Written by Gary
Closing Market Commentary For 01-27-2014
Markets basically did nothing today and closed in the red with the small caps leading the way being 1% off. The important technical factor is that the averages broke solidly below a support on Friday and did the same today on the second one below the upper one , BUT didn’t close below it.
By 4 pm the bears once again today held the line and melted the averages down on light volume.
We have had 6 red candles over the past same number of sessions and one would expect to see an up day, maybe tomorrow. I thought today was going to be a session that ended on a positive note because of ‘technical’ reasons, but most of these ‘technical’ aspects have to be looked at with a wary eye as they have not been accurate or reliable for several years.
The short term indicators are still leaning towards the hold side at the closing, 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. (NOTE: The sideways channel downside has been penetrated and that technical theory has to be thrown out the window, but will it go below the next support at (SP500) 1773 and close there? Below that and we could be in a serious correction mode and all bets are off. More likely we will start another sideways channel between the 2 SP500 supports of ~1409 and ~1773.
Got to watch out for these overnight negative World news announcements which are usually rumors and make sure you have stops in place if you are not in a position to monitor the markets.
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.
The Best Stock Market Indicator Update says the market is untradable.
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 15838 down 41 or -0.36%.
The SP500 is at 1782 down 9 or -0.49%.
SPY is at 178.01 down 0.88 or -0.49%.
The $RUT is at 1128 down 16 or -1.44%.
NASDAQ is at 4084 down 45 or -1.08%.
NASDAQ 100 is at 3509 down 32 or -0.92%.
$VIX ‘Fear Index’ is at 17.47 down 0.66 or -3.64%. Bullish
The longer trend is up, the past months trend is sideways, the past 5 sessions have been negative and the current bias is negative.
WTI oil is trading between 97.16 and 95.22 today. The session bias is negative and is currently trading up at 95.87.
Brent Crude is trading between 106.44 and 108.08 today. The session bias is negative and is currently trading down at 107.10.
Gold fell from 1279.20 earlier to 1252.07 and is currently trading down at 1255.30.
Dr. Copper is at 3.256 falling from 3.286 earlier.
The US dollar is trading between 80.64 and 80.39 and is currently trading down at 80.57, the bias is currently down, but sideways.
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Written by Gary