Written by Gary
Midday Market Commentary For 12-04-2014
By noon the markets had recovered somewhat from a sudden dip of -0.5% to -0.3% and a lot of green volume. The midday trend 'appears' to be trending upwards, but could become sideways by this afternoon.
Investors are taking their time in deciding what they want to do towards the end of the year. Santa Claus Rally, tax questions, profit taking and a host of other decision making themes are starting to become important.
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 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 any volatility may also promote sudden reversals. The SP500 MACD has turned down, but remains above zero at 21.30. 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 70 % Bearish (falling from 70% and now rising from 33%).
StockChart.com Overbought / Oversold Index ($NYMO) is at +9.21. (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.
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 55.77 %. (Chart Here) 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.
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 $NYA all show rounding off the tops which in the past has lead to a downturn.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 22.68. (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 10,933. (Chart Here) Markets move inverse to institutional selling. We are above the resistance (10,301) but is this a test of the next resistance (triple top) at ~11,109, watch to see if these numbers decline back down. Next stop down is 10600, 9750, then 9250, and 8500.
I put all that together and find it difficult to see good upside risk/reward from this point. When I saw lack of strength turn into outright weakness in mid-September, my bullish chips came off the table.
Now I find myself in a similar mode. Could ECB or the Fed come to the market's rescue and inject fresh catalytic strength into stocks? Absolutely. Could investors pour money into stocks and chase late December seasonal strength? Of course. I am confident those developments will show up quickly in my buying/selling strength measures and I will report them duly.
Right here, right now, however, I see global signs of disinflation and economic weakness; a Fed that has been talking about exiting QE; low equity put/call ratios; and persistent relative weakness in high yield bonds (HYG).
It will take a fresh catalyst--and fresh evidence of buying interest--to get my chips back on the bull's table.
The DOW at 12:00 is at 17860 down 54 or -0.30%. (Historical High 17,924.15)
The SP500 is at 2069 down 5 or -0.26%. (Historical High 2,076.28)
SPY is at 207.39 down 0.50 or -0.24%.
The $RUT is at 1174 down 5 or -0.39%.
NASDAQ is at 4773 down 1 or -0.01%. (Historical High 5132.52)
NASDAQ 100 is at 4316 up 3 or 0.06%.
$VIX 'Fear Index' is at 12.54 up 0.07 or 0.56%. Neutral Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is positive, the past 5 sessions have been sideways and the current bias is positive.
WTI oil is trading between 68.20 (resistance) and 66.12 (support) today. The session bias is trending down and is currently trading up at 66.48. (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 rose from 1201.50 earlier to 1213.52 and is currently trading up at 1209.10. The current intra-session trend is neutral and volatile. (Chart Here)
Dr. Copper is at 2.915 rising from 2.866 earlier. (Chart Here)
The US dollar is trading between 89.18 (highest since 2009) and 88.46 and is currently trading down at 88.24, the bias is currently negative. (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 next resistance/support ??? is at ~88.72 set in June, 2010.
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