Market Commentary: Markets Open Up, Direction Unsure

Written by Gary

Opening Market Commentary For 02-11-2014

Premarkets were up prior to Fed Chair Janet Yellen’s first speech this morning (+0.23%) and then fell to +0.03% prior to the opening. All of today’s US financial reporting is perceived as of low importance and had little effect on the premarket performance.

Markets opened up in the green, but flat and then melted upwards on light to moderate volume to +0.25%. By the 15 minute mark the SP500 was 4 points below the all important resistance at 1808 and the 50 day MA that may be tested this week. By 10 am the averages were showing signs of increased volatility and falling volume making any predictions of market direction difficult.

The fears of the emerging markets becoming increasingly unstable remains high on the minds of investors as a cash position becomes more favorable. More and more bearish pundits are pushing for investors to seek preserving and or increasing their cash reserves as reports of a mixed Fed according to prepared remarks this morning.

Yellen – Fed ‘easy’ but staying the course on Taper

• Taylor – Fed policy is the problem

• McCloskey – Fed regulation has reduced Main Street access to banking

• Calabria – Fed exit strategy not credible; cause of instability, not cure

• Kohn – Fed independence at risk

The short term indicators are leaning towards the hold side at the opening, 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.

In looking at the 50 DMA the SP500 is below that line, but above the 200 DMA and on 02-06-14 crossed above the 100. I can not see where the MA’s are rolling over to indicate any permanent bear run.

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. What is currently causing problems for the Emerging Markets is directly related to the tapering and investors should consider this factor too.

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 inner instincts tell me there is a possibility 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 being 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 10:15 is at 15861 up 59 or 0.37%.

The SP500 is at 1805 up 5 or 0.30%.

SPY is at 180.60 up 0.59 or 0.33%.

The $RUT is at 1122 up 3 or 0.26%.

NASDAQ is at 4163 up 14 or 0.34%.

NASDAQ 100 is at 3595 up 14 or 0.38%.

$VIX ‘Fear Index’ is at 15.04 down 0.22 or -1.44%. Bullish

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

How Oil Really Gets Priced

WTI oil is trading between 100.48 and 99.61 today. The session bias is negative and is currently trading down at 100.10.

Brent Crude is trading between 108.56 and 107.95 today. The session bias is sideways and is currently trading down at 108.36.

Gold fell from 1288.14 earlier to 1276.25 and then rebounding to previous levels and is currently trading up at 1285.00.

Analysts forecast a corrosive year for copper prices

Dr. Copper is at 3.217 falling from 3.227 earlier.

The US dollar is trading between 80.53 and 80.74 and is currently trading down at 80.59, the bias is currently negative.

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Written by Gary