Written by Gary
Closing Market Commentary For 02-12-2014
Markets closed on a sea-saw day that looks to spell weakness. The Blue Chips closed in the red while the small caps stayed in the green on very low red volume.
By 4 pm the averages were trading sideways and the red flags of caution were flapping briskly in the poor financial winds coming our way.
There are more and more reports, articles and plain old news that paint a deteriorating financial picture world wide that I print here every day. The bottom line is any hopes of climbing higher are getting dimmer each and every day. Having said that, I suspect the markets will push upwards tomorrow as I haven’t seen any ‘real’ test of the upper limits, but the low volume bothers me on how high the markets can continue to rise.
The short term indicators are leaning towards the sell side at the Close, 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. Again, note that the daily volume is very low matching the period of historical highs a few weeks ago and that could set the stage for addition weakness and market decline.
There is pressure to climb higher if only to test the previous Blue Chip historical highs and we are seeing that now. The latest question investors have lately is, will it go above the solid resistance at (SP500) 1850 and close there? That is the historical high and there are many doubts that the SP500 can go higher.
In looking at the 50 DMA the SP500 is just above that line, but way above the 200 DMA and on 02-06-14 crossed above the 100. I can not see, as of right now where the MA’s are rolling over to indicate any permanent bear run. The 50 DMA has flattening out, but not descending which is always the first sign the bears are smacking their lips in anticipation of a medium rare steak. Watch the 50 DMA as that will be the first sign of market deterioration.
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.
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.
The longer 6 month outlook is now 40-60 sell and will remain slightly bearish until we can see what the effects are in the game of the Fed’s ‘Tapering’. By the end of 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 February should, may, perhaps be the end of the recent correction.
For now, I am continuing to expect weak to sideways markets for the foreseeable future.
The Best Stock Market Indicator Update says the market is untradable.
Again, I would also take chart and other technical indicators with a lessor degree of reliability for the time being and watch what the Janet Yellen’s 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 most investors are considering 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 4:00 is at 15964 down 31 or -0.19%.
The SP500 is at 1819 down 0.49 or -0.03%.
SPY is at 182.13 up 0.09 or 0.05%.
The $RUT is at 1133 up 3 or 0.30%.
NASDAQ is at 4201 up 10 or 0.24%.
NASDAQ 100 is at 3627 up 6 or 0.16%.
$VIX ‘Fear Index’ is at 14.32 down 0.19 or -1.31%. Neutral
The longer trend is up, the past months trend is sideways, the past 5 sessions have been positive and the current bias is sideways and mixed.
WTI oil is trading between 100.05 and 101.35 today. The session bias is negative and is currently trading up at 100.31.
Brent Crude is trading between 108.06 and 108.98 today. The session bias is negative and is currently trading up at 108.28.
Gold rose from 1284.10 earlier to 1296.15 and is currently trading up at 1291.10.
Dr. Copper is at 3.255 rising from 3.221 earlier.
The US dollar is trading between 80.57 and 80.91 and is currently trading down at 80.75, the bias is currently negative.
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Written by Gary