Written by Gary
Opening Market Commentary For 03-19-2014
Premarket and futures were flat this morning awaiting the much anticipated new Fed Chairperson Ms. Yellen’s viewpoints this afternoon.
Markets opened slightly down with the DOW easing back up in the green but flat. By 10 am the averages were sea-sawing sideways.
Yesterday it was the ‘Putin Put’ and today it is the FMOC meeting later today.
Stock indices are little-changed, following the lead of little-changed global markets, and ahead of the FOMC announcement at 2 ET and Janet Yellen’s subsequent press conference. Most expect the Fed to continue with the taper and for updated guidance about what might have the central bankers considering higher interest rates.
Asian shares are mixed, European equities are mostly moderately lower and U.S. stock futures are higher as markets stay cautious ahead of the FOMC announcing its latest policy decision today.
With the Fed expected to taper some more and abandon its 6.5% unemployment rate threshold for considering rate hikes, punters are focusing on the triggers that would push the Fed to finally raise rates from rock-bottom levels.
The short term indicators are leaning towards the hold side at the opening. 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 24 % sell.
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 to turn downhill, but not convincingly signaling a down trend as it is very weak. Lastly, the markets are oversold and the margin debt for stock purchases are at an all time high.
In looking at the 50 DMA the current SP500 is 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 flatting slightly, but not descending which is always the first sign the bears are smacking their lips in anticipation of a medium rare steak.
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. For those who are hell-bent bears, this article, 5 Reasons Your Simple Bear Market Plans Could Backfire, should be required reading.
It is its ending of QE that worries me the most as many financial institution and emerging markets can not continue to push forward or upwards without the Fed’s ‘Market Viagra’. Even if the Fed reduces its purchases by $10 billion every month for the rest of 2014, the Fed will have acquired $320 billion more for its portfolio. Note, that in 2013, the Fed added more than $1.0 trillion in securities to its portfolio. 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 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. 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 in the February testimony to a Senate panel is flap her lips but the charts and other technical indicators completely failed us this time around. Read at DailyFX, “wouldn’t it be easier if the Fed would just announce the proper level for the S&P and spare us all the policy announcements and market gyrations?”
Today investors are alo worried about issues directly related to the Fed’s tapering and are considering this factor along with the Argentine Peso, South African Rand and the Yen. What is Ms. Yellen going to do today?
My inner instincts tell me there is a distinct 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.
The Best Stock Market Indicator Update says the market is untradable. The OEXA200R ended the week at 80%, down from 82% last weekend.
Of the three secondary indicators:
RSI is NEGATIVE (below 50).
MACD is NEGATIVE (black line below red).
Slow STO is POSITIVE (black line above red).
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The DOW at 10:00 is at 16354 up 17 or 0.10%.
The SP500 is at 1874 up 1 or 0.06%.
SPY is at 187.86 up 0.20 or 0.11%.
The $RUT is at 1204 down 1 or -0.12%.
NASDAQ is at 4333 up 0.01 or 0.00%.
NASDAQ 100 is at 3708 up 1 or 0.04%.
$VIX ‘Fear Index’ is at 14.40 down 0.12 or -0.83%. neutral Movement
The longer trend is up, the past months trend is positive, the past 5 sessions have been mixed and the current bias is positive.
WTI oil is trading between 98.40 and 99.18 today. The session bias is mixed and is currently trading up at 99.03.
Brent Crude is trading between 106.87 and 105.89 today. The session bias is negative and is currently trading down at 105.94.
Gold fell from 1360.27 earlier to 1342.02 and is currently trading down at 1343.80. The current intra-session trend is negative.
Dr. Copper is at 2.889 falling from 2.962 earlier.
The US dollar is trading between 79.64 and 79.48 and is currently trading up at 79.60, the bias is currently sideways.
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Written by Gary