Written by Gary
Opening Market Commentary For 10-24-2014
Premarkets fractionally switched back and forth on the unchanged line leaving investors wondering if the markets have enough left in them to be able to have the SP500 close above the 100 DMA any time soon. The time is ripe for the second bottom to form so we can continue to climb into a Santa Claus Rally later in the year.
By 10 am New Home Sales came in green and the markets continued to move down to the unchanged line and then beyond. Thus placing even more emphasis on the bulls inability to push the averages upwards above the resistance.
One has to be careful what you read and wonder if these pundits actually invest in the stock market. I read the following this morning from a main-stream financial news outlet (not MSNBC) and wondered what planet they were reporting from. I know what they were trying to say, but these 'perma-bulls' were trying sensationalize an event that hasn't actually materialized yet. It is these 'Sheeples' that could ruin your portfolio if you followed them obliviously because all they are looking for is the headline.
"US equities shook off yesterday's weakness, and not only did they retrace all of the losses, but they exceeded the prior highs."
Very misleading in trying to get you to jump aboard a train that hasn't left the station yet. In fact the Oversold Index ($NYMO) looks to be ready to reverse again as the All-Clear Is Not Quite Is Here just yet.
The end of the cycle is not upon us yet - I don't see it turning before the middle of next year . . . I also keep reiterating the fact that the core growth momentum of the economy hasn't changed - not for the worse, but not for the better either. . . I see another trend month in the making - that is, a weakish month for retail spending that will in time give way to holiday-related spending and fourth-quarter retail sales growth no different from last year.
The "all-clear 'til the end of the year" signal has not sounded yet either.
If we do get another bout of selling before Thanksgiving, the fact that it would be the second round in a month's time could conceivably induce the kind of selling panic that only the margin clerks experienced last week. I'm not predicting that eventuality, not yet, but even should it obtain, it would take something far bigger to derail the end-of-year rally. At this point the latter is virtually certain. So what's to worry? Listen - even 2008 and 2000 had end-of-year rallies.
Our medium term indicators are leaning towards sell portfolio of non-performers at the opening and the short-term market direction meter is bearish. 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 -11.85. 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 46 % 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 Overbought / Oversold Index ($NYMO) is at 52.88. (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!)
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 46.86 %. (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.
StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 43.88. (Chart Here) Below support zone but rising. Next stop was ~57, then ~44, below that is where we will most likely see the markets crash. We are seriously below 44 and need a reversal pronto as it looks like there is nothing to stop the fall until 25 and taking the markets with it.
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 48.60. (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 ($TNX) is at 22.43. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009.
Chris Ciovacco says, "As long as the consumer discretionary ETF (NYSEARCA:XLY) holds above [66.88], all things being equal, it is a good sign for stocks and the U.S. economy." This chart clearly shows that dropping below 65.00 / 62.75 (and staying there) should be of a great concern to bullish investors.
StockChart.com NYSE Composite (Liquidity) Index ($NYA) is at 10,523. (Chart Here) We are above the resistance (10,301) but is this a test of the next resistance at ~10600, stay tuned. Next stop down is 9750, then 9250, and 8500.
The following article has some interesting arguments for why the market have and have not topped.
Over the past few weeks, the S&P 500 has corrected almost 10%
and for the first time in a long time, there was legitimate fear in the marketplace.
After St. Louis Federal Reserve President James Bullard's remarks, however, the market rallied back to 1935 where it stands today.
With the market's recent action, is this another buy the dip scenario or have we seen the top of the market?
In this article it would be prudent to be aware that, in the words of the late JP Morgan, he predicted, when asked for a stock market forecast, that "share prices would fluctuate". But are they going to fluctuate downward with more 'gusto' than usual?
Importantly, the deterioration in the internal dynamics of the market also suggest that the current rebound is not the resumption of the current bull market cycle, but rather a bounce that will likely be used to liquidate holdings. This will likely lead to a retest of lows, or even perhaps the setting of a new low, before a bullish trend can be re-established.
While I am not stating that the 'polar icecaps' are melting and that we are about to experience 'tidal destruction'; I am suggesting that the potential for further declines in the market are a significant possibility. Therefore, reducing portfolio risk in the short-term will provide capital to reinvest at a more favorable point in the future. If the market surges back to new highs, and re-establishes the previous "bull trend," then the capital raised can be reinvested with greater confidence of a continued advance.
There is little risk in practicing some form of portfolio 'risk management.' The real risk is doing nothing and then spending the next advance in the market making up previous losses. That has been a successful investment strategy 'nowhere, never.'
It is still possible that Mr. Market is not through playing with the averages and even newer historical highs are a distinct possibility. Historically, accordingly to Eric Parnell, "major bull markets have almost never reached their final peak in a sideways grinding pattern. Instead, they have almost always peaked with flourish including one final crescendo toward a new all-time high before finally rolling over and succumbing to the forces of the new bear market".
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. 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 DOW at 10:15 is at 16692 up 14 or 0.09%.
The SP500 is at 1952 up 0.67 or 0.03%.
SPY is at 195.12 up 1 or 0.05%.
The $RUT is at 1115 down 1 or -0.13%.
NASDAQ is at 4459 up 7 or 0.16%.
NASDAQ 100 is at 4016 up 4 or 0.09%.
$VIX 'Fear Index' is at 17.16 up 0.66 or 3.93%. Bearish Neutral Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is net negative, the past 5 sessions have been positive and the current bias is unchanged.
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 81.83 (resistance) and 80.69 (support) today. The session bias is negative and is currently trading down at 80.80. (Chart Here)
According 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 1229.17 earlier to 1234.39 and is currently trading up at 1232.90. The current intra-session trend is positive. (Chart Here)
Dr. Copper is at 3.046 rising from 3.029 earlier. (Chart Here)
The US dollar is trading between 86.00 and 85.62 and is currently trading up at 85.70, the bias is currently negative. (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