Written by Gary
Opening Market Commentary For 02-13-2014
Premarkets were down (-0.50%) before the financial reports this morning where initial jobs missed and were back above the 8 month average. Adding to this was Retail Sales slide posting the biggest miss since June 2012.
Markets gaped down at the opening placing the averages on the support they just left 2 days ago. By 10 am the averages had recovered 20% of the initial 50% loss at the opening on moderate volume with signs of continued melting back up after testing the support. It remains obvious that the markets are very weak and there remains a danger of testing previous lows again.
First reaction of the averages was to go negative and then climb back upwards. Well so far this session, keeping up with a 3 year old trend, bad news is good news for the markets; does this mean more QE is coming? Is Janet going to taper the taper? Will we have pancakes for breakfast? What I do know is this Keynesian QE experiment of using ‘Financial Viagra’ is going to prove to be a disastrous waste of time and money that the US taxpayers are going to pay for.
The SP500 opened at 1809 and the support is at 1808 which remains a very important point of no return if crossed.
The short term indicators are leaning towards the hold side at the opening. Why ‘hold’, because the all important signs of reversal have not been observed. The 50DMA, MACD, volume and a host of other studies have not turned, only a 6% correction and that is not enough for me to start shorting.
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 any idea 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. Several notes is 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. The longer MACD view is starting downhill, but not convincingly signaling a continued down trend.
There is pressure to climb higher if only to test the previous Blue Chip highs, but we may have to see some more ‘correction’ or consolidation before we can start counting our ‘Bulls’. The latest question investors have lately is, will it go above the resistance at (SP500) 1850 and close there? This 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.
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 10:15 is at 15936 down 29 or -0.18%.
The SP500 is at 1817 down 2 or -0.13%.
SPY is at 181.83 down 0.28 or -0.14%.
The $RUT is at 1132 down 0.13 or -0.01%.
NASDAQ is at 4202 up 0.48 or 0.03%.
NASDAQ 100 is at 3631 up 3 or 0.09%.
$VIX ‘Fear Index’ is at 14.52 up 0.22 or 1.54%. Bullish
The longer trend is up, the past months trend is sideways, the past 5 sessions have been positive and the current bias is down, but positive.
WTI oil is trading between 99.40 and 100.27 today. The session bias is positive and is currently trading up at 100.27.
Brent Crude is trading between 107.65 and 108.31 today. The session bias is positive and is currently trading up at 108.25.
Gold rose from 1286.31 earlier to 1297.42 and is currently trading up at 1296.00.
Dr. Copper is at 3.226 falling from 3.261 earlier.
The US dollar is trading between 80.76 and 80.24 and is currently trading down at 80.34, the bias is currently negative.
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Written by Gary