Written by Gary
Opening Market Commentary For 10-31-2014
Premarket numbers were up +1.2% as the BOJ expanded their QE and investors jumped on board the bull train. Look for a spike on the charts and one in volume to signal a temporary market top.
By 10 am the opening market numbers could not be held as some VERY nervous investors decide to jump ship, but that doesn't mean the market ascent is over. Watch out for volatility that could wipe out your stops.
Investors need to be especially cautious at this point because of herd mentality:
It is generally expected to have some sort of small correction before the SC rally.
Technical's are converging on key resistance points that need to be tested and that sometime creates 'wind-up' decline before moving ahead.
Don't let anyone fool you, but the markets are in fragile shape and the only thing holding them up is the leftover liquidity from QE's as I explained last July here. BOJ's expanding their QE is miniscule compared to the big picture and any investor euphoric 'bump' upwards in the US markets is NOT going to last for long.
In fact, it may already be over as the opening numbers didn't hold, but these high marks may be temporarily on hold as the markets adjust. I would like nothing more to see a small correction now so the SC rally becomes a fact.
For those that are confused, I am saying several things that may or may not happen, but from a technical point of view would be optimal. First I want to see a small decline now. Second, I want to see a Santa Claus rally. Third I see the markets declining in 2015, How much, well that depends of course on a whole boatload of factors that are dynamic in nature and we will have to wait.
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, 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 +8.57. 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 $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages.
Today it represents the lowest levels seen since the beginning of the October, 2011 rally. Eric Parnell says, "If nothing else, given that relatively fewer stocks are trading above their 200-day moving average at a time when the market is just off of its all-time highs suggests that an increasingly narrowing group of stocks is driving the rally at this stage, which does not bode well for the future sustainability of the uptrend. It also strongly suggests there has been a 'stealth bear market' underway in recent months."
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) is at 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 ($BPNYA) is at 49.73. (Chart Here) Below support zone but rising. Next stop was ~57, then ~44, below that is where we will most likely see the markets crash. We are seriously below 44 and need a reversal pronto as it looks like there is nothing to stop the fall until 25 and taking the markets with it.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 23.25. (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 10,789. (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. 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.
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 17334 up 138 or 0.80%.
The SP500 is at 2011 up 17 or 0.83%.
SPY is at 201.18 up 2 or 0.89%.
The $RUT is at 1169 up 14 or 1.17%.
NASDAQ is at 4624 up 58 or 1.26%.
NASDAQ 100 is at 4152 up 53 or 1.28%.
$VIX 'Fear Index' is at 14.40 down 0.12 or -0.83%. Bullish to 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.
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 81.26 (resistance) and 79.56 (support) today. The session bias is negative and is currently trading up at 79.70. (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 1202.58 earlier to 1160.93 and is currently trading down at 1165.90. The current intra-session trend is negative. (Chart Here)
Dr. Copper is at 3.053 falling from 3.093 earlier. (Chart Here)
The US dollar is trading between 87.20 and 86.25 and is currently trading up at 87.08, 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