Written by Gary
Opening Market Commentary For 02-04-2015
Premarkets were down -0.2%, WTI oil although elevated, was falling with gold trending higher, albeit slowly. Markets opened lower as expected with the small caps down -0.5% and the DOW off 25 points. Today's session will probable be negative to a sea-sawing 'consolidation' awaiting Mr. Markets or WTI oil next move.
By 10 am the markets were trending up, SP500 and DOW just above their 50 DMA's with gold and the U.S. Dollar experiencing volatile trading conditions. Volume is fluctuating between very low and moderate and traders can expect some volatility in the morning session.
Our medium term indicators are leaning towards sell portfolio of non-performers at the opening and the session market direction meter (for day traders) is 64 % bearish (complete reversal from yesterday's 100% bullish). 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 up, but remains below zero at -2.73. 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 44 % Bearish.
CNN's Fear & Greed Index is 46. Above 50 = greed, below 50 = fear. (At 'Near Neutral') (Chart Here)
StockChart.com Overbought / Oversold Index ($NYMO) is at +37.26. (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 53.89 %. (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.
For example on XLY and $NYA, there are higher lows and lower highs forming a triangle that at some point breaks out to the top or the bottom. Which way will it goes and that is where you the investor have to follow World events and get your 'gut feeling' in check.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 18.17. (Chart Here) The Stock Market Is Just Noticing What The Bond Market Has Known For Months The all time low is 13.94 (11-2012) and we are trending there.
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 10,809. (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 support 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 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 45-55 sell and will remain somewhat bearish until we can see what the effects are from the oil decline, the Euro collision with Greece and the U.S. Fed possibly triggering a deflationary slide. The markets are at a crossroad of sorts, indecision of which way to go, with a bias to the downside. Investors should employ the first thing one learns while in a foxhole; keep their head down.
Risk Reward Shows Market In The Toilet For 2015
Risk is running very high and the momentum indicators are beginning to wane. Commodity prices are in free fall in some cases, and long-term interest rates continue to trend lower. These negative economic developments are deflationary, which augurs poorly for the stock market. Simultaneously, a plethora of indicators are also flashing warning signs. Our subscribers received a notice on December 15, advising them to add 10% to their short position. We are currently at 50% short.
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 17671 up 5 or 0.03%. (Historical High 18,103.45)
The SP500 is at 2043 down 7 or -0.34%. (Historical High 2,093.55)
SPY is at 204.16 down 0.68 or -0.33%.
The $RUT is at 1193 down 4 or -0.35%.
NASDAQ is at 4706 down 20 or -0.42%. (Historical High 5132.52)
NASDAQ 100 is at 4208 down 21 or -0.50%.
$VIX 'Fear Index' is at 17.49 up 0.16 or 0.92%. Bullish to Neutral Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is neutral, the past 5 sessions have been net positive and the current bias is down and trending up.
WTI oil is trading between 52.55 (resistance) and 50.43 (support) today. The support currently is ~46.70 and the next resistance is ~53.20. 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, meaning even lower prices to come. The session bias is trending down and is currently trading up at 50.91. (Chart Here)
Brent Crude is trading between 58.05 (resistance) and 55.86 (support) today. The support currently is ~50.40 and the next resistance is ~59.33. The session bias is trending down and is currently trading down at 56.20. (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 1257.11 earlier to 1272.68 and is currently trading up at 1270.50. The current intra-session trend is elevated, volatile and sideways. (Chart Here)
Dr. Copper is at 2.587 falling from 2.604 earlier. (Chart Here)
The US dollar is trading between 94.27 (highest since 2003 and ~92 is a very substantial support with 92.53 representing a triple top that has been broken) and 93.77. U.S. dollar is currently trading down at 94.21, the bias is currently 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 level of ~92 is the current support and is 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