Written by Gary
Opening Market Commentary For 07-25-2014
Premarkets were down -0.30% mostly due to yesterday’s nice rise in the SP500. The SP500 opened lower-0.15% and dropped to -0.30%, then spent the first half hour melting back up to -0.25%.
By 10 am the markets were solidly in the red with the DOW displaying red triple digits. Volume is moderate with bursts of buyers and sellers in a tug of war; not sure who is going to win by 4 pm.
Be sure that the pundits are still preaching a ‘correction is near’, but I don’t think today is going to be their day. A down day, yes, but another session that is more or less sideways in the bigger picture.
“The Bigger They Are, The Harder They Fall”
The S&P500 has now gone nearly 800 days since a correction of more than 10 percent – the “meaningful” level for many analysts.
The more extended the market becomes, the larger the eventual decline may be.
Over the last 50 years, the longer the time between market corrections, the steeper the drop once the correction does occur.
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 10.03. 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 58 % bearish and Investors Intelligence sets the breath at 67.1 % bullish with the status at Bear Correction. (Chart Here )
StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 71.41. (Chart Here)
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 82.60. (Chart Here)
StockChart.com Overbought / Oversold Index ($NYMO) is at -14.83. (Chart Here)
StockChart.com Consumer Discretionary ETF (XLY) is at 66.92. (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)
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!
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 16969 down 115 or -0.67%.
The SP500 is at 1981 down 7 or -0.36%.
SPY is at 198.01 down 0.65 or -0.33%.
The $RUT is at 1148 down 9 or -0.75%.
NASDAQ is at 4452 down 21 or -0.46%.
NASDAQ 100 is at 3963 down 20 or -0.51%.
$VIX ‘Fear Index’ is at 12.18 up 0.34 or 2.87%. Bearish 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 positive and the current bias is negative.
Cushing Drawdown Not A Concern For The Oil Market by Hard Assets Investor
WTI oil is trading between 102.31 (resistance) and 101.00 (support) today. The session bias is negative and is currently trading up at 101.17.
Brent Crude is trading between 107.43 (resistance) and 106.74 (support) today. The session bias is negative and is currently trading up at 106.92.
Gold: Drops To 1-Month Low Below $1300 by Dean Popplewell
Gold rose from 1291.19 earlier to 1296.46 and is currently trading down at 1294.80. The current intra-session trend is sideways and volatile.
Dr. Copper is at 3.245 falling from 3.277 earlier.
The US dollar is trading between 81.10 and 80.90 and is currently trading up at 81.06, the bias is currently elevated, sideways and volatile.
Real Time Market Numbers
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary
