Market Commentary: Markets Again Open Sharply Down Putting Santa Claus Rally At Risk

December 10th, 2014
in Gary's blogging, market open, syndication

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Opening Market Commentary For 12-10-2014

Premarket numbers dropped from about closing numbers yesterday to -0.3% around 8 am for reasons unknown. Markets opened at about the same level, sea-sawing giving conflicting direction signals on moderate volume.

By 10 am the averages were trending downward as crude oil dropped again and concerns of the financial mess in Greece. Hopes of a Santa Claus Rally are quickly fading.

Follow up:

Oil prices seem to be investors main concern in today's session. Bloomberg says, "OPEC cut the forecast for how much crude oil it will need to provide in 2015 to the lowest in 12 years amid surging U.S. shale supplies and reduced estimates for global consumption."

U.S. Stocks Fall as Energy Shares Drop on OPEC Forecast

U.S. stocks fell, after the Standard & Poor's 500 Index erased an intraday loss of 1.3 percent yesterday, as energy shares renewed declines after OPEC cut its forecast on 2015 demand for crude.

ConocoPhillips, Exxon Mobil Corp. and Chevron Corp. lost more than 1.2 percent to lead declines among oil companies. Yum! Brands Inc. (YUM) sank 4.8 percent after cutting its 2014 profit forecast amid a health scare in China. American Airlines Group Inc. and United Continental Holdings Inc. rose at least 2.7 percent after an industry group said global airlines will make record profit next year.

Our medium term indicators are leaning towards sell portfolio of non-performers at the opening and the short-term market direction meter is 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 15.37. 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 64 % Bearish.

Investors Intelligence sets the breath at 54.1 % bullish with the status at Bear Correction. (Chart Here ) I expect a market reversal at or before ~25.0 should the markets start to descend. Overbought / Oversold Index ($NYMO) is at -17.92. (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 $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. NYSE % of stocks above 200 DMA Index ($NYA200R) is at 52.62 %. (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 $NYA all show rounding off the tops which in the past has lead to a downturn. NYSE Bullish Percent Index ($BPNYA) is at 58.68. (Chart Here) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. S&P 500 Bullish Percent Index ($BPSPX) is at 74.80. (Chart Here) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 10 Year Treasury Note Yield Index ($TNX) is at 22.06. (Chart Here) Flattening Yield Curve Signaling Slowing Economic Growth? Consumer Discretionary ETF (XLY) is at 70.57. (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 10,764. (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".

Some Dark Clouds on the Stock Market Horizon

[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.

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The DOW at 10:15 is at 17689 down 111 or -0.63%. (Historical High 17,991.19)

The SP500 is at 2049 down 11 or -0.54%. (Historical High 2,079.47)

SPY is at 205.40 down 7 or -0.60%.

The $RUT is at 1181 down 1 or -0.50%.

NASDAQ is at 4751 down 16 or -0.33%. (Historical High 5132.52)

NASDAQ 100 is at 4283 down 11 or -0.26%.

How the Popular 'VIX' Gauge Works

$VIX 'Fear Index' is at 15.97 up 1.08 or 7.25%. 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 negative.

Gundlach: Rates not going anywhere; oil headed lower

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

WTI oil is trading between 63.24 (resistance) and 61.83 (support) today. The session bias is negative and is currently trading up at 62.13. (Chart Here)

Brent Crude is trading between 66.36 (resistance) and 64.99 (support) today. The session bias is negative and is currently trading up at 65.22. (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 1238.86 earlier to 1225.66 and is currently trading up at 1231.00. The current intra-session trend is neutral and volatile. (Chart Here)

Can Dr. Copper Heal Thyself

Dr. Copper is at 2.901 falling from 2.926 earlier. (Chart Here)

The Consequences Of A Strengthening U.S. Dollar

The US dollar is trading between 88.81 (highest since 2009) and 88.38 and is currently trading up at 88.42, the bias is currently trending down. (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


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