Market Commentary: Markets Headed Down Into The Deep

Written by Gary

Opening Market Commentary For 02-05-2014

Premarkets were down almost -0.50% and the anti-taper investors started the averages melting back up after the ADP Employment Change came in at 175K while expecting 185K. The oils and precious metals reacted favorably at the news and the US dollar fell. By 9:15 the trend was radically reversed bringing them back in line where they were. Such fluctuations are great for trading IF you can catch them, these would have been tricky at best.

The markets gaped down over -0.50%, recovered somewhat and started down again – wow – these swings could give someone a headache. By the 15 minute mark the averages were in the red, but flat on low volume. That all changed by 10 am when the averages, with only the DOW in the green, sharply shot up to near opening numbers and then turned tail once again.

The SP500 had descended below the 1747 line traded sideways for a while and then suddenly shot up to 1753, remaining there for a minute and by 10:05 then started to melt downward below the 1747 boundary again. By 10:30 the markets were heading into deep territory.

The short term indicators are leaning towards the buy side at the opening changing to sell by 10 am, but I would advise caution in taking any position during this volatile transition period of Mr. Market trying to figure out which way he wants to go. As it stands right now I do not have much in what Mr. Market has up his sleeve as the bulls and the bears both have convincing arguments why the markets should go up or that the markets should go down.

There is pressure to climb higher if only to test the previous Blue Chip highs, but we may have to see some more ‘correction’ before we can start counting our ‘Bulls’. The latest question investors have is, will it go below the next support at (SP500) 1743 and close there? Granted that the 1743 support is a weak one where swinging back and forth across that demarcation may not mean a whole lot. But below 1727 would be an indication that we could be in a really serious correction mode and all bets are off on how deep it can go.

Also, have to watch out for these overnight negative emerging market news announcements which many are pundits unsubstantiated guesses and rumors which can make markets move dramatically. Make sure you have stops in place if you are not in a position to monitor the markets.

The longer 6 month outlook is now 30-70 sell and will remain bearish until we can see what the effects are in the game of the Fed’s ‘Tapering’. By March investors should know how the taper and emerging markets are going to work out in relationship to the stability of the US financial markets and their ability to not to slide further downward. The middle of March should, may, perhaps, hopefully be the end of any correction.

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.

What I am really afraid of is that if a serious ‘Black Swan’ pops up, the resultant market decent would wipe out a lot of profits and undoubtedly be the start of a bear market. This ‘house of cards’ the Fed has built is fragile and would not take a lot to tear it down.

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 couple of months. Removing 10 to 20 billion from the bond buying program each month isn’t going to do much in reducing the QE program at first, but if it can be cut in half by the end of March 2014 certainly will. We are assuming the Fed’s will continue 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 or expand the program later in the year – especially should the employment rate suddenly start to increase. 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 is beening 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 10:30 is at 15375 down 76 or -0.50%.

The SP500 is at 1740 down 15 or -0.85%.

SPY is at 173.94 down 1.37 or -0.77%.

The $RUT is at 1085 down 18 or -1.61%.

NASDAQ is at 3976 down 55 or -1.37%.

NASDAQ 100 is at 3426 down 44 or -1.27%.

$VIX ‘Fear Index’ is at 20.72 up 1.61 or 8.22%. 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 98.24 and 97.39 today. The session bias is sideways and is currently trading up at 97.72.

Brent Crude is trading between 106.43 and 105.78 today. The session bias is sideways and is currently trading up at 106.03.

Gold fell from 1273.88 earlier to 1252.80 and is currently trading up at 1261.00.

Analysts forecast a corrosive year for copper prices

Dr. Copper is at 3.190 falling from 3.216 earlier.

The US dollar is trading between 81.33 and 81.00 and is currently trading down at 81.13, the bias is currently negative.

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Written by Gary