Market Commentary: SP500 Makes New Highs, Unable To Keep Gains, Markets Flat

Written by Gary

Opening Market Commentary For 07-24-2014

Premarket were significantly up (+0.25%) this morning and melted down from there to fall below yesterday’s closing highs. By the opening the markets were set to open higher, but investors are still concerned with persistent gloomy news from the World’s current hot spots. What is likely to happen is increased volatility because of polarization of investors views of a train wreck in progress.

By the 15 minute mark the SP500 once again set a new high (1989.84), the DOW traded sideways and flat and the small caps started to fall after opening up +0.20%. By 10 am volatility is the name of the game this morning, hold on to your investor’s hat.

Fears of the light at the end of the market tunnel is really a train coming at you and persistent fears of an impending 10% correction are scaring a lot of folks. Among the many horrific World events putting investors ill at ease, BTIG’ Dan Greenhaus says they’ve argued blue in the face that the lack of a 10% pullback just doesn’t matter.

Why the S&P rally is nothing to get freaked out about, in one graph

The S&P 500 marked its 26th closing high on Wednesday. (Emerging markets are also at 17-month highs.) Feel better? No? You’re not alone.

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 10.53. I would advise caution in taking any position during this uncertain period.

Barchart.com shows a 88 % buy. (Been at 88% for the last 8 sessions, I think their meter is broken) Investing.com members’ sentiments are 57 % bearish and Investors Intelligence sets the breath at 66.9 % bullish with the status at Bear Correction. (Chart Here )

StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 71.65. (Chart Here)

StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 82.60. (Chart Here)

StockChart.com Consumer Discretionary ETF (XLY) is at 67.56. (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)

Investor Sentiment: Actions Speak Louder Than Words

Summary:

• We would expect investors to be flocking toward stock-based investments if they were highly confident.

• What do the facts say?

• We can also gain some potential “bubble” insight by taking the pulse of investors in other developed, industrialized nations.

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.)

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.

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

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The DOW at 10:15 is at 17091 up 5 or 0.03%.

The SP500 is at 1987 up 0.23 or 0.01%.

SPY is at 198.63 down 0.01 or -0.00%.

The $RUT is at 1160 up 1 or 0.08%.

NASDAQ is at 4472 down 2 or -0.05%.

NASDAQ 100 is at 3981 down 5 or -0.13%.

$VIX ‘Fear Index’ is at 11.98 up 0.45 or 3.91%. 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 mixed and volatile.

How Oil Really Gets Priced

WTI oil is trading between 103.29 (resistance) and 102.67 (support) today. The session bias is sideways and volatile and is currently trading up at 102.95.

Brent Crude is trading between 108.24 (resistance) and 107.61 (support) today. The session bias is sideways and is currently trading down at 107.75.

Gold fell from 1306.48 earlier to 1291.43 and is currently trading down at 1293.20. The current intra-session trend is negative.

Dr. Copper is at 3.259 rising from 3.201 earlier.

The US dollar is trading between 80.98 and 80.81 and is currently trading down at 80.93, the bias is currently neutral, but very volatile.

Real Time Market Numbers

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Written by Gary