Written by Gary
Midday Market Commentary For 07-29-2014
Premarkets were up +0.20% and declined at the open to flat on low volume. By 10 am the averages were climbing and stood up by +0.25% with the small caps running around +0.35%.
If previous bullish sessions opening on a Tuesday still hold true, we should see an up day, so party on!
There was no opening posting because of a DDoS attack on our servers.
By 11 am the markets took a dip into the negative zone and have been melting up since.
The medium term indicators are leaning towards the hold side at the midday. 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 8.71. I would advise caution in taking any position during this uncertain period.
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 and has NOT really broken down and through – yet!)
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.
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.
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 today, 6-29-2014, it stood at $464 billion. (See monthly margin debt at Securities Market Credit) (It has since gone down slightly from March, 2014 at 466 billion, but remains higher than previous years. (See current chart here.)
New York Stock Exchange margin debt rocketed to about $464.31 billion in June from about $438.55 billion in May, the exchange reported Monday.
NYSE margin debt at its latest level thus is just -$1.41 billion, or -0.30 percent, lower than its all-time high of around $465.72 billion in February.
The European Central Bank’s move to tax reserves held by financial institutions at the ECB may have contributed to the explosion in market debt.
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 (October 2014) 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!
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 12:30 is at 17004 up 21 or 0.12%.
The SP500 is at 1980 up 1 or 0.06%.
SPY is at 197.95 up 0.13 or 0.07%.
The $RUT is at 1146 up 6 or 0.53%.
NASDAQ is at 4459 up 14 or 0.31%.
NASDAQ 100 is at 3974 up 6 or 0.15%.
$VIX ‘Fear Index’ is at 12.48 down 0.08 or -0.64%. 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 flat with a fractional positive trend.
WTI oil is trading between 101.81 (resistance) and 100.40 (support) today. The session bias is negative and is currently trading down at 100.64.
Brent Crude is trading between 108.05 (resistance) and 107.16 (support) today. The session bias is negative, but very volatile and is currently trading down at 107.39.
Gold fell from 1314.43 earlier to 1298.29 and is currently trading up at 1299.40. The current intra-session trend is negative.
Dr. Copper is at 3.221 falling from 3.254 earlier.
The US dollar is trading between 81.33 and 81.08 and is currently trading up at 81.33, the bias is currently positive.
Real Time Market Numbers
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary