Market Commentary: Afternoon Trading Cut Morning Losses By Half, Oils Rebound 6% Providing A Temporary Market Relief
Written by Gary
Closing Market Commentary For 01-14-2015
The Fed's Beige Book report was positive enough to stop the averages slide and reverse the trend to an upward one. By 3:30 the uptrend stalled and started to move sideways, most likely because of concerned investors fears of a continuing oil slide.
By the closing bell the averages tried to rise back up to the morning session highs and simply could not penetrate that resistance which does not bode well for tomorrow being a turn-around day. Oils did rebound 6% giving additional leverage to the averages, but most analysts say this is temporary. Be careful, I can hear the bear off in the distance.
This five day fall of the equities is really a no-brainier in which way to invest when everyone knows that oil will continue to fall. Many investors are selling their 'dogs' in light of falling oil continuing to be a sure thing and will continue to tumble. Well, some oil shorts were caught today, most likely being too greedy by overextending themselves with margin accounts and got called.
The others will wait until oil is only a buck a barrel and will be shocked to see it turn around at 35-40. Such is gambling in the Great Market Casino.
Oil still dominates equities movement and will continue for some time (several months?) however, today's positive Beige Book report provided some temporary relief to the sinking (stinking) markets. It said, the economy continued to expand at a modest to moderate pace in mid-November to December lifting the averages off their afternoon lows. But it also shows widespread concerns over oil's impact on the economy. The central bank reported the demand for energy related products and services has weakened across its twelve districts. Dallas reported slower growth and a real concern of lower oil prices on regional economies as time move on.
A $3 move higher in the last hour has WTI crude oil ahead by almost 6% on the session and above $48 per barrel. There's no particular news behind the move, just a heavily oversold asset burning a few greedy shorts.
Earlier, the EIA reported an unexpected big increase in crude inventories. When the bears couldn't take oil any lower on the news, it likely rang a bell to start buying.
Brent is at its resistance, but possibly could move up to 51 before retreating. WTI oil is also at a softer resistance which could be penetrated easily and move up to the ~49ish level before hitting a substantial resistance. This would make a good point to short.
Our medium term indicators are leaning towards sell portfolio of non-performers at the close and the session market direction meter has switched from 55 % bearish to 85% Bullish - another day traders delight. We remain mostly conservatively bullish, neutral in other words. Right now now I am getting very concerned any downtrend could get very aggressive in the short-term and any volatility may also promote sudden reversals. The SP500 MACD has turned down, but remains below zero at -4.95. I would advise caution in taking any position during this uncertain period and I hope you have returned your 'dogs' to the pound.
Having some cash on hand now is not a bad strategy as market changes are happening everyday. As of now, I do not see any leading indicators that are warnings of a 'long-term' reversal in the near-term. There may be one later in 2015, but any market fluctuations we see now are more of a internal market rectification than a bear market.
Investing.com members' sentiments are 42 % Bearish.
StockChart.com Overbought / Oversold Index ($NYMO) is at -16.04. (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 48.61 %. (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 18.37. (Chart Here) 10-year Treasury yield drops below 2% for first time in 7 months
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 10,566. (Chart Here) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors. It is a very important index for investors to watch. We are above the support (10,301) but is this a test of the next resistance (triple top) at ~11,000 to 11,108, watch to see if these numbers decline back down.
From StockTiming.co: Note what is going on in this chart below ... twice the index attempted to get past the 11108.39 resistance level and couldn't.
On its third attempt, it failed and made a lower high. It is now in a triangular pattern where it will break out soon. The bias was negative at the close yesterday, so be very cautious now. (Click on chart.)
The DOW at 4:00 is at 17427 down 187 or -1.06%. (Historical High 18,103.45)
The SP500 is at 2011 down 12 or -0.58%. (Historical High 2,093.55)
SPY is at 201.21 down 1.21 or -0.60%.
The $RUT is at 1177 down 4 or -0.30%.
NASDAQ is at 4639 down 22 or -0.48%. (Historical High 5132.52)
NASDAQ 100 is at 4146 down 20 or -0.49%.
$VIX 'Fear Index' is at 21.48 up 0.92 or 4.47%. Neutral Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is net negative, the past 5 sessions have been negative and the current bias is depressed, but trending up.
WTI oil is trading between 48.88 (resistance) and 45.03 (support) today. The session bias is positive and is currently trading up at 48.50. (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 1225.41 earlier to 1244.38 and is currently trading down at 1229.80. The current intra-session trend is negative. (Chart Here)
Dr. Copper is at 2.528 rising from 2.434 earlier. (Chart Here)
The US dollar is trading between 92.62 (highest since 2005 and ~92 is a very substantial resistance with 92.53 representing a triple top) and 91.80 and is currently trading up at 92.30, the bias is currently neutral and trending up. (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