Written by Gary
Closing Market Commentary For 10-16-2014
Most of the afternoon session was trading in a narrow zone and ended in a flat, mixed and directionless. Spinning top reversal Doji's marked the end of the DOW and SP500 today which need confirmation tomorrow.
By 4 pm the green volume picked up fractionally as some brave bulls dipped their toes into the market waters.
I have given examples of candlestick patterns over the past several sessions including this one where reversal pattern Doji's ended this session, but are they really accurate? Cam Hui has written a timely article about Doji's, the current market and where we are headed. This is required reading I think.
A bold forecast
Despite these promising bullish signs, I will make a bold forecast here. Yesterday, Wednesday, October 15, 2014, was not the bottom of the market decline. While the market is very oversold and we are likely to see a market bottom within days, the bulls will have to be prepared for more pain in the near future.
You know when you go to the hospital for a medical procedure that you know to be painful and the doctor tells you, "You're going feel a bit of a pinch"? I am afraid that's what going to happen to the bulls for the next few days.
Our medium term indicators are leaning towards sell portfolio of non-performers at the close and the short-term market direction meter is Bullish. We remain mostly, at best, negative and conservatively bullish. The important DMA's, volume and a host of other studies have now turned and may be enough for some to start shorting. Right now now I am getting very concerned the current downtrend will get more aggressive in the short-term and volatility may promote sudden reversals. The SP500 MACD has turned down, but remains below zero at -29.30. 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.
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 ~15010 and the intersecting up-trend is at 15685 (and rising), the SP500 still has a way to go to the 1700 level, NASDAQ at the 3750 level and the $RUT at the 1010 level marks the 2009 uptrend. Just a couple of serious down session would mark a good point for a reversal.
Investing.com members' sentiments are 34 % Bearish (falling from 70%) and it seems to be a good sign for being bearish. The 'Sheeples' always seem to get it wrong.
StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 38.77. (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 and taking the markets with it.
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 41.00. (Chart Here) In support zone and falling - doesn't look good. ~62, ~57, ~45 at which the markets are in a full-blown correction. The next stop now is ~37.00.
StockChart.com Overbought / Oversold Index ($NYMO) is at -38.25. (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 30.08 %. (Chart Here) Unless this downward trend reverses itself soon, we are going to see further downside. The next support is ~37.00, ~25.00 and ~15.00 below that. December, 20012 was the last time we saw numbers this low.
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.
The DOW at 4:00 is at 16117 down 25 or -0.15%.
The SP500 is at 1863 up 0.27 or 0.01%.
SPY is at 185.57 down 0.16 or -0.09%.
The $RUT is at 1086 up 13 or 1.25%.
NASDAQ is at 4217 up 2 or 0.05%.
NASDAQ 100 is at 3765 down 21 or -0.55%.
$VIX 'Fear Index' is at 25.20 down 1.05 or -4.00%. Bullish 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 mixed, but trending higher.
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.
WTI oil is trading between 84.61 (resistance) and 79.85 (support) today. The session bias is positive, volatile and is currently trading down at 82.47. (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 fell from 1244.63 earlier to 1236.09 and is currently trading down at 1239.80. The current intra-session trend is neutral. (Chart Here)
Dr. Copper is at 2.986 rising from 2.952 earlier. (Chart Here)
The US dollar is trading between 85.52 and 84.84 and is currently trading down at 85.01, the bias is currently negative and testing support. (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