Market Commentary: Markets Open Down Over One Percent, Currently Trending Upward Erasing Some Losses
Written by Gary
Opening Market Commentary For 01-14-2015
Premarkets dropped down into the -1% after import prices declined to December 2008 levels and retail prices also fell. Markets opened down with the DOW off 200 points but the volume remained in the low to moderate levels.
By 10 am there was a fractional trending up from the morning opening, but today's doldrums must be played out before making any decisions.
WTI oil is still testing the resistance at the ~47 and has failed twice so far. It may take a few more sessions to play this oil decline out, but ~40 is expected to be the bottom. I would expect the equities to also follow the oil trace lines.
Our medium term indicators are leaning towards sell portfolio of non-performers at the opening and the session market direction meter is 0.5 % 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 below zero at -5.09. 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 18.30. (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 10,518. (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.
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".
A lot of notable analysts are starting to tout the prospect of bearish scenarios and should be paid attention to. But that does not mean to start shorting and general selling - not just now at least.
The longer 6 month outlook is now 40-60 sell and will remain somewhat bearish until we can see what the effects are from the oil slide, ECB and the U.S. Fed possibly triggering a deflationary slide. Investors should employ the first thing one learns while in a foxhole; keep their head down.
Bill Gross wrote recently that the "Good Times Are Over" may be a bit premature, because looking out a year ahead, there is no recession foreseen for the next 12 months. Mr. Gross goes on to say, "When the year is done, there will be minus signs in front of returns for many asset classes," Gross, 70, wrote in the outlook. "The good times are over."
The DOW at 10:15 is at 17470 down 151 or -0.85%. (Historical High 18,103.45)
The SP500 is at 2010 down 14 or -0.67%. (Historical High 2,093.55)
SPY is at 200.59 down 1.44 or -0.71%.
The $RUT is at 1175 down 5 or -0.44%.
NASDAQ is at 4643 down 18 or -0.39%. (Historical High 5132.52)
NASDAQ 100 is at 4150 down 18 or -0.43%.
$VIX 'Fear Index' is at 22.14 up 1.58 or 7.44%. Bearish 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 46.70 (resistance) and 45.03 (support) today. The session bias is positive and is currently trading up at 46.45. (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 up at 1238.10. The current intra-session trend is elevated. (Chart Here)
Dr. Copper is at 2.533 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 92.23, 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