Written by Gary
Opening Market Commentary For 02-11-2015
Premarkets were down -0.1%, WTI oil was trading in the 49's and MBA Mortgage Applications were down 9% from +1.3%. Markets opened mixed and the large caps quickly moved into the red while the Nasdaq remained in the green.
By 10 am the markets were mixed where the DOW was down -0.3% and the small caps were up +0.3% on falling volume. Short-term trading indicators were heavy on the bearish side and falling oil depressing equities as a whole. Time to sit on hands and wait this one out.
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 61 % Bearish. 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 above zero at +5.76. 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 52 % Bearish.
CNN's Fear & Greed Index is 57. Above 50 = greed, below 50 = fear. (At 'Greed') (Chart Here) The number of stocks hitting 52-week highs exceeds the number hitting lows and is at the upper end of its range, indicating extreme greed.
StockChart.com Overbought / Oversold Index ($NYMO) is at +8.08. (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 54.10 %. (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 it has made a double top 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 20.02. (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).
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 10,879. (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.
Just when you thought the U.S. economy was roaring back to health, Former Federal Reserve Chairman Alan Greenspan is here to tell you otherwise.
"The United States is doing better than anybody else, but we're still not doing all that well," Greenspan, 88, said today (12-30-2014) in an interview on Bloomberg Television's "In the Loop" with Betty Liu. "We still have a very sluggish economy."
Greenspan said the economy won't fully recover until American companies invest more in productive assets and the housing market bounces back.
"Almost all of the weakness in the last four, five, six years has been in long-lived investments" in capital goods and real estate, Greenspan said. "Until these pick up, we're not going to get the kind of vibrant growth that everyone is hoping for."
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.
The DOW at 10:15 is at 17822 down 47 or -0.26%. (Historical High 18,103.45)
The SP500 is at 2067 down 2 or -0.07%. (Historical High 2,093.55)
SPY is at 206.72 down 0.10 or -0.05%.
The $RUT is at 1201 down 3 or -0.23%.
NASDAQ is at 4793 up 6 or 0.12%. (Historical High 5132.52)
NASDAQ 100 is at 4290 up 8 or 0.19%.
$VIX 'Fear Index' is at 17.41 up 0.18 or 1.04%. 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 mixed, sideways.
The recent surge in oil prices is just a "head-fake," and oil as cheap as $20 a barrel may soon be on the way, Citigroup said in a report . . . Despite global declines in spending that have driven up oil prices in recent weeks, oil production in the U.S. is still rising, wrote Edward Morse, Citigroup's global head of commodity research. Brazil and Russia are pumping oil at record levels, and Saudi Arabia, Iraq and Iran have been fighting to maintain their market share by cutting prices to Asia. The market is oversupplied, and storage tanks are topping out. Read More >>
WTI oil is trading between 50.72 (resistance) and 48.81 (support) today. The support currently is ~46.70 and the next resistance is ~54.00. 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 much lower prices to come. The session bias is negative and is currently trading down at 49.08. (Chart Here)
Brent Crude is trading between 58.10 (resistance) and 55.74 (support) today. The support currently is ~50.40 and the next resistance is ~60.00. The session bias is negative and is currently trading up at 56.04. (Chart Here)
Citi reduced its annual forecast for Brent crude for the second time in 2015. Prices in the $45-$55 range are unsustainable and will trigger "disinvestment from oil" and a fourth-quarter rebound to $75 a barrel, according to the report.
Prices this year will likely average $54 a barrel.
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 fell from 1238.74 earlier to 1223.31 and is currently trading up at 1224.40. The current intra-session trend is negative. (Chart Here)
Dr. Copper is at 2.553 falling from 2.583 earlier. (Chart Here)
The US dollar is trading between 95.18 (highest since 2003 and ~92 is a very substantial support with 92.53 representing a triple top that has been broken) and 94.79. U.S. dollar is currently trading up at 95.14, the bias is currently positive. (Chart Here)
FRED USD chart. (Trade Weighted U.S. Dollar Index: Major Currencies) 10 yr, monthly, add to graph, from 2000
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. The ~94.25 area appears to be a minor resistance for those interested. Historical chart Here.
The markets are still susceptible to climbing on 'Bernankellen' vapor, use caution!
"Investors should Hinge Kir Businessremember 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