Market Commentary: Markets Fall And Slice Through Key Support Levels

Written by Gary

Closing Market Commentary For 01-24-2014

The markets slid downward all day and The $VIX moved up to 17.88 at the close. The markets slid downwards all session and sliced through major support levels Marking today a one of the worst declines since November, 2013.

By 4 pm the major markets had declined +2.00% with analyst on the bearish side of the fence calming “I told you so.”

Well, not so fast Pilgrim, the 500 may be lower but the bullish momentum and support are still intact. The markets will eventually ease down, I agree, but I do not think just now. The bearish action lately will serve as a long awaited correction for one thing and now that is out of the way . . .

The reasons for my VERY short term bullishness is there will be an up day just to offset this drastic fall if nothing else. Highly unlikely the markets will continue to fall on Monday UNLESS the is a black swan over the weekend. I should see some bullishness at the very least for an hour or so and will pull the plug on FAS and take a small loss if I am incorrect.

Next the sp500 and dow highs HAVE NOT been tested, plus the opening gaps left by several markets when they gaped down on opening. This become a powerful leverage to bring the averages back up to close them. Gaps in the Blue Chips is NOT a good thing and usually point the market direction later.

The fall yesterday and today are weak bears because the are based on rumors that the Chinese are going to default and India is having serious issues with corruption and relatively weak US financial news. Today decline was a bit steeper than I anticipated, but not all surprising either.

The financial news on Monday is light and even a bad report on home sales, which I expect it to be, is not enough to continue the descent.

Lastly, the BTFDers are going to find this low to be irresistible and some will buy in. There is way too much bullishness and pressure to continue to move upwards, at least for the short term.

The short term indicators are leaning very slightly towards the buy side at the close, but I would advise caution in taking any position during this volatile transition period. There will be pressure to climb higher if only to test the previous Blue Chip highs, therefore I do not foresee the markets descending below the sideways channel they are currently in until AFTER those highs are tested.

The gaps left by descending averages over the past several sessions is a bullish indicator, plus the fact we have not tested the previous highs. From a purely technical stand point the actual support of the markets was touched on this morning AND bounced off. This could mark the bottom of the correction and Monday will verify this. I feel strongly that we will see these markets recover shortly and climb back up to at least the previous highs.

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? What I am afraid of is that if a serious ‘Black Swan’ pops 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, watch for QE5 when Obamacare starts drags the economy down into trouble in 2015.

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.

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The DOW at 4:00 is at 15879 down 318 or -1.96%.

The SP500 is at 1790 down 38 or -2.09%.

SPY is at 178.59 down 4 or -2.13%.

The $RUT is at 1144 down 28 or -2.41%.

NASDAQ is at 4128 down 91 or -2.15%.

NASDAQ 100 is at 3541 down 72 or -2.00%.

$VIX ‘Fear Index’ is at 18.14 up 4.37 or 31.74%. Bearish

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

How Oil Really Gets Priced

WTI oil is trading between 97.80 and 96.28 today. The session bias is negative and is currently trading down at 96.86.

Brent Crude is trading between 106.24 and 108.01 today. The session bias is positive and is currently trading up at 107.91.

Gold fell from 1272.50 earlier to 1260.89 and is currently trading up at 1268.60.

Analysts forecast a corrosive year for copper prices

Dr. Copper is at 3.263 falling from 3.300 earlier.

The US dollar is trading between 80.64 and 80.23 and is currently trading up at 80.55, the bias is currently sideways.

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Written by Gary