Written by Gary
Opening Market Commentary For 12-23-2013
Premarkets were up +0.50% by 9 am with the US dollar falling and gold rising. The oils were trading sideways with a positive slant and traders were preparing for a potentially volatile day.
At the opening bell the SP500 gaped up a half of a percentage point, matching the futures, along with other averages posting higher numbers. By 10 am the $VIX remained in the low 13’s as the averages started to melt off their morning highs supporting some investors fears of a weakening market and the end of the Santa Claus Rally
Several pundits are claiming the financial news was good and pointing to an improving economy, but I disagree that the numbers are indicating a robust economy in the making, far from it.
US Savings Rate Slides As Personal Incomes Below Expectations; Real Disposable Income Growth Tumbles
For the second month in a row, Income, which rose a modest 0.2%, missed expectations of a 0.5% rise for the month, even as Personal Spending rose by 0.5% – driven by a 2.2% increase in spending on Durable Goods while Non-durable expenditures were unchanged on the month, in line with expectations.
As a result, the US consumers dug even deeper into their meager savings, and in November the savings rate dropped once more, sliding from 4.5% to 4.2%, the lowest since January 2013, after hitting a high of 5.2% in September on “government shutdown uncertainty.”
One of our proprietary chart indicators made a ‘significant’ double top last week from the year 2007 indicating a real threat for the markets moving higher. It is a reliable signal that means investors need to carefully monitor the markets over the coming months. A break-out going higher seems unlikely at this point.
Several others are approaching a resistance that approximates the same level and has us concerned on the prospects of the major markets moving higher. We can see where new highs are going to be achieved, but at a great cost in the long run for anyone going long at this point.
The average of the six was an impressive 2.91%, with Germany’s DAXK as the top performer, up 4.37%. The two negative performers were the two China indexes.
The Hang Seng fell 1.87% and the Shanghai Composite plunged a gut-wrenching 5.07%, its worst weekly loss since May 2011.
The short term indicators are leaning towards the buy side at the opening and is expected to change to sell, but I would advise caution in taking any position during this volatile transition period. Here is the quandary some investors have now. They have bet on the QE program to bolster their profits and knowing full well they may see some eroding over the next few months, so what should they do? Start reducing positions now, most probable, or let profits ride a bit longer? My non-technical ‘gut feeling’ says the little guy, that’s us, had better take some additional caution through the remaining days of the year and try not to get caught in a faux bull or bear trap.
I would also take chart and other technical indicators with a grain of salt for the time being and watch what the Fed does over the next 4 months. Removing 10 billion from the bond buying program each month isn’t going to do much in reducing the QE program in the beginning, but halving it in 4 months certainly will – IF – the Fed’s continues the taper program. My instincts tell me that the Keynesian’s are going to be reluctant to stop their grand financial experiment and will want to taper the taper within the next several months – especially if the employment rate increases.
The longer 6 month outlook still remains 40-60 sell until we can see what the effects are in this almost nothing start of the Fed’s ‘Taper’. By March investors should know how the taper is going to work out in relationship to the stability of the US financial markets and their ability to not to slide downward.
For now, I am continuing to expect weak to negative markets for the foreseeable future. My advise is to invest in tennis balls as they have a higher rate of return!
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’, even if it has been reduced somewhat! I would like to see a blowout candle (shooting star) to verify a top along with heavy volume.
The DOW at 10:00 is at 16283 up 61 or 0.37%.
The SP500 is at 1826 up 8 or 0.41%.
SPY is at 182.24 up 0.67 or 0.37%.
The $RUT is at 1151 up 5 or 0.44%.
NASDAQ is at 4129 up 24 or 0.60%.
NASDAQ 100 is at 3554 up 23 or 0.70%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been positive and the current bias is negative.
WTI oil is trading between 98.86 and 99.28 today. The session bias is negative and is currently trading up at 98.99.
Brent Crude is trading between 111.27 and 111.88 today. The session bias is positive and is currently trading down at 111.72.
Gold rose from 1192.20 earlier to 1202.80 and is currently trading up at 1199.60.
Dr. Copper is at 3.306 falling from 3.312 earlier.
The US dollar is trading between 80.70 and 80.50 and is currently trading up at 80.60, the bias is currently positive.
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary