Written by Gary
Opening Market Commentary For 07-21-2014
Premarkets were down at -0.30% amid speculation the the Ukraine and Gaza ‘issues’ were borderline Black Swans in the making. WTI oil made a noticeable gap downward in the Friday aftermarket of 1.14 points and has since melted up 0.37 points.
Markets opened down -0.30% amid weak speculation that Russia has proof positive that Ukraine launched the MH17 airstrike. By 10 am the markets were still showing signs of investors inflating life boats and ready to jump ship.
I think this decline is no more than the Wall Street Manipulators moving the markets lower for their own purpose of buying the dip. Yes, the markets are going to correct – sometime – but not today! In fact, this might be one of the few times I have invited investors to BTFD.
This is why markets shrug off Ukraine plane crash, Gaza and other geopolitical flashpoints
Stocks and other risky assets won’t be immune forever to geopolitical risk, and emerging markets may be the first to feel the heat, warns Alberto Gallo of Royal Bank of Scotland.
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 9.35. I would advise caution in taking any position during this uncertain period.
Barchart.com shows a 88 % buy. (Been at 88% for the last 7 sessions, I think their meter is broken) Investing.com members’ sentiments are 58 % bearish and Investors Intelligence sets the breath at 66.6 % bullish with the status at Bear Correction. (Chart Here )
StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 71.29. (Chart Here)
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 82.80. (Chart Here)
StockChart.com Consumer Discretionary ETF (XLY) is at 67.29. (Chart Here)
Chris Ciovacco says, “As long as the consumer discretionary ETF (NYSEARCA:XLY) holds above 67.06, all things being equal, it is a good sign for stocks and the U.S. economy.” (Actually the support looks to be in the 66.88 range)
Do You Trust The Fed?
By Bret Jensen
My own opinion is that the Federal Reserve should have taken off the “training wheels” some time ago. The economy would have taken a short-term hit, but I think we would be much further along in our recovery by taking our lumps earlier in the cycle before the Federal Reserve expanded their balance sheet to such a massive level.
So, going forward; Do you trust the Fed? There are myriad reasons I do not and I believe rough times are ahead in the market.
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.
Also, the margin debt has been very high and as of Monday, 2-7-2014, it stood at $466 billion. (Read More at Securities Market Credit) (It has since gone down slightly, but remains higher than previous years. (See current chart here.)
The markets are still susceptible to climbing on ‘Bernankellen’ vapor, use caution!
If you would like to get advanced buy/sell tweets, sign-up in the column to the right of this post by clicking on the ‘Follow‘ button. Write me with suggestions and I promise not to bite.
The DOW at 10:15 is at 17018 down 80 or -0.47%.
The SP500 is at 1971 down 8 or -0.39%.
SPY is at 196.95 down 0.75 or -0.38%.
The $RUT is at 1144 down 7 or -0.65%.
NASDAQ is at 4416 down 16 or -0.36%.
NASDAQ 100 is at 3927 down 13 or -0.33%.
$VIX ‘Fear Index’ is at 13.06 up 1.02 or 8.46%. 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 sideways and the current bias is depressed and trending down.
Oil stays near $101 a barrel; US gasoline prices slip to 3-month low
WTI oil is trading between 102.39 (resistance) and 101.47 (support) today. The session bias is positive and is currently trading up at 102.38. (Gap at 102.97, expect WTI to move up)
Brent Crude is trading between 107.54 (resistance) and 106.79 (support) today. The session bias is positive and is currently trading up at 107.44.
Gold prices sink as worries over Europe that drove prices up last week dissipate
Gold fell from 1318.98 earlier to 1311.26 and is currently trading up at 1313.20. The current intra-session trend is negative.
Dr. Copper is at 3.197 rising from 3.174 earlier.
The US dollar is trading between 80.66 and 80.48 and is currently trading down at 80.65, the bias is currently positive.
Real Time Market Numbers
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Written by Gary
