' always seem to get it wrong.
StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 40.05. (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 seriously below 44 and need a reversal pronto as it looks like there is nothing to stop the fall until 25.
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 42.60. (Chart Here) In support zone and falling - doesn't look good. ~62, ~57, ~45 at which the markets are in a full-blown correction. The next stop is ~37.00.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 20.25. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009.
StockChart.com Overbought / Oversold Index ($NYMO) is at -44.34. (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 30.48 %. (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.
As long as Institutional Investors are in a "Selling Up Trend", the market has to much pressure on it and it goes down.
On September 4th, Institutional Investors started an up trend in their selling, so the stock market went down.
Yesterday, the trend lines on Institutional Selling were still trending up which meant that Institutional Investors were still selling. Note how the NYA Index is below its lower Bollinger Band ... this is a level where the index is starting to act oversold.
The DOW at 12:15 is at 16036 down 282 or -1.73%.
The SP500 is at 1845 down 33 or -1.77%.
SPY is at 184.29 down 4 or -1.89%.
The $RUT is at 1053 down 8 or -0.80%.
NASDAQ is at 4162 down 64 or -1.50%.
NASDAQ 100 is at 3750 down 60 or -1.57%.
$VIX 'Fear Index' is at 27.56 up 4.92 or 21.59%. 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.
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 82.40 (resistance) and 79.99 (support) today. The session bias is positive and is currently trading up at 82.29. (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 1222.24 earlier to 1249.94 and is currently trading down at 1246.10. The current intra-session trend is positive and volatile. (Chart Here)
Dr. Copper is at 3.009 falling from 3.084 earlier. (Chart Here)
The US dollar is trading between 86.12 and 84.52 and is currently trading up at 85.18, the bias is currently negative and trending sideways. (Chart Here) Resistance made in Aug., 2013 (~85.00) has been broken and now is support. Support was tested this morning and has rebounded.
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