Written by Gary
Opening Market Commentary For 03-31-2014
Premarkets were up over +0.60% this morning and the DOW jumped to +0.71% at the opening. The opening volume was low, the $VIX fell to the highs 13’s and the savvy investors were wondering how much longer this party was going to last. Traders are loving it as the volatility is starting to makes it way back into the markets.
My 10 am the Bull party was in high gear, the NASDAQ was at +1.03% and the large caps were chugging along at +0.90% while investors were digesting the ‘not-so-good’ numbers of the Chicago Purchasing Manger coming in at 55.9 as it plunges to a 7 month low.
Janet Yellen has just started speaking at a Development Conference in Chicago and apparently she does not like the rise in US Yields after the FOMC meeting two weeks ago. “sees considerable slack in the labor market and the economy, QE taper does not mean reduced commitment to stimulus.” The markets have surged as she goes ‘Uber-Dovish’ at this point in time.
On other news, I have made disparaging remarks just about every day for the past 4 years regarding the algo computers, the henchmen HFT operators and other market manipulators. I seriously believe we could do without these nasty operations and it would be for the good well-being of the World Financial Markets. It is just so obvious and unbelievable that the SEC would allow them to continue to operate. Oh, that right, the SEC is a crooked bunch of leotard wearing girlymen themselves.
It was almost [exactly] five years ago to the day, on April 10, 2009, that Zero Hedge – widely mocked at the time by “experts” – began its crusade against HFT and the perils of algorithmic trading (which of course were validated a year later with the Flash Crash).
In the interim period we wrote hundreds if not thousands of articles discussing and explaining the pernicious, parasitic and destabilizing role HFT plays in modern market topology, and how with every passing day, markets are becoming increasingly more brittle, illiquid and, in one word, broken.
Or, as Michael Lewis put it most succinctly, “rigged.” With Lewis’ appearance last night on 60 Minutes to promote his book Flash Boys, and to finally expose the HFT scourge for all to see, we consider our crusade against HFT finished.
At this point it is up to the general population to decide if this season’s participants on Dancing with the Stars or the fate of Honet Boo Boo is more important than having fair and unrigged markets (obviously, we know the answer).
The U.S. stock market is rigged to hurt the average investor and benefit high frequency traders, stock exchanges and large Wall Street banks, according to the author of the new book “Flash Boys: A Wall Street Revolt.”
This computer-based high-speed trading is considered sophisticated and uses complex algorithms to move in and out of positions in fractions of a second.
These HTFs give the big guys an edge, that the little guys cannot compete with, says Michael Lewis, famed Wall Street author in a new interview on 60 minutes last night.
“High frequency traders have found ways to use their speed to gain an advantage that few understand,” says Lewis in the interview.
“They’re able to identify your desire to buy shares in Microsoft and buy them in front of you and sell them back to you at a higher price,” says Lewis. “The speed advantage that the faster traders have is milliseconds…fractions of milliseconds.”
Steve Goldstein said this morning:
Goldman Sachs and the Royal Bank of Canada have endorsed them. So too has hedge-fund investor David Einhorn, in the “60 Minutes” segments on high-frequency trading.
But if you want to buy into IEX, the stock exchange set up to deter high-frequency trading, do not enter an order for the company with the stock-market symbol IEX. That would be IDEX Corp. IEX 0.34% , which is a “global fluidics leader” according to its website – basically, nothing remotely to do with stock-market operations.
(IEX, the stock market, is not publicly traded.)
It’s worth issuing this warning given the wave of mistaken ticker-symbol purchases, as recently as Oculus VisionTech Inc. last week, which was not the company that Facebook purchased for $2 billion.
For more on high-speed trading, click here.
– Steve Goldstein Follow Steve on Twitter @mktwgoldstein.
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, 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. The MACD has turned down slightly, but remains above zero. I would advise caution in taking any position during this volatile transition period although Barchart.com shows a 88 % sell.
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.
Chris Puplava writes, “As shown below, the long-term outlook for the S&P 1500 is clearly bullish as 77.0% of the 1500 stocks in the index have bullish long-term trends.”
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 35-65 sell and will remain 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. 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?”
Several notes of negativity are that the daily volume is very low which could set the stage for addition weakness and market decline. The margin debt for stock purchases are at an all time high and investors are also worried about issues directly related to the Fed’s tapering. They are considering this factor along with the Argentine Peso, South African Rand and the Yen. And of course, China’s defaulting businesses are dropping like flies.
If the Russian President Putin stops at annexing Crimea, the markets may alleviate current weakness and the bull run will continue as some bullish pundits seem to indicate. It is also possible that this is simply a pause where Putin will take the slack time to consider his next global conquest. One of the many issues investors face is that a Reuters article suggests that tensions in Eastern Europe/Central Asia aren’t going away as Russian posturing persists in spite of Russian Propaganda.
The real story behind the current weakness is the US weak housing, layoffs and poor employment data, inventory reductions and soft economic outlook including a mediocre sales outlook.
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 Untradeable. The OEXA200R is well above 65%, currently at 75%. However, all three secondary indicators are negative:
RSI is NEGATIVE (below 50)
Slow STO is NEGATIVE (black line below red)
MACD is NEGATIVE (black line below red)
My feeling is that we’re entering the final euphoria phase of the five-year stock market bull, and I’ll be watching warily for major resistance points in the coming months.
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The DOW at 10:15 is at 16455 up 132 or 0.82%.
The SP500 is at 1872 up 15 or 0.79%.
SPY is at 186.96 up 1.47 or 0.79%.
The $RUT is at 1162 up 11 or 0.93%.
NASDAQ is at 4198 up 42 or 1.02%.
NASDAQ 100 is at 3607 up 35 or 0.97%.
$VIX ‘Fear Index’ is at 13.99 down 0.42 or -2.57%. Bullish Movement
The longer trend is up, the past months trend is positive, the past 5 sessions have been sideways and the current bias is positive.
WTI oil is trading between 101.17 and 101.85 today. The session bias is positive and is currently trading down at 101.73.
Brent Crude is trading between 107.62 and 108.32 today. The session bias is positive and is currently trading down at 108.19.
Gold fell from 1299.09 earlier to 1289.11 and is currently trading up at 1293.90. The current intra-session trend is mixed.
Dr. Copper is at 3.031 falling from 3.049 earlier.
The US dollar is trading between 80.50 and 80.15 and is currently trading down at 80.20, the bias is currently negative.
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Written by Gary