Written by Gary
Closing Market Commentary For 10-31-2014
Markets opened high because Janna extended their QE and the US markets went wild. The trading zone has been very narrow, sideways and on anemic volume. During the last minute there was a very heavy red spike in volume as some investors jumped ship.
By 4 pm the averages were mostly up by one percent, DOW makes new high (17395.54) and new closing high (17390.52), SP500 makes new closing high (2018.05). However, it doesn't appear to be all that rosy in the market place.
One of the proprietary models we use indicate the next several sessions show the market is going to have extremely difficult time going higher and that a technical pull-back (+- 2%) is required. Unfortunately, Mr. Market has not been listening to me lately and like a spoiled teenager he is going to do whatever he wants, but do not be surprised at anything that may happen. Also, be aware that the 'Sheeples' like to panic.)
Our medium term indicators are leaning towards sell portfolio of non-performers at the midday and the short-term market direction meter is fractionally 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 above zero at +9.51. 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 54 % 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 ($BPNYA) is at 51.01. (Chart Here) Below support zone but rising. Next stop was ~57, then ~44, below that is where we will most likely see the markets crash. We are seriously below 44 and need a reversal pronto as it looks like there is nothing to stop the fall until 25 and taking the markets with it.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 23.35. (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 10,831. (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 4:00 is at 17390 up 195 or 1.13%.
The SP500 is at 2017.99 up 23.34 or 1.17%.
SPY is at 201.60 up 2 or 1.14%.
The $RUT is at 1174 up 18 or 1.53%.
NASDAQ is at 4631 up 65 or 1.41%.
NASDAQ 100 is at 4158 up 58 or 1.40%.
$VIX 'Fear Index' is at 14.04 down 0.48 or -3.31%. 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 elevated and trending up.
WTI oil is trading between 81.26 (resistance) and 79.56 (support) today. The session bias is neutral, trending up and is currently trading up at 80.69. (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 1171.90. The current intra-session trend is down, sideways and quiet. (Chart Here)
Dr. Copper is at 3.047 falling from 3.093 earlier. (Chart Here)
The US dollar is trading between 87.24 and 86.25 and is currently trading up at 87.00, 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