Market Commentary: Markets Gingerly Open Up Awaiting FOMC Taper Decision

Written by Gary

Opening Market Commentary For 12-18-2013

Premarket numbers were up +0.11% and held steady after the housing starts jumped 22.7%. WTI oil, gold and copper were climbing while the US dollar was falling prior to the opening session bell. Today, this afternoon, is the FOMC meeting and supposedly we will learn what the Fed has in mind regarding the long awaited taper.

At the opening bell the averages opened flat into the green and slowly started to sea-saw upward on low volume as investors wait for the afternoon fireworks from the Fed. By 10 am the averages, looking weak, settled into a narrow trading zone that will probably remain near the flat-line until later today.

Pretty much what I have been saying for the past month.

Santa Yellen Or Scrooge McBen

Of the 8 “most important ever” FOMC decisions in 2013, this one is undisputedly, and without doubt, the 8th.

As Jim Reid summarizes, what everyone wonders is whether today’s decision by the FOMC will have a bearing on a few last-minute Xmas presents around global financial markets.

No taper and markets probably breathe a sigh of relief and the feel-good factor might turn that handheld game machine into a full-blown PS4 by Xmas day. However a taper now might just take the edge off the festivities and leave a few presents on the shelves.

Given that the S&P 500 has pretty much flat-lined since early-mid November in spite of better data one would have to say that some risk of tapering has been priced in but perhaps not all of it.

Alternatively if they don’t taper one would expect markets to see a pretty decent relief rally over the rest of the year.

So will it be Santa or Scrooge from the Fed tonight at 2pm EST?

The short term indicators are leaning heavily towards the sell side at the opening, 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 today 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 many believe it will, the markets are going to price that in by declining sooner. 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.” (low on 12-12-13 was 15,698) Personally, I think it will eventually go a lot lower. First stop will be in the 15,540 to 15,530 area from there is anyone’s guess.

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 10:15 is at 15934 up 58 or 0.37%.

The SP500 is at 1784 up 3 or 0.18%.

SPY is at 178.98 up 0.32 or 0.18%.

The $RUT is at 1121 up 2 or 0.18%.

NASDAQ is at 4020 down 3 or -0.09%.

NASDAQ 100 is at 3463 down 6 or -0.17%.

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

How Oil Really Gets Priced

WTI oil is trading between 97.30 and 98.18 today. The session bias is positive and is currently trading up at 98.15.

Brent Crude is trading between 107.81 and 108.88 today. The session bias is positive and is currently trading down at 108.67.

Gold fell from 1236.58 earlier to 1228.46 and is currently trading down at 1230.00.

Here’s why copper has lost its indicator role

Dr. Copper is at 3.316 rising from 3.298 earlier.

The US dollar is trading between 80.34 and 80.16 and is currently trading up at 80.21, the bias is currently negative.

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Written by Gary