Written by Gary
Closing Market Commentary For 02-23-2015
The averages did indeed move sideways as expected, but the volatility was more exaggerated than expected partially due to oil production cuts rumors. WTI oil climbed 1.34 at one point while Brent moved 1.80 before settling down near its session lows as investors largely ignored the 'noise'.
By 4 pm the large caps moved upwards to flat status while the small caps were sprouting green. Oil rumors played a large part in today's volatile action and I suspect the rest of the week will continue to scare timid investors. More thoughts on oil below.
Volatility and sea-sawing marked today's session and most likely defines the rest of the week. Yes, it is more than possible to see equities with higher highs just as it is likely to see the averages plunge deep into the red as some analysts have been chanting for weeks.
Right now the oils have moved down and the equities have moved up - something is going to give shortly.
Some believe Saudi Arabia is ready to call 'uncle' and cut oil production which would obviously raise prices. But that would be in the face of NOT achieving their goals of financially hurting Iran or Russia. Kevin Kerr, president of Kerr Trading International is positive that "the Saudi's [will] announce a production cut" is a bit premature and most likely not happen in 2015.
I am betting that the emergency meeting was more about what can they do to make oil fall further and faster, but that is just my opinion of course.
SAN FRANCISCO (MarketWatch) - Traders beware: A surprise oil production cut from OPEC could be in the works.
"Once the Saudi's announce a production cut - and they will - combined with all the lost production and infrastructure in the U.S. and elsewhere, prices could jump rapidly," said [Kevin] Kerr.
"It's a game of dangerous musical chairs, and I think we are about 3/4 of the way through the song, so traders should start looking for a chair soon," he said.
Personally, the real issue with oil right now is where to store all of it. So many pundits have guessed wrong about what the Saudi's are doing or try to accomplish. Most have guessed the Saudi's are attempting to hurt the Canadian and U.S. Sand and shale oil production, which it will, but that is NOT the real reason for NOT cutting production.
Oil back under $50 as investors continue to fret about excess crude in the U.S., but heating-oil prices rally on supply concerns, strong demand.
The impact of fewer U.S. drilling rigs will be seen only later this year, according to analysts at BNP. The changes are more marked in the second half of the year, consistent with the time lag between lower drilling activity and production, they said.
But traders appeared unfazed by a report Monday from the Financial Times which said members of the Organization of the Petroleum Exporting Countries have discussed holding an emergency meeting if crude continues to slide.
Our medium term indicators are leaning towards Hold portfolio of non-performers at the close and the session market direction meter (for day traders) is 54 % 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 18.70.
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.
Brett Arends described the U.S. stock market as "one of the most dangerous in the world ," based on the research of Wellershoff & Partners, and suggested it may be a good idea to diversify with some international or emerging markets funds.
Investing.com members' sentiments are 65 % Bearish.
CNN's Fear & Greed Index is 78. 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 24.57. (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 59.89 %. (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.
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 ($TNX) is at 20.59. (Chart Here) The Stock Market Is Just Noticing What The Bond Market Has Known For Months The all time low is 13.94 (11-2012).
Chris Ciovacco says, "As long as the consumer discretionary ETF (NYSEARCA:XLY) holds above [66.88], all things being equal, it is a good sign for stocks and the U.S. economy." This chart clearly shows that dropping below 65.00 / 62.75 (and staying there) should be of a great concern to bullish investors.
StockChart.com NYSE Composite (Liquidity) Index ($NYA) is at 11,065. (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.
The DOW at 4:00 is at 18117 down 24 or -0.13%. (Historical High 18,144.29)
The SP500 is at 2110 down 0.64 or -0.03%. (Historical High 2,110.61)
SPY is at 211.16 down 0.03 or -0.01%.
The $RUT is at 1232 up 0.04 or 0.00%.
NASDAQ is at 4961 up 5 or 0.10%. (Historical High 5132.52)
NASDAQ 100 is at 4449 down 6 or 0.14%.
$VIX 'Fear Index' is at 14.56 up 0.26 or 1.82%. Bullish 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 elevated and trending up.
WTI oil is trading between 50.98 (resistance) and 48.60 (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 trending sideways and is currently trading up at 49.34. (Chart Here)
Brent Crude is trading between 60.48 (resistance) and 58.37 (support) today. The support currently is ~50.40 and the next resistance is ~62.00. The session bias is down and sideways and is currently trading up at 59.97. (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 1190.71 earlier to 1209.88 and is currently trading down at 1202.00. The current intra-session trend is neutral and trending sideways. (Chart Here)
Dr. Copper is at 2.587 falling from 2.609 earlier. (Chart Here)
The US dollar is trading between 59.01 and 94.58 (highest levels since 2003 and ~93.69 is a very substantial support). U.S. dollar is currently trading up at 94.68, the bias is currently trending sideways. (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
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Written by Gary