Written by Gary
Midday Market Commentary For 03-12-2014
The morning session was a slow but relentless push to higher numbers as expected. Just before noon the averages were all showing green on low volume however, the Pentagon has announced the US Army it is ready to backup the Ukraine and its allies in Europe with a military response if necessary.
By noon the averages were once again headed down on the prospect of military escalation tensions in the Ukraine. Caution is once again being stressed.
It is going to become even more tense as Putin and Obama play a game of chicken. Investors are becoming increasingly alarmed as they wait to see who blinks first.
With diplomacy having failed miserably to resolve the Russian annexation of Crimea, and soon East Ukraine (and with John Kerry in charge of it, was there ever any doubt), the US is moving to the heavy artillery.
First, moments ago, the US DOE announced in a shocking announcement that it would proceed with the first draw down and sale of crude from the US strategic petroleum reserve.
The first since June 2011, in what it said was a “test sale to check the operational capabilities of system infrastructure”, but is really just a shot across the bow at Putin for whom high commodity prices are orders of magnitude more important than how the Russian stock market performs.
And now, as Bloomberg just reported, the US has escalated even further, citing the Chairman of the Joint Chiefs of Staff, General Martin Dempsey, who “has claimed that in the case of an escalation of unrest in Crimea, the U.S. Army is ready to back up Ukraine and its allies in Europe with military actions.“
The short term indicators are leaning towards the hold side at the midday. The all important signs of reversal, up or down, have not been observed so we are mostly, at best, neutral and conservatively holding. 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 although Barchart.com shows a 16% buy.
Several notes of negativity are that the daily volume is very low matching the period of historical highs in the past which 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. Lastly, the markets are oversold and the margin debt for stock purchases are at an all time high.
I still believe that Mr. Market is STILL not through playing with us and even newer historical highs are a distinct possibility beyond what we have seen, mainly because the amount of bond buying the Fed still does on a monthly basis. 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’.
There is continuing pressure to climb higher, but we may have to see some more ‘consolidation’ or sideways trading before we can start counting our ‘Bulls’. The old historical closing high at 1859 (now 1878) is no longer and there are many serious doubts that the SP500 can go higher much higher. I am not saying it can’t go higher but that it will be tough sledging in light of prevailing financial winds.
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 Fed’s ‘Tapering’ game plan. 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.
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.
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 Best Stock Market Indicator Update says the market is untradable. The OEXA200R ended the week at 82%, unchanged from last weekend.
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The DOW at 12:00 is at 16329 down 22 or -0.14%.
The SP500 is at 1864 down 3 or -0.18%.
SPY is at 186.88 down 0.35 or -0.19%.
The $RUT is at 1187 down 0.01 or -0.00%.
NASDAQ is at 4311 up 3 or 0.08%.
NASDAQ 100 is at 3697 up 5 or 0.15%.
$VIX ‘Fear Index’ is at 14.62 down 0.18 or -1.22%. Neutral Movement
The longer trend is up, the past months trend is positive, the past 5 sessions have been mostly negative and the current bias is negative.
WTI oil is trading between 100.41 and 97.72 today. The session bias is negative and is currently trading down at 97.76.
Brent Crude is trading between 107.81 and 106.92 today. The session bias is neutral and is currently trading down at 107.49.
Gold rose from 1345.75 earlier to 1368.60 and is currently trading up at 1366.10. The current intra-session trend is positive.
Dr. Copper is at 2.970 falling from 3.036 earlier.
The US dollar is trading between 79.96 and 79.72 and is currently trading up at 79.77, the bias is currently neutral.
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Written by Gary