Written by Gary
Closing Market Commentary For 01-06-2014
Markets were predominantly in the red all session today being blamed on good job news that investors interpreted as Fed Taper prospects in progress.
By 4:00 the averages were headed down, but not as far as the 11:30 am low reaching -0.27% for the DOW and -0.77% for the $RUT. Volume was not particularly heavy at the end, but it was red and short term indicators expect this down trend to continue tomorrow morning.
Investors are concerned that a major correction is in progress.
US equities converged down to VIX‘s warnings from the holiday period as for the 3rd day in a row equities dropped.
This is the worst start to the year for the S&P 500 since 2005. Equities improved during the European session but top-ticked at the US open, tumbling to 10-day lows by the time Europe closed.
A leak higher with a vertical ramp to VWAP in the afternoon gave way to selling in the last hour. Trannies are the worst year-to-date (-2.2% from 2013 close highs).
Treasuries gained further today, with yields down 6-8bps on the year. The USD lost ground during the European session then flatlined for the rest of the day (-0.25% on the day).
From Friday’s close, commodities are ending almost unchanged but all had a very volatile ride today (most notably in gold and silver).
The short term indicators are leaning towards the sell side at the closing, but I would advise caution in taking any position during this volatile transition period.
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.
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 of profits over the next few months, so what should they do? Start reducing positions now, my choice, or let profits ride a bit longer? I would be afraid that if a serious ‘Black Swan’ popped up, the market decent would wipe out a lot of profits. This ‘house of cards’ the Fed has built is fragile and would not take a lot to tear it down.
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 to signify a market top.
The DOW at 4:00 is at 16425 down 45 or -0.27%.
The SP500 is at 1827 down 5 or -0.25%.
SPY is at 182.39 down 0.53 or -0.29%.
The $RUT is at 1147 down 9 or 0.77%.
NASDAQ is at 4114 down 18 or -0.44%.
NASDAQ 100 is at 3527 down 12 or -0.33%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been sideways and the current bias is negative.
WTI oil is trading between 94.59 and 93.23 today. The session bias is negative and is currently trading up at 93.69.
Brent Crude is trading between 106.60 and 107.96 today. The session bias is negative and is currently trading down at 107.11.
Gold fell early this morning from 1247.62 earlier to 1217.27 and is currently trading back up at 1236.90.
Dr. Copper is at 3.359 rising from 3.330 earlier.
The US dollar is trading between 81.08 and 80.69 and is currently trading up at 80.80, the bias is currently negative.
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Written by Gary