Market Commentary: U.S. Morning Financial's Off, Markets Open Down, Volatility Expected

February 18th, 2015
in Gary's blogging, market open, syndication

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Opening Market Commentary For 02-18-2015

Premarkets were off -0.3% after U.S. Financial's for housing starts and permits slid along with wholesale inflation falling more than expected. Markets opened down on heavy red volume and then the BTFDers jumped in helping the averages recover fractionally.

By 10 am the markets were still down, but trading sideways as volume was falling off to near anemic levels. We are near SP500 historic highs and it is know that the HFT computing crowd like to push the averages up when volume is low. Today is a day to be cautious unless you are a day trader as volatility is expected.


Follow up:

Our medium term indicators are leaning towards Hold portfolio of non-performers at the opening and the session market direction meter (for day traders) is 28 % 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 14.85.

Having some cash on hand now is not a bad strategy as negative 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 64 % Bearish.

CNN's Fear & Greed Index is 77. Above 50 = greed, below 50 = fear. (At 'Extreme 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.

Investors Intelligence sets the breath at 59.3 % bullish with the status at Bull Confirmed. (Chart Here )

StockChart.com Overbought / Oversold Index ($NYMO) is at 18.42. (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 58.40 %. (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.

StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 62.94. (Chart Here) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash.

StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 72.00. (Chart Here) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction.

StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 21.20. (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).

StockChart.com Consumer Discretionary ETF (XLY) is at 74.51. (Chart Here)

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."

StockChart.com NYSE Composite (Liquidity) Index ($NYA) is at 11,026. (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 (which we are in). 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.

Greenspan Throws a Wet Blanket on Hopes for Growth Breakout

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."

Read More >>

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.

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."

ECRI Recession Watch: Weekly Update

The DOW at 10:30 is at 17988 down 59 or -0.33%. (Historical High 18,103.45)

The SP500 is at 2093 down 7 or -0.35%. (Historical High 2,101.30)

SPY is at 209.47 down 0.65 or -0.31%.

The $RUT is at 1220 down 5 or -0.40%.

Don't Invest In The Russell 2000

NASDAQ is at 4888 down 11 or -0.23%. (Historical High 5132.52)

NASDAQ 100 is at 4377 down 8 or -0.18%.

How the Popular 'VIX' Gauge Works

$VIX 'Fear Index' is at 16.51 up 0.71 or 4.49%. Bearish to Neutral Movement

(Follow Real Time Market Averages at end of this article)

The longer trend is up, the past months trend is positive, the past 5 sessions have been positive and the current bias is negative.

Citi: Oil Could Plunge to $20, and This Might Be 'the End of OPEC'

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 54.20 (resistance) and 52.67 (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 neutral, sideways and is currently trading up at 53.61. (Chart Here)

Brent Crude is trading between 62.41 (resistance) and 60.81 (support) today. The support currently is ~50.40 and the next resistance is ~62.00. The session bias is neutral, sideways and is currently trading up at 61.67. (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 rose from 1202.20 earlier to 1210.71 and is currently trading up at 1207.10. The current intra-session trend is neutral and very volatile. (Chart Here)

Dr. Copper in Need of Some Medicine?

Dr. Copper is at 2.630 rising from 2.564 earlier. (Chart Here)

The Consequences Of A Strengthening U.S. Dollar

Will 2015 be the Year of the Greenback?

The US dollar is trading between 94.57 and 94.09 (highest levels since 2003 and ~93.69 is a very substantial support). U.S. dollar is currently trading down at 94.49, 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 level of ~93 is the current support and is substantial. The ~95 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 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

If you would like to get advanced buy/sell tweets, sign-up in the column to the right of this post by clicking on the 'Follow' button. Write me with suggestions and I promise not to bite.

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

Written by Gary

 









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