Market Commentary: SP500 Makes New High, Volume Very low, Caution Ahead

Written by Gary

Opening Market Commentary For 07-01-2014

Premarkets were up +0.30% this morning suggesting a positive market opening. US financial news was not to be announced until after the markets opened. However the averages opened +0.25% and shot up to +0.35 in the first 15 minutes on low volume.

By 10 am the June US Manufacturing PMI came with the strongest improvement in four years and moved the markets up to +0.45% pushing the SP500 to a new high of 1971.24 (and holding). But are these PMI numbers good enough to keep this bull market going?

Negative numbers are negative, evidently good for the markets when the June US PMI Manufacturing reported in at 57.3 lower than the 57.5 consensus and higher than the last report of 56.4 in May which is the strongest in four years say some analysts.

ISM Manufacturing Drops, Misses By Most Since January

On the heels of Markit’s US PMI missing expectations but rising to its highest since May 2010 (with notable inflation signals and [dominated] by weakness in small business) despite new export orders tumbling; ISM printed at 55.3, down from May and missing expectations.

Only 50% of survey respondent s expect to increase jobs – the lowest number in 2014.

New export orders also fell in ISM. Following last month’s utter SNAFU, we are not exactly sure whether this is real yet. So far the market reaction is positive to this bad news so we do not expect a revision…

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 14.74. I would advise caution in taking any position during this volatile period.

Barchart.com shows a 88 % buy. Investing.com members’ sentiments are 62 % bearish and Investors Intelligence sets the breath at 68.9 % bullish with the status at Bear Correction.

StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 73.86.

StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 83.20.

(Click on $BPNYA or $BPSPX to see chart)

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 factors of the Argentine economy, South African Rand and Japan. And of course, China’s defaulting businesses are dropping like flies. Now the Second Chinese Bond Company Defaults, First High Yield Bond Issuer and Another Chinese High Yield Bond Issuer Declares Bankruptcy. Iraq Anxiety Pushes Oil to Three-Month High is just another notch in the bears gun.

The markets are still susceptible to climbing on ‘Bernankellen’ vapor, use caution!

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The DOW at 10:15 is at 16944 up 117 or 0.70%.

The SP500 is at 1971 up 10 or 0.53%.

SPY is at 196.79 up 1.05 or 0.54%.

The $RUT is at 1207 up 14 or 1.17%.

NASDAQ is at 4449 up 40 or 0.92%.

NASDAQ 100 is at 3881 up 32 or 0.83%.

$VIX ‘Fear Index’ is at 11.32 down 0.25 or -2.16%. 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 net even and the current bias is positive.

How Oil Really Gets Priced

WTI oil is trading between 106.08 (resistance) and 105.31 (support) today. The session bias is positive and is currently trading down at 105.94.

Brent Crude is trading between 112.81 (resistance) and 112.22 (support) today. The session bias is sideways and volatile and is currently trading up at 112.61.

Maybe I’m Wrong – Justifying $2,000+ Gold by Jeffrey Dow Jones

Gold fell from 1333.03 earlier to 1324.71 and is currently trading down at 1328.00. The current intra-session trend is sideways.

Analysts forecast a corrosive year for copper prices

Dr. Copper is at 3.204 rising from 3.194 earlier.

The US dollar is trading between 79.89 and 79.79 and is currently trading up at 79.85, the bias is currently sideways.

Real Time Market Numbers

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Written by Gary