Written by Gary
Opening Market Commentary For 02-20-2015
Premarkets were down -0.2% and the markets opened in a similar fashion with the BTFDers jumping in a halving the early loss. Minutes later the averages and WTI oil fell over -0.5% on heavy selling as the DOW dips into the triple digits.
By 10 am the markets were poised to fall further, but most of the initial action was over but further volatility is to be expected.
If recent market history plays any part of the next few sessions next week, you can consider today as the first of several down days, three to be exact. There are mixed scenarios that several prominent analysts have proposed that support both bullish and bearish market paths after this small correction.
Oil will be the most prominent indicator of market direction over the next several sessions and I have increased my position of SCO currently at 76.19.
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 43 % 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 flat, but remains above zero at 15.96.
Having some cash on hand now is not a bad strategy as negative market changes are happening everyday. Many investors are starting to take in some profits from 'high-fliers' as a precaution and to build a better cash base for the 'dips'.
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. If you are not worried, then at least be cautious.
Investing.com members' sentiments are 67 % 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.
StockChart.com Overbought / Oversold Index ($NYMO) is at +10.74. (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 58.49 %. (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.
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 ($TNX) is at 20.54. (Chart Here) The Stock Market Is Just Noticing What The Bond Market Has Known For Months The all time low is 13.94 (11-2012).
Chris Ciovacco says, "As long as the consumer discretionary ETF (NYSEARCA:XLY) holds above [66.88], all things being equal, it is a good sign for stocks and the U.S. economy." This chart clearly shows that dropping below 65.00 / 62.75 (and staying there) should be of a great concern to bullish investors.
StockChart.com NYSE Composite (Liquidity) Index ($NYA) is at 10,896. (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.
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 17919 down 64 or -0.36%. (Historical High 18,103.45)
The SP500 is at 2090 down 8 or -0.37%. (Historical High 2,102.13)
SPY is at 209.25 down 7.25 or -0.35%.
The $RUT is at 1222 down 6 or -0.48%.
NASDAQ is at 4918 down 7 or -0.14%. (Historical High 5132.52)
NASDAQ 100 is at 4410 down 2 or -0.04%.
$VIX 'Fear Index' is at 16.16 up 0.87 or 5.62%. Bullish Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is net positive, the past 5 sessions have been net positive and the current bias is negative.
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 52.46 (resistance) and 51.05 (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 51.30. (Chart Here)
Bank analysts are predicting the oil rally of recent weeks isn't going to last. . . nothing in particular happened in these five weeks to cause this upturn . . . Investors are learning that rig counts have diminishing value as an indicator . . .
But the price of oil is another matter. That's going to depend on the headlines that reflect those national interests and technological advances -- or perhaps some new short term factors of the day. Traders rarely lack explanations for the numbers that skip across their screens.
Brent Crude is trading between 61.09 (resistance) and 59.83 (support) today. The support currently is ~50.40 and the next resistance is ~62.00. The session bias is neutral, trending down and is currently trading down at 60.23. (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. 2014 to Aug. 2015). Goldman Sachs estimates that gold will fall to $1,050 an ounce, a drop of nearly 19%.
Gold rose from 1201.40 earlier to 1214.75, reversed direction and is currently trading down at 1206.80. The current intra-session trend is trending down. (Chart Here)
Dr. Copper is at 2.583 fell from 2.622 earlier. (Chart Here)
The US dollar is trading between 94.89 and 94.40 (highest levels since 2003 and ~93.69 is a very substantial support). U.S. dollar is currently trading down at 94.78, the bias is currently trending upwards. (Chart Here)
FRED USD chart. (Trade Weighted U.S. Dollar Index: Major Currencies)
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
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Real Time Market Numbers
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Written by Gary