Market Commentary: DOW Sets New High, Markets Melt Off, Stabilize On Moderate Volume

Written by Gary

Opening Market Commentary For 07-16-2014

Premarkets were up +0.40% on not so good financial reporting this morning. Markets did open up at that range with the DOW again setting a new high (17139) and then promptly started to melt downward all on moderated volume.

By 10 am the markets remained elevated and trading sideways in moderate volume. Who is going to win today’s tug of war?

Today’s morning activity is active and could result into some volatile action on the part of the bears as we wait for Ms. Yellen’s dovish remarks to set in.

The medium 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 11.75. I would advise caution in taking any position during this uncertain period.

Barchart.com shows a 88 % buy. (Been at 88% for the last 5 sessions, I think their meter is broken) Investing.com members’ sentiments are 58 % bearish and Investors Intelligence sets the breath at 67.3 % bullish with the status at Bear Correction. (Chart Here )

StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 72.43. (Chart Here )

StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 84.60. (Chart Here )

Why You Should Not Be Comfortable With The Level Of The Stock Markets

Summary

• The Dow Jones has set a new record above 17,000.

• The NFP came out with a stronger than expected number of 288,000 new jobs for June.

• Wage growth remains low, well below the level the Fed would like to see.

The U.S. economic recovery is not on sure footing yet. There are foundation issues, especially in the housing market and with wages. The Fed should take into account these problems before raising rates. The Fed is in the middle of tapering its massive bond buying program, hoping to end it by end of October 2014. They have continued to keep short term rates near zero, amid speculation they will raise them soon. The Fed is correct in keeping them as is. It is still too early to raise rates. While 200K new jobs a month is a good thing, a print of 300K would point to a stronger economic recovery.

There are reasons to be concerned. While there is a feeling of euphoria over the Dow Jones hitting 17,000 and closing above it, do not expect it to stay at this level. There is no real economic growth supporting it.

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 daily 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. There hasn’t been a 10% correction in several years and some investors are becoming increasingly concerned an imminent correction is on the way.

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.

Charts and other technical tea reading exercises are, for the most part, not worth the effort to discern directions now that the Fed has refilled the sand box with gravel, rocks and old beer cans. That is just my view, but they have completely thrown a monkey wrench into the works and no one knows anything anymore with certainty.

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

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The DOW at 10:15 is at 17117 up 55 or 0.32%.

The SP500 is at 1981 up 7 or 0.38%.

SPY is at 197.98 up 0.72 or 0.37%.

The $RUT is at 1156 up 3 or 0.22%.

NASDAQ is at 4443 up 26 or 0.59%.

NASDAQ 100 is at 3943 up 28 or 0.72%.

$VIX ‘Fear Index’ is at 11.27 down 0.69 or -5.77%. Bullish 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 positive and the current bias is elevated and trending sideways.

Oil stays near $101 a barrel; US gasoline prices slip to 3-month low

WTI oil is trading between 100.99 (resistance) and 100.42 (support) today. The session bias is mixed and is currently trading up at 100.78.

Brent Crude is trading between 107.63 (resistance) and 106.95 (support) today. The session bias is mixed and is currently trading up at 107.36.

Gold prices sink as worries over Europe that drove prices up last week dissipate

Gold rose from 1295.89 earlier to 1303.99 and is currently trading up at 1301.10. The current intra-session trend is net positive, but trending down.

Dr. Copper is at 3.246 falling from 3.253 earlier.

The US dollar is trading between 80.64 and 80.45and is currently trading up at 80.61, the bias is currently sideways and quiet.

Real Time Market Numbers

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Written by Gary