Written by Gary
Closing Market Commentary For 04-16-2014
Today was one of those day’s that no one profited except the HFT algo computer and some ‘Crooked Wall Streeters’. There is certainly enough evidence in my book to say the ‘correction’ has not gone far enough and feel we could see another downturn any day now.
By 4 pm the averages had made new session highs on low closing green volume. It is going to be a roll of the dice tomorrow if the markets continue up or sell off.
Very interesting writeup about margin debt . . . “and coinciding with the greed and exuberance would be the inclination to borrow more in order to fulfill the perception of making more on the underlying amount invested”.
This morning, I did some research on the relationship between the NYSE Margin Debt levels and the end of Bull markets.
If you think about it, Bull markets end with greed and exuberance at an extreme … and coinciding with the greed and exuberance would be the inclination to borrow more in order to fulfill the perception of making more on the underlying amount invested.
If that makes logical sense, then you would expect the NYSE Margin Debt to rise and up trend higher as the Bull market rises. And then … a pull back on Margin Debt would coincide with a pull back in the stock market. We won’t delve into the possible reasons for a pull back in Margin Debt other than to say it could be because of a change in margin requirements, an out of control over-exuberance that scares the Fed, or a myriad of other reasons which could include an “event crisis” that unsettles and scares market participants.
In any case, let’s just look at monthly data and trending of the NYSE’s Margin Debt from 1997 to February 2014 which is shown on the top part of the graph.
If you look at that part of the graph, the red line depicts the actual amount of margin debt incurred as of the end of each running month. (The blue line is an eight month, moving average that is weighted which makes it easier to observe the up and down trending.)
The first observation one could make is that the margin debt levels are now on a fast upward trending trajectory which was getting very close to resistance at the end of February. (February was the last NYSE data available.)
The second observation one could make, is that the NYSE Index couldn’t make it as high as the previous rise, even with more money (margin debt). From a longer term perspective, this is an unhealthy condition. (Do remember that this data is monthly data and it is therefore not reflective of the short term action in the market.)
The conclusion one could draw from the Margin Debt levels is that he Bull market is definitely closer to the end rather than the beginning.
Now, let’s look at the bottom graph which shows a 21 month setting on a Stochastic RSI Indicator. During the past two Bull market peaks, the stock market peaked after the Stochastic RSI went negative (below 50) along with the Margin Debt starting to fall … or when the Stochastic RSI was down trending and very close to going negative along with the Margin Debt peaking or pulling back.
Currently, the Stochastic RSI Indicator was not near a negative level at the end of February, nor was it down trending. Without the March data, we don’t know if that changed last month, but as of the end of February, the market trending was still up for March.
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 holding. The important DMA’s, volume and a host of other studies have not turned, only a past 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 48 % sell. (Remember this has been negative for weeks.)
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The DOW at 4:00 is at 16425 up 162 or 1.00%.
The SP500 is at 1862 up 19 or 1.05%.
SPY is at 185.90 up 2 or 1.05%.
The $RUT is at 1132 up 12 or 1.10%.
NASDAQ is at 4086 up 52 or 1.29%.
NASDAQ 100 is at 3533 up 45 or 1.30%.
$VIX ‘Fear Index’ is at 14.22 down 1.39 or -8.78%. Bullish Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is sideways, the past 4 sessions have been positive and the current bias is mildly positive.
WTI oil is trading between 104.97 (resistance) and 103.15 (support) today. The session bias is positive and is currently trading up at 103.89.
Brent Crude is trading between 110.33 (resistance) and 109.00 (support) today. The session bias is negative and is currently trading down at 109.59.
Gold rose from 1293.79 earlier to 1306.97 and is currently trading down at 1302.40. The current intra-session trend is mixed, but trending sideways.
Dr. Copper is at 3.030 rising from 2.981 earlier.
The US dollar is trading between 79.91 and 79.94 and is currently trading down at 79.91, the bias is currently mixed and volatile.
Real Time Market Numbers
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Written by Gary