Written by Gary
Opening Market Commentary For 05-30-2014
The premarkets were dead this morning as investors waited for the personal spending and income report after yesterday’s poor GDP number. Markets are expected to open flat perhaps lower as personal spending came in at -0.1% while expecting +0.2%. Premarkets slowly traded sideways in what may another volume-less session and a sideways track.
The SP500 opened at a new high 1920.34 and melted down from there on anemic volume while the small caps remained mixed and flat and melting down. The DOW on the other hand started in the red and continued to head south from the get go. By 10 am the averages were melting back up as the Institute for Supply Management-Chicago’s manufacturing activity gauge rose to 65.5 in May from 63 the month prior, surpassing analysts expectation to drop to 61 and the party continues.
The SP500 set another record high by 10 am at 1921.30 One would have thought that the Personal spending and income report would have brought much more negative attention than normal because of yesterday’s poor GDP figure, but it didn’t as they waiting for the Institute for Supply Management-Chicago’s manufacturing activity report, at 10 am, was the highest since October, but probably will not rescue the negative laden market today.
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 important DMA’s, volume and a host of other studies have not turned and that is not enough for me to start shorting. The SP500 MACD has turned up, but remains above zero at 11.33. I would advise caution in taking any position during this volatile transition period although Barchart.com shows a 40 % sell. Investing.com members’ sentiments are 68 % bearish.
The small caps remain above the 50 DMA. I can not see, as of right now where those large cap MA’s are rolling over to indicate any permanent bear run but the small caps are a real worry. (See deviation of large and small caps here.)The NASDAQ 50 DMA is about to cross over the 145 DMA and the small cap trend is positive as of late and the $RUT is below the 145 DMA and that has me worried as the $RUT trend for the last 2 months has been negative.
Bottom line here is that I have not seen any serious bears jumping out of the woods just yet, although I am VERY concerned that ANY minor correction could turn nasty in a heart beat. One significant signal would be losses in any of the major averages that go over the ‘magic’ 3 % and then you need to pay close attention to risk-off tactics. Any market correction over 6% would be an additional signal and I can’t see having one without the other.
The large caps having bounced back and forth between losses and gains for over 11 weeks have once again approached all time highs or have reached them. The last six months of trading in the SP500 has been within a narrow 4.8% range. This sideways movement and falling volume may be foretelling signs of waning energy and the lack of ability to continue higher and investors need to be alert for a possible significant market selloff.
It is still possible that Mr. Market is not through playing with the averages and even newer historical highs are a distinct possibility. Historically, accordingly to Eric Parnell, “major bull markets have almost never reached their final peak in a sideways grinding pattern. Instead, they have almost always peaked with flourish including one final crescendo toward a new all-time high before finally rolling over and succumbing to the forces of the new bear market”.
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 and Russia’s annexing game playing. 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. Also, the margin debt is very high and has been setting historic highs and as of Monday, 4-7-2014, it stands at $466 billion. (Read More at NYSE Statistics Archive)
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.
At some point during the taper process, this market will crack after one too many tapers. That, among the many other negative issues will most likely come without warning and the major average’s losses will be over 3 percent during a single session.
Several additional notes of negativity where investors are worried about issues directly related to the Fed’s tapering and Putin’s annexing. They are considering these factors along with the Argentine Peso, South African Rand and Japan. And of course, China’s defaulting businesses are dropping like flies. And now the Second Chinese Bond Company Defaults, First High Yield Bond Issuer. And now Another Chinese High Yield Bond Issuer Declares Bankruptcy.
The markets are still susceptible to climbing on ‘Bernankellen’ vapor, use caution!
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. I just can not buy the continual optimism of the bullish pundits when it comes to politicians and our economy. They lie and misrepresent the financial status just about every day, but of course, that is the definition of a politician, is it not? We may never know how ‘dark’ our shadow banking is, ‘Dark Pool’ activity and there are too many lurking ‘Black Swans’ on the horizon to be as confident as some bulls are. For now the ‘law of gravity’ does not apply to the stock market.
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The DOW at 10:15 is at 16682 down 17 or -0.10%.
The SP500 is at 1921 up 1 or 0.06%.
SPY is at 192.50 up 0.13 or 0.07%.
The $RUT is at 1140 down 0.49 or -0.04%.
NASDAQ is at 4249 up 1 or 0.03%.
NASDAQ 100 is at 3739 up 3 or 0.08%.
$VIX ‘Fear Index’ is at 11.48 down 0.09 or -0.78%. Bullish Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is upwards, the past 5 sessions have been positive and the current bias is positive.
WTI oil is trading between 103.93 (resistance) and 102.73 (support) today. The session bias is negative and is currently trading down at 102.95.
Brent Crude is trading between 110.36 (resistance) and 109.39 (support) today. The session bias is negative and is currently trading down at 109.40.
Gold fell from 1260.62 earlier to 1250.92 and is currently trading down at 1251.60. The current intra-session trend is negative.
Dr. Copper is at 3.137 falling from 3.159 earlier.
The US dollar is trading between 80.55 and 80.40 and is currently trading down at 80.46, the bias is currently sideways.
Real Time Market Numbers
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Written by Gary