Written by Gary
Midday Market Commentary For 10-31-2014
Markets remain solidly in the green, mostly above one percent, but showing some signs of weakness as volume dropped to anemic levels. The DOW is above its old high by 10 points and the SP500 just can't quite make it up to its old high. The NASDAQ is just above its closing high in March of 2000 and volume levels become non-existent.
By noon the excitement was over as the averages start a 'consolidating phase' which may take on any number of scenarios.
One possible scenario is for a bear-trap to start and then push upwards. Another is to have several sessions move more or less sideways. As for the decline I was hoping for is beginning to look like it isn't going to happen. Next stop could very well be the SC rally.
Our medium term indicators are leaning towards sell portfolio of non-performers at the midday and the short-term market direction meter is bearish. 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 above zero at +9.18. 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 52 % 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 67.72. (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 53.40 %. (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 ($BPNYA) is at 50.40. (Chart Here) Below support zone but rising. Next stop was ~57, then ~44, below that is where we will most likely see the markets crash. We are seriously below 44 and need a reversal pronto as it looks like there is nothing to stop the fall until 25 and taking the markets with it.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 23.41. (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 10,812. (Chart Here) We are above the resistance (10,301) but is this a test of the next resistance at ~10600/700, watch to see if these numbers decline back down. If they don't then there an excellent possibility for the markets going higher now that we have topped 10800. Next stop down is 10600, 9750, then 9250, and 8500.
The following article has some interesting arguments for why the market have and have not topped.
The DOW at 12:15 is at 17349 up 154 or 0.90%.
The SP500 is at 2011 up 17 or 0.84%.
SPY is at 201.14 up 2 or 0.88%.
The $RUT is at 1167 up 11 or 0.95%.
NASDAQ is at 4618 up 52 or 1.14%.
NASDAQ 100 is at 4148 up 48 or 1.16%.
$VIX 'Fear Index' is at 14.74 down 0.22 or -1.52%. Neutral 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 elevated and trending sideways.
WTI oil is trading between 81.26 (resistance) and 79.56 (support) today. The session bias is down, sideways and is currently trading down at 80.17. (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."
- 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 1202.58 earlier to 1160.93 and is currently trading up at 1165.40. The current intra-session trend is down, sideways and quiet. (Chart Here)
Dr. Copper is at 3.048 falling from 3.093 earlier. (Chart Here)
The US dollar is trading between 87.24 and 86.25 and is currently trading up at 86.99, the bias is currently positive. (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