Written by Gary
Opening Market Commentary For 01-09-2014
Premarkets were up nicely at +0.30% amidst of mixed news where the US Initial Jobless Claims reported in at 330K versus the 335K expected and 345K prior. (see report below)
The Market place opened up as expected, leaving opening gaps, but started to melt downward immediately to where the Blue Chips were headed for flat territory. The Blue Chip averages are very near testing the previous highs and testing that level that will probably be the force that drive the markets in the next few days.
By 10 am the averages were all in the green on low to moderate volume trending but trending down.
Earlier this week I thought we would see a negative market by tomorrow and now it doesn’t look like that will be the case. However, watching the markets trading sideways for the past 12 sessions is not exactly helpful in deciding the next trading move.
Part of the problem is the number of souls working part-time and those not working at better paying jobs being counted as full-time workers therefor skewing the statistics. The BLS U-6 unemployment probably reflects the true state of affairs at 13.2% blowing away the more optimistic U-3 at 7.0%.
The Department of Labor states that there is no indication that the winter storm affected this week’s numbers (though they are likely to remain volatile through January) as jobless claims dropped from a ubiquitously revised-upwards 345k to 330k this week – the lowest level since the end of November (even as NSA data jumped from 451k to 486k on the week).
Continuing claims rose modestly back into the middle of the range of the last 4 months just like initial claims. The emergency claims data is lagged so we will not see the impact of congressional decisions on that until 2 weeks from now but its worth noting that the data we already have shows 104,000 dropping off the rolls.
California, Pennsylvania, and Michigan topped the initial claimants list with California worse than this time last year.
The short term indicators are leaning towards the sell side at the opening, 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.
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.
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 10:00 is at 16484 up 20 or 0.12%.
The SP500 is at 1842 up 4 or 0.22%.
SPY is at 183.91 up 0.41 or 0.23%.
The $RUT is at 1161 up 4 or 0.32%.
NASDAQ is at 4173 up 7 or 0.16%.
NASDAQ 100 is at 3568 up 1 or 0.03%.
The longer trend is up, the past months trend is bullish, the past 12 sessions have been sideways and the current bias is negative.
WTI oil is trading between 92.31 and 92.92 today. The session bias is negative and is currently trading up at 92.52.
Brent Crude is trading between 107.30 and 108.15 today. The session bias is negative and is currently trading up at 107.67.
Gold fell from 1230.50 earlier to 1223.61 and is currently trading up at 1226.10.
Dr. Copper is at 3.311 falling from 3.356 earlier.
The US dollar is trading between 80.98 and 81.32 and is currently trading down at 81.24, the bias is currently positive.
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Written by Gary