Opening Market Commentary For 02-20-2014
Premarkets were flat at +0.05% and melted up at the not-so-good financial news this morning. Consumer prices rose 0.1%, weekly jobs came in at 336K missing 334K expected and the January CPI fell short of the expected 233.770.
Markets opened in the green and slowly melted up to ~+0.25% before turning back down to flat, mixed on moderate volume. Candlestick patterns, if they can be trusted, seem to be confirming yesterday’s session as a ‘Dark Cloud’ signaling the failure to penetrate the upper resistance. By 10 am the markets were mixed and uncertain.
I am sure the following is confusing many investors right now.
FOMC minutes: A few see chance of rate hikes “relatively soon.” In the last FOMC meeting chaired by Ben Bernanke, a few policy makers saw a chance of rate hikes “relatively soon.”
As for forward guidance in which the Fed promised to hold Fed Funds near 0% after the 6.5% unemployment rate threshold was crossed – that’s pretty much done with.
The minutes also show little concern about the string of soft economic data at the start the year.
The short term indicators are leaning towards the hold side at the opening. Why ‘hold’, because the all important signs of reversal, up or down, 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 why they should go down. Several notes of negativity are 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.
On the other hand, there is pressure to climb higher if only to test the previous Blue Chip highs, but we may have to see some more ‘consolidation’ or sideways trading before we can start counting our ‘Bulls’. The latest question investors have lately is, will the SP500 go above the resistance at 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 current SP500 is somewhat 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.
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. The OEXA200R is well above 65%, currently at 75%. However, all three secondary indicators are negative.
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 along with the emerging market woes.
We are assuming the Fed’s will continue the taper program – so far, they are moving ahead in spite of the emerging market issues.
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. The candle for yesterday’s SP500 could be interpreted as a shooting star or a Dark Cloud, but the volume wasn’t very convincing.
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The DOW at 10:00 is at 16032 down 12 or -0.07%.
The SP500 is at 1827 down 1 or -0.06%.
SPY is at 183.01 down 0.03 or -0.02%.
The $RUT is at 1150 up 0.76 or 0.07%.
NASDAQ is at 4233 down 5 or -0.12%.
NASDAQ 100 is at 3646 down 6 or -0.18%.
$VIX ‘Fear Index’ is at 15.50 down 0.03 or -0.19%. Neutral
The longer trend is up, the past months trend is sideways, the past 5 sessions have been positive and the current bias is negative.
WTI oil is trading between 102.29 and 102.93 today. The session bias is slightly positive and is currently trading down at 102.79.
Brent Crude is trading between 109.58 and 110.18 today. The session bias is neutral and is currently trading down at 110.06.
Gold rose from 1307.72 earlier to 1317.56 and is currently trading up at 1340.30. The current intra-session trend is neutral.
Dr. Copper is at 3.275 rising from 3.256 earlier.
The US dollar is trading between 80.07 and 80.39 and is currently trading down at 80.28, the bias is currently negative.
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
<p><strong><span style=”font-family: arial,helvetica,sans-serif;”><span style=”font-size: medium;”>Written by <a rel=””author”” href=”/files/gary.htm”>Gary</a></span></span></strong></p>