Written by Gary
Market Close Commentary For 02 Mar, 2015
The DOW made a new historical high and the Nasdaq composite crossed the 5000 mark for the first time since 2000 and volume ramped up during the closing hour.
By 4 pm the DOW was sailing high along with the Nasdaq composite and the SP500 was trailing behind. The DOW was still climbing at the close and finished at its new historic high.
Several years ago I looked at the charts of the DOW, SP500 and the Nasdaq composite searching for similarities and any 'visions' that might jump out and shout 'hallelujah, You have found where the top will be'. I mused over the idea that would be an interesting article, but at the time there was so much confusion about what was happening and the bears were so damn sure the market was going to fall, which it didn't. Actually, it doesn't matter because the foretelling was so far in the future, no one would have paid any attention with everyone else throwing half-baked spaghetti ideas on the financial walls.
The Nasdaq Composite crossed the 5000 mark for the first time in 2000, the height of the dot com bubble. Meanwhile, the broader U.S. averages were also trading solidly in the green despite a round of disappointing economic data.
I look at today's charts and wonder if I didn't really have something going on back then. There are 'reasonable' bearish scenarios being touted currently by 'reasonable' financial aficionados like Buffett, Gross, Greenspan and Brett Arends that paint a dreary outcome for 2015. What if the markets decided to start a deep correction coinciding with the Nasdaq reaching its all-time high of 5,132.52; WOW, what a coincidence that would be. Every pundit would be claiming, 'See, I told you so' as if they saw this years ago like I did.
At the time, it was indeed way too far in the future to make a call of that magnitude as so many black swans were swimming in the Wall Street pond. Any one of them could have easily upset the financial apple cart at anytime during the past 3 or 4 years. Still, what is the markets reaction going to be when the Nasdaq tops out? Will this be the 'straw' that broke the camels back?
The Nasdaq went as high as [5,020] before pulling back a bit. But believe it or not, the Nasdaq is now just 2.6% from the all-time peak [of 5,132.52] it notched during the Dot-com bubble.
Deja vu all over again? Still, there are some eerie comparisons to15 years ago. Apple is now worth more than $750 billion and some experts are predicting that the company will one day top the $1 trillion market value level.
Back in 2000, many were saying the same thing about Cisco Systems (CSCO, Tech30). That didn't happen. Cisco is no slouch. It's even in the Dow. But its stock has not gotten back to 2000 levels. Its market value is $150 billion.
Our medium term indicators are leaning towards Hold portfolio of non-performers and the session market direction meter (for day traders) is 7 % Bullish and falling. We remain mostly conservatively bullish, but with a bearish slant. I am very concerned any downtrend could get very aggressive in the short-term and any volatility may also promote sudden reversals that will only please the day traders. The SP500 MACD has turned flat, but remains above zero at 19.27.
Having some cash on hand now is not a bad strategy as negative market changes are happening everyday. Many investors are starting to take in some profits from 'high-fliers' as a precaution and to build a better cash base for the 'dips'.
As of now, I do see some leading indicators that are warning of a 'long-term' reversal within six months. I believe one is most likely to occur later in 2015, but any market fluctuations we see now are more of a internal market rectification than a bear market. If you are not worried, then at least be cautious.
Brett Arends described the U.S. stock market as "one of the most dangerous in the world ," based on the research of Wellershoff & Partners, and suggested it may be a good idea to diversify with some international or emerging markets funds.
Investing.com members' sentiments are 76 % Bearish.
CNN's Fear & Greed Index is 73. Above 50 = greed, below 50 = fear. (At 'Greed') (Chart Here) The number of stocks hitting 52-week highs exceeds the number hitting lows and is at the upper end of its range, indicating extreme greed.
StockChart.com Overbought / Oversold Index ($NYMO) is at +8.76. (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 60.81 %. (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.
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 11,098. (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.
I am going to change the way we report the market action by having a 9 am premarket news report followed later with what is happening at irregular times. I am going to rely on tweeting alerts to notify you on important changes in the markets. If you want to be on my front line for 'significant' events that could effect your trading and want to recieve Trader Alert 'Tweets' click here:
The DOW at 4:00 is at 18288.63 up 155.93 or 0.86%. (Historical High 18,288.63)
The SP500 is at 2117 up 13 or 0.61%. (Historical High 2,119.59)
SPY is at 211.89 up 1.33 or 0.63%.
The $RUT is at 1243 up 9 or 0.75%.
NASDAQ is at 5008 up 45 or 0.90%. (Historical High 5132.52)
NASDAQ 100 is at 4483 up 42 or 0.95%.
$VIX 'Fear Index' is at 13.02 down 0.32 or -2.40%. Bullish 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 elevated and sideways and the current bias is positive.
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 51.00 (resistance) and 48.71 (support) today. The support currently is ~49.00, then ~45.06 and the next resistance is ~54.40+. 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, failing to go above 51 and is currently trading up at 49.84. (Chart Here)
Some believe Saudi Arabia is ready to call 'uncle' and cut oil production which would 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.
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.
Markets Open Fractionally
Brent Crude is trading between 62.30 (resistance) and 59.37 (support) today. The support currently is ~58.60, next ~58.13 and the next resistance is ~62.00. The session bias is down and is currently trading up at 59.89. (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 fell from 1223.05 earlier to 1204.34 and is currently trading up at 1205.60. The current intra-session trend is negative. (Chart Here)
Dr. Copper is at 2.697 rising from 2.677 earlier. (Chart Here)
The US dollar is trading between 95.54 and 95.09 (highest levels since 2003 and ~93.69 is a very substantial support). U.S. dollar is currently trading up at 95.52, 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
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Written by Gary