Market Commentary: Not A Waterfall, But Investors Are Carefully Watching

Written by Gary

Closing Market Commentary For 12-11-2013

So much for my recovery guessing today. The averages continually melted down today except for a brief sideways stint coinciding with lunch time. The day’s candle looks like past negative 1% sessions in which it recovers the next day completely or has one more faux down session, then recovers on the 3rd day by gaping upwards. I do not see this market faltering down very far even in the face of tapering this month.

By 4 pm every major market, sans the DOW, were down over 1% and the $RUT down over -1.60%. It seems we have one of these day every month, but I doubt the ‘bears’ are sleeping.

It appears the swings between institutional accumulation and distribution are getting narrower and ready for a breakout. Again, caution is warranted for investors as we await the Fed’s decision on the 18th.

@stocktiming:_______

We have been commenting about the relationship between the Stock Market and Institutional Investor Buying and Selling activity.

Basically, it matters whether Institutional Investors are in Accumulation or Distribution as seen on this chart. As we have commented in the past, Institutional Investors own over half of the stock market’s equities and therefore control the action of the Stock Market depending whether they are in Accumulation or Distribution.

As seen on today’s chart, they are in Accumulation when the blue Buying line shows that Buying is running higher than the amount of daily Selling (the red line). Conversely, Institutional Investors are in Distribution when the red Selling line is higher that the blue Buying line.

While they are in Accumulation, the market goes up … when they are in Distribution, the market goes down. The lesson behind this story is: “Never go against what the Institutional Investors are doing”.

Yesterday’s close was an important inflection point because Institutional Investors had equal Buying and Selling amounts putting them in a Neutral position.

The short term indicators are still leaning heavily towards the sell side at the close, but I would advise caution in taking a position because of the Fed’s cryptic utterances in hinting when the taper will begin and by how much. I would also take chart and other technical indicators with a grain of salt for the time being and watch what the Fed does WHEN it actually does something.

The longer 6 month outlook remains 40-60 sell until we can see what the Fed is actually going to do, simple as that. If we get some Fed tapering in December (17th. -18th. meeting) the markets will certainly react in a negative fashion, how much of course depends on much bond buying takes place. If the tapering begins in March 2014, like some believe it will, the markets are going to price that in by declining sooner. However, 74% of Bloomberg surveyed economists believe tapering will believe either in December or January as of 12-09-2013, but Fisher says it will take place in the first quarter. I am expecting weak to negative markets for the foreseeable future.

Members of the FOMC believe the US economy has shown signs of improvement, but they have assured short-term interest rates would remain low for quite some time to come. Alpari Market Analyst, Craig Erlam, said: “Many members of the Fed now appear eager to start winding down its asset purchases and are looking for ways to do it that will create the least disruption in the financial markets, such as setting simple thresholds for reductions, or even more simply, providing a timetable for tapering that is not data dependent.”

ADVFN reported, “The rally in question has been built on the back of the Fed’s promise of a stimulatory environment. If any catalyst points to the Fed giving up its accommodative stance, there is a danger of a pullback and near term support for the index lies around the 15,965, 15,890 and 15,804 levels.” Personally, I think it could go a lot lower.

Also, many pundits have stated that we may have seen the top – but I wouldn’t count it as long as the Fed continues to hand out ‘Market Viagra’! I would like to see a blowout candle (shooting star) to verify a top along with heavy volume.

The DOW at 4:00 is at 15844 down 130 or -0.81%.

The SP500 is at 1782 down 20 or -1.13%.

SPY is at 178.73 down 2 or -1.12%.

The $RUT is at 1101 down 18 or -1.62%.

NASDAQ is at 4004 down 57 or -1.40%.

NASDAQ 100 is at 3469 down 45 or -1.29%.

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

How Oil Really Gets Priced

WTI oil is trading between 98.62 and 97.22 today. The session bias is negative and is currently trading down at 97.39.

Brent Crude is trading between 109.87 and 108.63 today. The session bias is positive and is currently trading up at 109.77.

Gold fell from 1262.67 earlier to 1251.66 and is currently trading up at 1253.40.

Here’s why copper has lost its indicator role

Dr. Copper is at 3.288 rising from 3.256 earlier.

The US dollar is trading between 80.05 and 79.76 and is currently trading down at 79.89, the bias is currently negative.

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

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Written by Gary