Market Commentary: Large Caps In Green, Small Caps Remain Down

November 17th, 2014
in Gary's blogging, market open

Written by

Opening Market Commentary For 11-17-2014

Premarkets were down -0.2% and didn't move much after the 'not-so-good' US financial reports this morning. Markets opened down on moderate volume and started to trend upwards to where the major averages were all in the green, but flat.

By 10 am the averages were mixed, sea-sawing along the unchanged line and generally trending up except for the small caps. Volatility is present with volume spiking to higher than normal levels and then dropping to VERY low levels. Market session direction is not well defined - caution.

Follow up:

Many indicators are showing markets leveling off or rounding indicating market softness that could lead to lower values and investor's should watch carefully. The SP500 MACD, $BPNYA, $BPSPX, $TNX and the $NYA all show rounding off the tops which in the past has lead to a downturn.

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 conservatively bullish, neutral in other words. Right now now I am getting very concerned any downtrend could get very aggressive in the short-term and volatility may also promote sudden reversals. The SP500 MACD has turned flat, but remains above zero at 24.48. 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. members' sentiments are 62 % Bearish (falling from 70% and now rising from 33%).

Investors Intelligence sets the breath at 52.9 % bullish with the status at Bear Correction. (Chart Here ) I expect a market reversal at or before ~25.0 should the direction continue to descend. Overbought / Oversold Index ($NYMO) is at 15.02. (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 $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. NYSE % of stocks above 200 DMA Index ($NYA200R) is at 56.49 %. (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. NYSE Bullish Percent Index ($BPNYA) is at 57.51. (Chart Here) Below support zone but rising. Next stop was ~57, then ~44, below that is where we will most likely see the markets crash. We are seriously below 44 and need a reversal pronto as it looks like there is nothing to stop the fall until 25 and taking the markets with it. S&P 500 Bullish Percent Index ($BPSPX) is at 69.20. (Chart Here) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 10 Year Treasury Note Yield Index ($TNX) is at 23.36. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009. Consumer Discretionary ETF (XLY) is at 69.35. (Chart Here)

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. NYSE Composite (Liquidity) Index ($NYA) is at 10,864. (Chart Here) We are above the resistance (10,301) but is this a test of the next resistance at ~10600/900, 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 10900. Next stop down is 10600, 9750, then 9250, and 8500.

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 50-50 sell and will remain neutral until we can see what the effects are in the Fed's game plan. Investors should employ the first thing one learns while in a foxhole; keep their head down.

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The DOW at 10:15 is at 17635 down 1 or -0.01%. (Historical High 17,705.48)

The SP500 is at 2039 down 1 or -0.04%. (Historical High 2,046.18)

SPY is at 204.28 up 0.06 or 0.03%.

The $RUT is at 1172 down 2 or -0.16%.

NASDAQ is at 4683 down 6 or -0.13%.

NASDAQ 100 is at 4219 down 6 or -0.13%.

How the Popular 'VIX' Gauge Works

$VIX 'Fear Index' is at 14.13 up 0.82 or 6.16%. Bearish 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 sideways and the current bias is flat and trending up.

Gundlach: Rates not going anywhere; oil headed lower

A believer in the shale boom, Goldman cuts oil price forecasts -

WTI oil is trading between 75.83 (resistance) and 74.75 (support) today. The session bias is neutral and is currently trading down at 75.25. (Chart Here)

Brent Crude is trading between 79.47 (resistance) and 77.96 (support) today. The session bias is neutral and is currently trading down at 78.70. (Chart Here)

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 1193.48 earlier to 1181.06 and is currently trading down at 1183.30. The current intra-session trend is trending down. (Chart Here)

Currency Corruption Weighs on Copper

Dr. Copper is at 3.044 falling from 3.061 earlier. (Chart Here)

The Consequences Of A Strengthening U.S. Dollar

The US dollar is trading between 88.02 (highest since 2009) and 87.24 and is currently trading down at 87.95, 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


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