Written by Gary
Opening Market Commentary For 06-17-2014
Premarkets were up ~+0.07% before the morning financial’s were reported and dropped to -0.20% when the CPI Core Inflation jumped most in 3 years and US Home Construction fell 6.5%. Add that news to the Iraq ‘surprise’ and that should keep the markets from advancing.
The averages generally opened down -0.20% on low volume, churning for the first 15 minutes and slowly trending up to flat . By 10 am the averages moved into the green on mixed low volume.
Here is the latest on this morning CPI and Home Construction miss. I would now expect the averages to settle in for some more sideways consolidation in the weeks ahead. If they were going to fall or start a correction, it would have started with the Iraq issue. As it stands not much will happen until the countries oil production is totally interrupted.
Fear mongering is always a factor in the markets and will cause volatility and stressful times, but in today’s case it isn’t enough to cause a market collapse. It will just stymie any near-term advancement to new historic highs, but additional advances today are iffy unless the HFT computers decide to melt the markets up.
WASHINGTON (AP) – U.S. consumer prices increased in May by the largest amount in more than a year as the cost of food and gasoline showed big gains and airline fares jumped by the largest amount in 15 years.
The consumer price index rose 0.4 percent in May, the biggest one-month jump since a 0.6 percent increase in February 2013, the Labor Department reported Tuesday. Over the past 12 months, consumer prices are up 2.1 percent. While that was the biggest 12-month price change since October 2012, it still left prices rising at a pace near the Federal Reserve’s 2 percent target.
But analysts said the May price jump, double what had been expected, would get the attention of Fed policymakers, who were starting a two-day meeting on Tuesday.
“The Fed will have to acknowledge in tomorrow’s policy statement that price pressures are growing,” said Paul Dales, senior U.S. economist at Capital Economics. “The chances that it will raise interest rates before the middle of next year are increasing.”
WASHINGTON (AP) – The pace of U.S home construction slipped in May with many Americans still struggling to afford new houses. Builders started work at a seasonally adjusted annual rate on 1.01 million homes last month, the Commerce Department said Tuesday.
That was down 6.5 percent from 1.07 million in April. Construction firms began work on fewer single-family houses, condominiums and apartments last month. Home construction has struggled to gain much traction this year, limiting its ability to contribute as much to broader economic growth as it has in the past.
Many would-be buyers face higher mortgage rates than at this time last year, while builders are selling fewer new homes but charging more for them. That has reduced the number of possible buyers and the number of construction jobs.
Builders employ 1.49 million fewer workers than they did at the start of the Great Recession in December 2007, a loss of roughly 20 percent.
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 flat, but remains above zero at 15.02. I would advise caution in taking any position during this volatile transition period although Barchart.com shows a 24 % sell. Investing.com members’ sentiments are 66 % bearish and Investors Intelligence sets the breath at 67.2 % bullish with the status at Bear Correction.
Here is the John Carlucci weekly update on his best stock market indicator.
The $OEXA200R Monthly (the percentage of S&P 100 stocks above their 200 DMA) is a technical indicator available on StockCharts.com used to find the “sweet spot” time period in the market when you have the best chance of making money.
According to this system, the market is now Tradable. The OEXA200R ended the week at 88%, down from 94% last week.
All three secondary indicators are positive.
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, Russia’s annexing game playing and of course the World’s newest player Iraq. 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 the final 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 10:00 is at 16776 down 4 or -0.02%.
The SP500 is at 1939 up 0.76 or 0.04%.
SPY is at 194.42 up 0.15 or 0.08%.
The $RUT is at 1174 up 7 or 0.59%.
NASDAQ is at 4333 up 12 or 0.28%.
NASDAQ 100 is at 3785 up 5 or 0.13%.
$VIX ‘Fear Index’ is at 12.41 down 0.24 or -1.90%. Neutral 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 neutral and the current bias is positive.
WTI oil is trading between 106.21 (resistance) and 105.46 (support) today. The session bias is positive and is currently trading up at 106.19.
Brent Crude is trading between 113.12 (resistance) and 112.16 (support) today. The session bias is positive and is currently trading up at 113.08.
Maybe I’m Wrong – Justifying $2,000+ Gold by Jeffrey Dow Jones
Gold fell from 1273.48 earlier to 1259.79 and has now changed direction currently trading up at 1269.00. The current intra-session trend is positive.
Dr. Copper is at 3.055 falling from 3.066 earlier.
The US dollar is trading between 80.74 and 80.48 and is currently trading up at 80.71, the bias is currently positive and volatile.
Real Time Market Numbers
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Written by Gary