Written by Gary
Closing Market Commentary For 10-28-2014
Markets closed up nicely after the volume picked up in the afternoon session pushing the large caps through and above resistances and the 50 DMA's. The small caps likewise put in a stellar performance displaying high volume at the close.
By 4 pm the bulls were in party mode and the bears went into hiding, but is the end of the fairytale bull market near?
I am not a betting man nor do I hear the 'Fat Lady' singing, but there are many indicators telling a different story than what was witnessed today. One of which is the positive effects of the HFT computers, which is not necessarily a good thing, nor a permanent one. This market could go either way in the short-term, only time will tell what Mr. Market is going to do. The longer term is for the bull market to continue into Q1 2015.
Interesting read on the state of the markets today. There is ALWAYS a bit of truth in even the wildest of statements.
The behavior of financial markets these days is frankly divorced from reality, with value-investing banished.
Our dysfunctional markets have become little more than the essential prerequisite . . .
. . . as Louis XIV's finance minister Colbert might have said, to plucking the goose for the largest amount of feathers with the minimum of hissing.
Markets have become distorted by Rumsfeld-knowns such as interest rate policy and "market guidance", and Rumsfeld-unknowns such as undeclared market intervention by the authorities.
On top of these distortions there is remote investing by computers programmed with algorithms and high-frequency traders, unable to make human value-assessments.
Our medium term indicators are leaning towards sell portfolio of non-performers at the close and the short-term market direction meter is now very bullish. We remain mostly, at best, negative and conservatively bullish, neutral in other words. 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 any downtrend could get more aggressive in the short-term and volatility may also promote sudden reversals. The SP500 MACD has turned up, but remains below zero at -2.36. 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 as market changes are happening everyday. As of now, I do not see any leading indicators that are warning of a 'long-term' reversal in the near-term. There may be one later in 2015, but any market fluctuations we see now are more of a internal market rectification than a bear market.
Investing.com members' sentiments are 48 % 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 52.99. (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 are high enough to descend again - watch out!)
This $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages.
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) is at 47.66 %. (Chart Here) The downside decent has reversed, but will it continue to rise above 50%? The next support is ~37.00, ~25.00 and ~15.00 below that. December, 2011 was the last time we saw numbers in the 20's.
StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 46.44. (Chart Here) Below support zone but rising. Next stop was ~57, then ~44, below that is where we will most likely see the markets crash. We are seriously below 44 and need a reversal pronto as it looks like there is nothing to stop the fall until 25 and taking the markets with it.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 22.84. (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 10,675. (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 DOW at 4:00 is at 17006 up 188 or 1.12%.
The SP500 is at 1985 up 23 or 1.19%.
SPY is at 198.52 up 2.25 or 1.15%.
The $RUT is at 1149 up 32 or 2.86%.
NASDAQ is at 4564 up 78 or 1.75%.
NASDAQ 100 is at 4107 up 61 or 1.50%.
$VIX 'Fear Index' is at 14.39 down 1.65 or -10.29%. Bullish Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is net positive, the past 5 sessions have been positive 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.
"We believe that OPEC will no longer act as the first-mover swing producer and that U.S. shale oil output will be called upon to fill this role," says Goldman, cutting its 2015 Q1 oil price forecasts by $15 per barrel - WTI to $75, Brent to $85. "Our forecast also reflects the realization of a loss of pricing power by core-OPEC."
The Goldman team believes OPEC's largest members - rather than responding to price declines by cutting production - are attempting to defend market share by reducing prices.
WTI oil is trading between 81.64 (resistance) and 81.34 (support) today. The session bias is neutral, volatile and is currently trending up at 81.03. (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 fell from 1235.25 earlier to 1227.49 and is currently trading down at 1228.40. The current intra-session trend is neutral and quiet. (Chart Here)
Dr. Copper is at 3.090 rising from 3.056 earlier. (Chart Here)
The US dollar is trading between 85.74 and 85.29 and is currently trading up at 85.47, the bias is currently down but trending upwards. (Chart Here) Resistance made in Aug., 2013 (~85.00) has been broken and now is support. This support has gotten much stronger since August, 2014 and isn't likely to fall easily.
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