Written by Gary
Closing Market Commentary For 10-17-2014
The SP500, DOW and the NASDAQ all closed below a major resistance, below the 200 DMA and on low volume. The markets were quiet this Friday afternoon leading into what some analysts is going to be very volatile in the week ahead.
By 4 pm the averages were up over 1.3%, $RUT continued its decline and continued market weakness is prevalent. The large caps ended the week down 1%, NASDAQ and the $RUT were down 0.4% for the week. The bull's party on.
In a previous article I joked about having a QE5, skipping QE 4, and evidently this is something a lot of investors really want. Just the 'rumor of delaying QE3 was enough to send the markets soaring, but savvy investors know this is just a rumor - it is, right?
Stocks turned higher Friday as worries in Europe eased and traders grew hopeful the Federal Reserve could delay ending its stimulus program.
Traders are closely watching the Fed, which is on pace to fully phase out its bond-buying program at the end of October. Bullard, who has a reputation as a fiscal hawk, said the central bank should consider delaying the end of QE3, even though U.S. fundamentals remain strong.
Our medium term indicators are leaning towards sell portfolio of non-performers at the close and the short-term market direction meter is bullish down from VERY bullish this morning. We remain mostly, at best, negative and conservatively bullish. The important DMA's, volume and a host of other studies have now turned and may be enough for some to start shorting. Right now now I am getting very concerned the current downtrend will get more aggressive in the short-term and volatility may promote sudden reversals. The SP500 MACD has turned down, but remains below zero at -28.41. I would advise caution in taking any position during this uncertain period and I hope you have returned your 'dogs' to the pound. Having some cash on hand now is not a bad strategy.
Looking at the weekly charts it appears we have another 4% to 5% more to go before we hit the up-trend line from 2009. Just a couple of serious down session would mark a good point for a reversal.
Investing.com members' sentiments are 40 % Bearish (falling from 70%) and it seems to be a good sign for being bearish. The 'Sheeples' always seem to get it wrong.
StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 39.34. (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 ($BPSPX) is at 41.60. (Chart Here) In support zone and falling - doesn't look good. ~62, ~57, ~45 at which the markets are in a full-blown correction. The next stop now is ~37.00.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 22.99. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009.
StockChart.com Overbought / Oversold Index ($NYMO) is at -9.67. (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. Today's reading indicates we are ripe for another dip.
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 32.01 %. (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 16380 up 263 or 1.63%.
The SP500 is at 1887 up 24 or 1.29%.
SPY is at 188.36 up 2 or 1.18%.
The $RUT is at 1082 down 4 or -0.35%.
NASDAQ is at 4258 up 41 or 0.97%.
NASDAQ 100 is at 3815 up 50 or 1.33%.
$VIX 'Fear Index' is at 22.23 down 2.98 or -11.83%. 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 net negative and the current bias is positive and trending down.
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 84.42 (resistance) and 82.53 (support) today. The session bias is neutral, trending down and is currently trading down at 83.00. (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 fell from 1242.16 earlier to 1232.53 and is currently trading down at 1228.10. The current intra-session trend is neutral. (Chart Here)
Dr. Copper is at 3.002 rising from 2.951 earlier. (Chart Here)
The US dollar is trading between 85.34 and 84.85 and is currently trading down at 85.29, the bias is currently positive. (Chart Here) Resistance made in Aug., 2013 (~85.00) has been broken and now is support. Support has been tested several times and has held.
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