Written by Gary
Midday Market Commentary For 02-06-2014
The 500 reached 17 handles, just below the resistance of 1773, before it arched over and started to slide sideways with a very slight positive slant.
By noon it was unclear if the HFT computers had enough strength to move the averages back up and over the resistance. If the averages close above that resistance, then it will probably be smooth sailing for the bulls. Baring penetration we have to sit back and watch how the markets sideways channel works out. The danger for the non-complacent is that the averages could plunge without notice.
Eric Parnell write an interesting article how fragile the financial markets are what wrong with rampant bullishness over the past year and the negative aspects for today’s bullish investor.
The tide in the market is now turning, and we have only just begun to feel the pain. It is a process that will take an extended period of time to play out, as the pain certainly will not be felt all at once.
But for those that have found the “wipeout” over the last two weeks worthy of “panic”, they are in for a most unpleasant surprise, as a -6% decline is nothing compared to what may lie ahead over the next few years.
It will be interesting to see, but now is the time to begin using both pullbacks and rallies not only in stocks but a variety of other asset classes to begin preparing portfolios for what potentially lies ahead.
The short term indicators are leaning towards the hold side at the midday, 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 and 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 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.
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The DOW at 12:00 is at 15583 up 144 or 0.93%.
The SP500 is at 1768 up 16 or 0.93%.
SPY is at 176.88 up 1.70 or 0.97%.
The $RUT is at 1104 up 11 or 0.99%.
NASDAQ is at 4053 up 42 or 1.04%.
NASDAQ 100 is at 3493 up 38 or 1.09%.
$VIX ‘Fear Index’ is at 17.89 down 2.06 or -10.33%. Bullish
The longer trend is up, the past months trend is sideways, the past 5 sessions have been negative and the current bias is positive.
WTI oil is trading between 97.20 and 98.82 today. The session bias is negative and is currently trading down at 98.15.
Brent Crude is trading between 106.16 and 107.28 today. The session bias is negative slant and is currently trading up at 106.83.
Gold fell from 1266.45 earlier to 1253.19 and is currently trading down at 1256.00.
Dr. Copper is at 3.236 rising from 3.190 earlier.
The US dollar is trading between 81.33 and 80.81 and is currently trading up at 80.90, the bias is currently negative.
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Written by Gary