Market Commentary: Averages Trade Sideways, WTI Oil Falls Below $50, DOW Closes Down 331, Upside Trend Still Intact
Written by Gary
Closing Market Commentary For 01-05-2015
Oil stopped falling in the early part of the afternoon session and so did the equities. WTI oil has remained below 51 since it touched 50.02 earlier in the session and then went below 50 at 2:30 this afternoon. Current wisdom indicates we have NOT seen the last decline.
By 4 pm the session remained down and traded sideways until the close. The 'oils' and disruptive issues in Europe and Greece are driving the markets and further downside is expected, however, the upside trend has not been breached - yet!
Some thoughts of manipulation are making a buzz around the analyst arm chairs in that the oils are going to be pushed higher before resuming the downward trend again. An interesting trading prospect if you are quick on the buy sell buttons.
NEW YORK (AP) - The price of oil plunged again Monday and fell below $50 a barrel for the first time since April 2009 as evidence mounted that the world will be oversupplied with oil this year.
Benchmark U.S. oil dipped to $49.77 before closing down $2.65, or 5 percent, to $50.04 a barrel. Brent crude, a global benchmark used to price oil used by many U.S. refineries, sank $3.31, or 5.9 percent, to $53.11. In June of last year oil traded above $107 a barrel.
But rising production outside of OPEC, especially in the U.S., boosted supplies just as weakness in the global economy slowed the growth in oil demand.
OPEC's decision in November to maintain existing production levels accelerated the rout in oil prices. Slower growth in China's economy, a driver of oil demand in recent years, and a strong dollar, which makes oil more expensive for holders of foreign currencies have also pressured oil prices.
Our medium term indicators are leaning towards sell portfolio of non-performers at the close and the session market direction meter is 100+ % bearish. We remain mostly conservatively bullish (even now), neutral in other words. Right now now I am getting very concerned any downtrend (like this one) could get very aggressive in the short-term and any volatility may also promote sudden reversals. The SP500 MACD has turned down, but remains above zero at +6.29. I would advise caution in taking any position during this uncertain period and I hope you have returned your 'dogs' to the pound.
Having some cash on hand now is not a bad strategy as market changes are happening everyday. As of now, I do not see any leading indicators that are warnings of a 'long-term' reversal in the near-term. There may be one later in 2015, but any market fluctuations we see now are more of a internal market rectification than a bear market.
Investing.com members' sentiments are 48 % Bearish.
StockChart.com Overbought / Oversold Index ($NYMO) is at +6.13. (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 52.76 %. (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 $NYA all show rounding off the tops which in the past has lead to a downturn.
Also, the SP500 10 DMA has crossed over the 20 DMA (12-11-14) always indicating a 'correction' underway. The 50,100, 145 and 200 DMA are all going flat which is never a good omen for a continuing bull run. Watch for the 50 DMA to cross over the 100,145 and 200 DMA to indicate how deep the correction will be.
These are not 'leading' indicators as such, but depicting 'trends' in the making showing data accumulated over the past several months, but needs to be watched.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 20.39. (Chart Here) Flattening Yield Curve Signaling Slowing Economic Growth?
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 10,608. (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 ~11,900, watch to see if these numbers decline back down. Next stop down is 10600, 9750, then 9250, and 8500.
The DOW at 4:00 is at 17502 down 331 or -1.86%. (Historical High 18,103.45)
The SP500 is at 2021 down 38 or -1.83%. (Historical High 2,093.55)
SPY is at 201.96 down 3.71 or -1.81%.
The $RUT is at 1181 down 17 or -1.46%.
NASDAQ is at 4653 down 74 or -1.57%. (Historical High 5132.52)
NASDAQ 100 is at 4161 down 69 or -1.64%.
$VIX 'Fear Index' is at 19.92 up 2.13 or 11.97%. 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 net negative and the current bias is negative and sideways.
WTI oil is trading between 52.09 (resistance) and 49.70 (support) today. The session bias is negative and is currently trading down at 49.88. (Chart Here) (~50 appears to have been a support and now a resistance.)
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 1186.80 earlier to 1207.35 and is currently trading up at 1206.30. The current intra-session trend is trending up. (Chart Here)
Dr. Copper is at 2.768 falling from 2.811 earlier. (Chart Here)
The US dollar is trading between 92.04 (highest since 2005 and ~91 is a very substantial resistance) and 91.56 and is currently trading up at 91.67, 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 current level (~91 / 92) is the resistance (substantial) and could be a triple top of sorts. Historical chart Here.
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