Market Commentary: SP500 Closes At New Historical High On Low Volume

Written by Gary

Closing Market Commentary For 02-27-2014

I guess I was correct when I wrote that the market could post new historical closing highs which the SP500 did today. It did not top the 2-24-2014 high, but closed higher than ever before making a believer out of some bears.

By 4 pm some investors were jumping for joy while other don’t quite believe what they are seeing. After all the new closing high is only 6.68 points higher, hardly ground breaking and on low volume. There is a real caution to be expressed in jumping on board now. The red flags of caution are flapping briskly in the financial winds of the World and its woes.

I still believe that Mr. Market is STILL not through playing with us and even newer historical highs are a distinct possibility beyond today mainly because the amount of bond buying the Fed still does on a monthly basis. Today’s session is a very important reminder of what QE has done in the past and remains a continuing and very powerful stimulus to the financial markets.

It is its ending that worries me the most as the financial institution can not continue to push upwards without the Fed’s ‘Market Viagra’. The debt stands at 4 trillion and will be at 5 trillion by the time the taper is completed and that is one hell of a debt that ‘someone’ has to pay.

The short term indicators are leaning towards the hold side at the close. The all important signs of reversal, up or down, have not been observed so we are mostly at best neutral and conservatively at hold. The 50DMA, MACD, volume and a host of other studies have not turned, only a 6% correction (and recovery) 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 and quit playing with us.

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 uphill, but not convincingly signaling a continued up trend as it is very weak.

There is a 3 day Symmetrical triangle forming with the apex ending by Friday (02-28-2014). It appears to have happened on Wednesday (02-26-2014) yesterday. But, if you are looking for an entry point following a symmetrical triangle, (says one analyst) jump into the fray at the breakout point. However, investors have experienced early breakouts only to give investors a “head fake and that may be what we saw today.” I mentioned to hold off for a day or two after the breakout and determine whether or not the breakout is for real. Aren’t you glad you did?

There is continuing pressure to climb higher if only to test the previous SP500 highs (8 tests counting today), 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 1848/50 and close there?

Well it did, but on low volume and only because of some BTFDers during the last session’s closing, hardly convincing. The old historical closing high is no longer and there are many serious doubts that the SP500 can go higher much higher. I am not saying it can’t but that it will be tough sledging.

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 in fact quiet the opposite. The 50 DMA is climbing slightly, but not descending which is always the first sign the bears are smacking their lips in anticipation of a medium rare steak.

Now more than ever, I am really afraid of a ‘Black Swan’ popping up and watching the resultant market start falling like an over inflated tire with a nail in it and undoubtedly the beginning of a bear market. This ‘house of cards’ the Fed has built with QE is fragile and would not take a lot to tear it down.

The longer 6 month outlook is now 35-65 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.

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. All she did today is flap her lips but the charts and other technical indicators completely failed us this time around.

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 April 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 Chinese Banking woes. All along we have assumed the Fed’s will continue the taper program – so far, they are moving ahead and a lot of ‘sheeples’ are jumping on board what I think is a sinking ship of fools.

My inner instincts tell me there is also 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. After hearing Ms. Yellen speak 2-27-2014, I am more sure of it happening. 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. I am beginning to believe that will never happen in this current market’s atmosphere.

The candle for 02-19-2014 SP500 could be interpreted as a shooting star or a Dark Cloud, but the volume wasn’t very convincing and 02-21-2014 action does not wholly confirm it. It happened again on Monday (02-24-2014) and Tuesday (02-25-2104) ended in a red spinning top that usually means a direction change. Wednesday (02-26-2014) had another spinning top suggesting we could see change of direction once again. Today it is up and did not confirm a reversal spinning top – will it stay or is this a faux bull run.

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The DOW at 4:00 is at 16273 up 74 or 0.46%.

The SP500 is at 1854 up 9 or 0.49%.

SPY is at 185.96 up 0.97 or 0.52%.

The $RUT is at 1188 up 6 or 0.53%.

NASDAQ is at 4319 up 27 or 0.63%.

NASDAQ 100 is at 3700 up 23 or 0.63%.

$VIX ‘Fear Index’ is at 14.04 down 0.31 or -2.16%. Neutral Movement

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

How Oil Really Gets Priced

WTI oil is trading between 103.03 and 101.79 today. The session bias is negative and is currently trading up at 102.11.

Brent Crude is trading between 109.45 and 108.65 today. The session bias is negative and is currently trading down at 108.86.

Gold rose from 1324.18 earlier to 1336.09 and is currently trading up at 1331.80. The current intra-session trend is positive.

Analysts forecast a corrosive year for copper prices

Dr. Copper is at 3.205 falling from 3.213 earlier.

The US dollar is trading between 80.60 and 80.26 and is currently trading up at 80.30, the bias is currently sideways.

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Written by Gary