Written by Gary
Opening Market Commentary For 12-05-2014
Premarkets fluctuated widely from -0.2% to +0.2% and the markets opened at +0.1%. The DOW set another new high at the opening while the SP500 sea-sawed just below it previous high on moderate to high volume.
By 10 am the averages were in the green with the $RUT at +0.7%. The short-term movement indicator has me concerned about the markets going higher today and caution is indicated.
The averages are in the green, but for how long is the question?
Our medium term indicators are leaning towards sell portfolio of non-performers at the opening and the short-term market direction meter is approaching 'very' bearish. We remain mostly conservatively bullish, neutral in other words. Right now now I am getting very concerned any downtrend could get very aggressive in the short-term and any volatility may also promote sudden reversals. The SP500 MACD has turned down, but remains above zero at 21.10. I would advise caution in taking any position during this uncertain period and I hope you have returned your 'dogs' to the pound.
Having some cash on hand now is not a bad strategy as market changes are happening everyday. As of now, I do not see any leading indicators that are warning of a 'long-term' reversal in the near-term. There may be one later in 2015, but any market fluctuations we see now are more of a internal market rectification than a bear market.
Investing.com members' sentiments are 68 % Bearish (falling from 70% and now rising from 33%).
StockChart.com Overbought / Oversold Index ($NYMO) is at -8.65. (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 54.45 %. (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 23.05. (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 10,956. (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.
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".
[I] 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 longer 6 month outlook is now 45-55 sell and will remain neutral until we can see what the effects are in the ECB's game plan. Investors should employ the first thing one learns while in a foxhole; keep their head down.
The DOW at 10:30 is at 17950 up 50 or 0.28%. (Historical High 17,957.76)
The SP500 is at 2075 up 3 or 0.16%. (Historical High 2,077.34)
SPY is at 207.99 up 0.37 or 0.18%.
The $RUT is at 1180 up 7 or 0.60%.
NASDAQ is at 4778 up 8 or 0.18%. (Historical High 5132.52)
NASDAQ 100 is at 4312 up 0.42 or 0.01%.
$VIX 'Fear Index' is at 11.94 down 0.44 or -3.55%. Bullish to Neutral Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is trending up, the past 5 sessions have been sideways and the current bias is trending up.
WTI oil is trading between 66.86 (resistance) and 65.71 (support) today. The session bias is trending down and is currently trading up at 65.85. (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 1207.78 earlier to 1186.74 and is currently trading up at 1194.30. The current intra-session trend is trending down. (Chart Here)
Dr. Copper is at 2.910 falling from 2.938 earlier. (Chart Here)
The US dollar is trading between 89.48 (highest since 2009) and 88.68 and is currently trading down at 89.39, 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 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