Written by Gary
Closing Market Commentary For 10-21-2014
At a cursory glance at today's session it would appear all is well with the US market place and the near 10% correction that ended last Wednesday is all but over. Unfortunately that may not be the case, read more below.
At the 4 pm closing bell, the averages were up very nicely, some exceeding 2.5% including the DOW up over 1.2%. The real action may not have happened yet as mounting EU worries continue to smother the bears.
Trouble in the European markets can spell trouble in the USA markets as well and there appears to be a bunch of problems across the 'Pond'. We have written for years that the financial cracks that have been papered over on Europe's financial walls are getting larger and much more transparent. US investors are looking for stability in the EU; having seen none lately, they remain nervous.
What Mr. Goette says below is true regarding 'multi-day upmoves', but that they have to be solid moves NOT HFT algo computer generated like in today's session. What we have here is the ' highly volatile phase of attempting to bottom' that will come back and bite the current lot of bulls in the arse.
This [past] correction might be the symptom for something larger," Benedict Goette, founder of asset-management firm Compass Capital AG in Zurich, said in an interview. "I do not expect a big positive impulse from the current earnings season in Europe. Unless a multi-day upmove develops, people will remain nervous. We're now in the highly volatile phase of attempting to bottom, but I would expect a final bottom only by the end of October or mid-November."
Another area of concern, just one of many, are the gaps the NASDAQ has left on it bullish push. Gaps like to be closed, sooner rather than later and in this case another decline could be realized soon adding to already bearish predictions being touted by many analysts.
This chart clearly shows the support and gaps on this NASDAQ daily chart. The red trend line is the 100 DMA, orange = 145 DMA and the purple is the 200 DMA. In light of the HFT computer trading today this sessions rise is NOT a confirmation of a continuing bull run. In fact I think the markets could very well begin contracting starting tomorrow. The ($NYMO) oversold index is in positive territory and savvy investors are seriously looking to short long positions. Look at the chart and tell what you think.
Here the StockTiming.com points out what the Inflowing Liquidity levels are showing and it is not a pretty picture. There are so many stats out there pointing towards more 'correction' that it would be wise to play your cards closely to your chest.
. . . when you look at the Inflowing Liquidity levels on the IWM (ETF for the Russell 2000), you will see some disturbing action.
What is disturbing can be seen on the red arrows displayed. Note that the first one showed a lower/high, and the second showed a lower/low.
What is wrong with that? It is the definition of a down trend, so unless it changes, there will be trouble ahead
Our medium term indicators are leaning towards sell portfolio of non-performers at the close and the short-term market direction meter is bullish. We remain mostly, at best, negative and conservatively bullish. The important DMA's, volume and a host of other studies have now turned and may be enough for some to start shorting. Right now now I am getting very concerned the current downtrend will get more aggressive in the short-term and volatility may promote sudden reversals. The SP500 MACD has turned up, but remains below zero at -22.49. I would advise caution in taking any position during this uncertain period and I hope you have returned your 'dogs' to the pound. Having some cash on hand now is not a bad strategy.
Investing.com members' sentiments are 40 % Bearish (falling from 70% and now rising from 33%) and it seems to be a good sign for being bearish. The 'Sheeples' always seem to get it wrong.
StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 41.44. (Chart Here) Below support zone but rising. Next stop was ~57, then ~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 ($BPSPX) is at 43.20. (Chart Here) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. The next stop now is ~37.00.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 22.08. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009. Spinning top possible reversal indicator.
StockChart.com Overbought / Oversold Index ($NYMO) is at +35.77. (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. (Now were in good shape to descend again - watch out!)
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 38.55 %. (Chart Here) The downside decent has reversed, but will it continue to rise? The next support is ~37.00, ~25.00 and ~15.00 below that. December, 2012 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.
StockChart.com NYSE Composite (Liquidity) Index ($NYA) is at 10498. (Chart Here) We are well above the resistance (10,301) but is this still a test, stay tuned. Next stop is 9750, then 9250, and 8500.
The DOW at 4:00 is at 16615 up 215 or 1.31%.
The SP500 is at 1941 up 37 or 1.96%.
SPY is at 194.23 up 4 or 1.98%.
The $RUT is at 1113 up 18 or 1.63%.
NASDAQ is at 4419 up 103 or 2.40%.
NASDAQ 100 is at 3971 up 101 or 2.62%.
$VIX 'Fear Index' is at 16.26 down 2.31 or -12.44%. Neutral Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is down, the past 5 sessions have been up and the current bias is positive.
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 83.24 (resistance) and 81.59 (support) today. The session bias is neutral, very volatile and is currently trading down at 82.47. (Chart Here)
Acording to Rob Kurzatkowski, Senior Commodity Analyst at OptionsExpress.com, ". . . we see the December Crude Oil contract holding above the $80 level. To this point, the contract has held up at this technical support level. More stout support can be found around the $75 mark, should Oil fail to hold $80. The result of recent price weakness has been oversold technical levels. The 14-day RSI is in the mid-teens, which could be supportive of prices in the near term. In order to gain some traction, Crude Oil prices may need to post several closes north of the $85 mark."
Monday, October 20, 2014 For those traders who really take a long view of market trends, looking at the monthly continuation chart for Gold futures, we notice that the bull market that began back in 2001 when Gold prices were... Read More...
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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 1246.05 earlier to 1255.57 and is currently trading up at 1248.02 The current intra-session trend is trending lower and volatile. (Chart Here)
Dr. Copper is at 3.030 rising from 2.974 earlier. (Chart Here)
The US dollar is trading between 85.46 and 84.79 and is currently trading up at 85.45, the bias is currently positive. (Chart Here) Resistance made in Aug., 2013 (~85.00) has been broken and now is support. (Which has been tested and failed 2 times.)
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