Written by Gary
Closing Market Commentary For 01-22-2015
Markets closed up nicely today apparently liking the new 'free' money coming in from Draghi and his Merry Men at the ECB - sound anything like the U.S.'s QE? Importantly the WTI oil closed at the support line. Some analysts say above, but we will have to wait for a couple more sessions.
By 4 pm the averages posted nice gains melting just at the +1.5% mark and Mr. Market assures investors there is more bull to come and be happy (self shaking head, BS me thinks).
I am still in a holding pattern of sorts and the SOXS inverse ETF may have been premature, but I am holding. The SCO has resulted in a 20% increase and will probably see more upside.
I have said for years that the house of cards the U.S. Fed's have built will eventually be the markets ultimate demise and that can't be more true today than today. Now that Draghi's QE dream is becoming an actuality, it is becoming clear, at least in this analysts mind, the markets are headed for a fall of serious proportions sometime in the future. Near future, like the fourth quarter of 2015 is where my current thinking is planing.
In an awkwardly uncomfortable non-cheerleadery few minutes on CNBC this morning, he-who-must-be-listened-to (when he is buying stuff and not selling it) - Carl Icahn - dropped a few truth bombs on an unsuspecting Scott Wapner.
Starting with warnings about energy sector debt, fearing a surge in defaults and "what management can do to hurt you" if you own that debt, Icahn then moved on to discuss today's ECB move and its implications.
Confirming his "extremely cautious" stance to the overall market, Icahn explained how "the reason the stock market has gone up is because of the Federal Reserve," and now the rest of the world is jumping on the bandwagon "with all this issuance of money," and the implicitly strengthening US Dollar "will come home to roost at some point."
While not pointing to a specific point in time, Icahn concluded, "you do have to be extremely cautious and we have hedges on.. and it's too early to buy oil stocks/bonds."
Our medium term indicators are leaning towards sell portfolio of non-performers at the close and the session market direction meter (for day traders) is 42 % bearish up from flat at the opening. We remain mostly conservatively bullish, but with a bearish slant. I am very concerned any downtrend could get very aggressive in the short-term and any volatility may also promote sudden reversals that will only please the day traders. The SP500 MACD has turned flat, but remains below zero at -3.85. I would advise caution in taking any position during this 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 see some leading indicators that are warning of a 'long-term' reversal within six months. I believe one is most likely to occur 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 35 % Bearish.
CNN's Fear & Greed Index is 28. Above 50 = greed, below 50 = fear. (At 'Fear') (Chart Here)
StockChart.com Overbought / Oversold Index ($NYMO) is at +0.36. (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 49.44 %. (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 $NYA all show rounding off the tops which in the past has lead to a downturn.
Also, the SP500 10 DMA has crossed over the 20 DMA (12-11-14) always indicating a 'correction' underway. The 50,100, 145 and 200 DMA are all going flat which is never a good omen for a continuing bull run. Watch for the 50 DMA to cross over the 100,145 and 200 DMA to indicate how deep the correction will be.
These are not 'leading' indicators as such, but depicting 'trends' in the making showing data accumulated over the past several months and needs to be watched.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 18.96. (Chart Here) The Stock Market Is Just Noticing What The Bond Market Has Known For 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 10,853. (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 17814 up 260 or 1.48%. (Historical High 18,103.45)
The SP500 is at 2063 up 31 or 1.53%. (Historical High 2,093.55)
SPY is at 206.03 up 3.02 or 1.49%.
The $RUT is at 1190 up 24 or 2.07%.
NASDAQ is at 4750 up 83 or 1.78%. (Historical High 5132.52)
NASDAQ 100 is at 4270 up 78 or 1.87%.
$VIX 'Fear Index' is at 16.40 down 2.45 or -13.00%. Bullish Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is net neutral, the past 5 sessions have been positive and the current bias is elevated and trending sideways.
WTI oil is trading between 49.00 (resistance) and 45.88 (support) today. The support floor currently is ~46.70. The Iranians say they are comfortable with $25 and I'll bet the Saudi's will do everything possible to make it painful for them. The session bias is negative and is currently trading down at 46.49. (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 1279.68 earlier to 1307.26 and is currently trading down at 1302.10. The current intra-session trend is positive. (Chart Here)
Dr. Copper is at 2.588 falling from 2.610 earlier. (Chart Here)
The US dollar is trading between 94.76 (highest since 2003 and ~92 is a very substantial support with 92.53 representing a triple top that has been broken) and 82.67 and is currently trading up at 93.73, the bias is currently positive. (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 support (substantial). 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