Market Commentary: Markets Slowly Melting Up From Morning Lows, Weakness Still Prevails

Written by Gary

Midday Market Commentary For 01-31-2014

By noon the averages had climbed out of the morning lows to cut losses fro minus one point to a mere -0.75% for the DOW – whoopee! (Pardon the sarcasm) The small caps fared better at -0.45% but on falling volume and that is not a good sign of strength.

Most investors are holding their collective breath hoping (remember ‘Hopium’?) the markets will continue the melting upwards.

The short term indicators are leaning towards the sell hold at the midday, but I would advise caution in taking any position during this volatile transition period. As it stands right now I do not have a clue what Mr. Market has up his sleeve as the bulls and the bears both have convincing arguments why the markets should go this way or that way.

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 new sideways channel between 1809 and 1773 for the SP500. (However, I said the same thing about the support at 1809 – and that is long gone – take my guesses for what they are worth.) The latest question investors have is, will it go below the next support at (SP500) 1773 and most importantly, close there? Below that and we could be in a serious correction mode and all bets are off on how deep it can go. More likely this is the start another sideways channel that may drag on for a month baring any Black Swans.

Also, have to watch out for these overnight negative World news announcements which many are 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.

Again, 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 by March 2014 certainly will – IF – the Fed’s continues the taper program – so far, they are moving ahead in spite of the emerging market worries.

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 12:00 is at 15738 down 110 or -0.68%.

The SP500 is at 1787 down 7 or -0.40%.

SPY is at 178.59 down 0.60 or -0.35%.

The $RUT is at 1135 down 5 or -0.41%.

NASDAQ is at 4108 down 15 or -0.36%.

NASDAQ 100 is at 3522 down 11 or -0.30%.

$VIX ‘Fear Index’ is at 17.45 up 0.16 or 0.93%. Neutral

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

How Oil Really Gets Priced

WTI oil is trading between 98.21 and 97.13 today. The session bias is positive and is currently trading up at 98.02.

Brent Crude is trading between 108.02 and 106.56 today. The session bias is negative and is currently trading down at 106.95.

Gold rose fell 1254.63 earlier to 1239.73 and is currently trading down at 1241.80.

Analysts forecast a corrosive year for copper prices

Dr. Copper is at 3.211 falling from 3.230 earlier.

The US dollar is trading between 81.08 and 81.42 and is currently trading down at 81.32, the bias is currently negative.

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Written by Gary