Written by Gary
Opening Market Commentary For 06-13-2014
Happy Friday the 13th. Premarkets were hovering at the even mark all morning even after the US PPI came in lower, slipping -0.2%. By 9 am futures were up +0.20% suggesting the markets may open higher which was one of the scenarios suggested yesterday.
Markets open in the green at +0.20% and just as quickly started to melt downward to flat status. By 10 am the averages were flat, mostly in the red and trending up on low volume. Be careful, this still a casino market and sudden reversals are not out of the question.
Today, the investor concerns revolve around Iraq oil.
On Wednesday the markets woke up to find that crude oil was trading noticeably higher. At first I thought the summer driving season was upon us and as usual crude generally goes up during this time of year. Then it was discovered that turmoil in Iraq was causing this situation.
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 down, but remains above zero at 17.13. I would advise caution in taking any position during this volatile transition period although Barchart.com shows a 88 % sell. Investing.com members’ sentiments are 65 % bearish and Investors Intelligence sets the breath at 67.3 % bullish with the status at Bear Correction.
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.
In Lance Roberts article he asks, Is The Market Consolidating Or Topping?
There are two ways to look at stagnation in the markets. It is either a consolidation process that works off an overbought condition which leads to further advances, OR it is a topping process that leads to a market decline. Discerning which process is currently “in play” is critical for investor decision making.
Let me be clear. I am not stating that the current consolidation process will absolutely collapse into a sharp correction in the months ahead. However, I am stating that the current environment is more similar to past markets which did correct, than not.
While it is certainly possible that the markets could ratchet higher from here due to the “psychological momentum” that currently exists, the likelihood of a runaway bull market from here is remote.
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 has been very high and as of Monday, 4-7-2014, it stood at $466 billion. (Read More at NYSE Statistics Archive) (It has since gone down slightly, but remains high.)
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.
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 and Iraq Anxiety Pushes Oil to Three-Month High.
The markets are still susceptible to climbing on ‘Bernankellen’ vapor, use caution!
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The DOW at 10:15 is at 16756 up 22 or 0.13%.
The SP500 is at 1930 down 0.02 or 0.00%.
SPY is at 193.61 up 0.07 or 0.04%.
The $RUT is at 1157 down 3 or -0.24%.
NASDAQ is at 4297 down 0.08 or 0.00%.
NASDAQ 100 is at 3768 up 5 or 0.13%.
$VIX ‘Fear Index’ is at 12.53 down 0.03 or -0.24%. Bearish Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is positive, the past 5 sessions have been net negative and the current bias is sideways and volatile.
WTI oil is trading between 107.67 (resistance) and 106.40 (support) today. The session bias is negative and is currently trading down at 106.67.
Brent Crude is trading between 114.07 (resistance) and 112.16 (support) today. The session bias is negative and is currently trading down at 112.59.
Maybe I’m Wrong – Justifying $2,000+ Gold by Jeffrey Dow Jones
Gold fell from 1277.48 earlier to 1270.99 and is currently trading down at 1273.20. The current intra-session trend is sideways and volatile.
Dr. Copper is at 3.030 falling from 3.040 earlier.
The US dollar is trading between 80.68 and 80.44 and is currently trading down at 80.63, the bias is currently sideways and quiet.
Real Time Market Numbers
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Written by Gary