Market Commentary: Markets Close Lower For The Fifth Day, WTI Oil Falls From Resistance, DOW Off 106
Written by Gary
Closing Market Commentary For 01-15-2015
The Swiss national Banks unexpected move to scrap a cap against the Euro was more of a fizzle and oil ruled the day again by falling more than 2% taking the equities with it in mid-day trading.
By 4 pm the averages took a fractional dive after having traded sideways for the entire afternoon reaching the session lows for the second time. Market problems continue to drive the equities downward questioning rational thoughts of investors on just what they are going to do?
The latest negative problem for investors is the SNB's sudden move to scrap a cap on the Euro which turned out not to be such a big problem. According to Eric Marshall there are larger issues investor have to deal with.
"There's a lot of cash still on the sidelines because of the worries over the global economy, over what's going to happen with lower commodity prices," said Eric Marshall, director of research at Hodges Capital Management in Dallas.
Investors are waiting not just results but forecasts from companies, he said. "There's nervousness ... but we think the fourth quarter earnings season will be somewhat of a relief."
Regardless of what the Swiss frank does today the U.S. Unemployment report today represents a "significant uptick" according to Richard Hastings of Global Hunter Securities. After the Labor Department released a report this morning showing claims for state unemployment benefits rose last week. The total claims climbed to 316,000, 16K beyond what is associated with a firming labor market.
"That uptick in jobless claims is something that will really get the entire market reacting."
NEW YORK (MarketWatch) - Don't be too quick to look past the turmoil that swept global financial markets after Switzerland's central bank unexpectedly scrapped a cap on the value of its currency versus the euro.
While European and U.S. equities largely regained their footing after a panicky round of selling in the wake of the decision, dangers may still lurk in some corners of the market. Here are the potential shock waves to look out for: Read More >>
Some say the SNB's move is far worse that a "Ripple" as Mr. Sturkenboom claims. For U.S. companies, trade exposure to Switzerland is small. And that means the direct impact is likely to be more of a ripple than a wave, said Wouter Sturkenboom, senior investment strategist at Russell Investments in London.
However, I am not convinced, but we will see. This revelation has not changed my investment strategy which is oil based for now.
Then there's crude CLG5, -3.80% the number one factor in determining the fate of the world economy, according to Anatole Kaletsky. "Every global recession since 1970 has been preceded by at least a doubling of the oil price, and every time the oil price has fallen by half and stayed down for six months or so, a major acceleration of global growth has followed," he wrote. Kaletsky said $50 is the new ceiling, while many believe it to be the floor.
WTI oil reached the 51 dollar level as I proposed it would do yesterday and then fell sharply after the resistance could not be penetrated. It has continued to fall all session and I expect it to settle at the $40 range before moving either up or down. I will make further assertions of direction then.
Samantha Sunne of Investing.com reported that "Bank of America Merrill Lynch cut its crude oil price forecasts on Thursday, saying Brent could go as low as $31 by the end of the first quarter of 2015." Which means WTI will go lower.
Our medium term indicators are leaning towards sell portfolio of non-performers at the close and the session market direction meter is 98 % bearish. We remain mostly conservatively bullish, neutral in other words. Right now now I am getting very concerned any downtrend could get very aggressive in the short-term and any volatility may also promote sudden reversals. The SP500 MACD has turned down, but remains below zero at -7.99. I would advise caution in taking any position during this uncertain period and I hope you have returned your 'dogs' to the pound.
Having some cash on hand now is not a bad strategy as market changes are happening everyday. As of now, I do not see any leading indicators that are warnings of a 'long-term' reversal in the near-term. There may be one later in 2015, but any market fluctuations we see now are more of a internal market rectification than a bear market.
Investing.com members' sentiments are 41 % Bearish.
StockChart.com Overbought / Oversold Index ($NYMO) is at -25.70. (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 47.51 %. (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 17.75. (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 10,544. (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. Next stop down is 10600, 9750, then 9250, and 8500.
The DOW at 4:00 is at 17323 down 105 or -0.60%. (Historical High 18,103.45)
The SP500 is at 1993 down 2 or -0.92%. (Historical High 2,093.55)
SPY is at 199.53 down 0.86 or -0.41%.
The $RUT is at 1155 down 22 or -1.90%.
NASDAQ is at 4571 down 69 or -1.48%. (Historical High 5132.52)
NASDAQ 100 is at 4090 down 56 or -1.36%.
$VIX 'Fear Index' is at 22.48 up 1.00 or 4.66%. Bearish to 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 negative.
WTI oil is trading between 51.19 (resistance) and 46.13 (support) today. The session bias is negative and is currently trading down at 46.20. (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 1226.24 earlier to 1266.44 and is currently trading down at 1258.40. The current intra-session trend is elevated and sideways. (Chart Here)
Dr. Copper is at 2.571 falling from 2.594 earlier. (Chart Here)
The US dollar is trading between 93.14 (highest since 2005 and ~92 is a very substantial resistance with 92.53 representing a triple top) and 91.54 and is currently trading down at 92.57, the bias is currently sideways. (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