Written by Gary
Opening Market Commentary For 08-18-2014
Premarkets were up 0.45% this morning after the US NAHB Housing Market Index surprisingly printed in at 55 up from 53. Markets gaped up about the same percentage points and the DOW quickly eased up to triple digits on low volume.
By 10 am the averages were all in the green and reporting +0.70% or better. WTI oil and gold are falling and the US dollar is rising quickly which is a possible signal this mornings gains could be erased.
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 up, but remains below zero at -2.44. I would advise caution in taking any position during this uncertain period although some technical indicators are starting to turn bearish.
Investing.com members’ sentiments are 48% bearish and when it switches over to bullish, as it did on Tuesday 8-5, watch for the market bottom to fall out some are saying as the markets usually go against ‘Sheeple’ buying high and selling low.
Investors Intelligence sets the breath at 58.3 % bullish with the status at Bear Confirmed. (Chart Here )
StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 62.76. (Chart Here) Very close to support, but rising.
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 71.60. (Chart Here) Remains below support, now resistance.
The Market Is Overpriced But The Correction Will Likely Be Shallow
StockChart.com Overbought / Oversold Index ($NYMO) is at 29.57. (Chart Here) (Need to type in $NYMO) It is now around the area where it turns and start to descend, but any thing below -30 / -40 is a concern. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold.
StockChart.com Consumer Discretionary ETF (XLY) is at 67.77. (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) We have entered an area that concerns me should the XLY drops any further. This chart clearly shows that dropping below 65.50 should be of a great concern to bullish investors.
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.
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.
Sometime in the future, there will be another three percent drop, only it will go to four, recover somewhat and the BTFDers will cry halleluiah and buy again. Only this time it doesn’t recover fully like in the past and drops again, increasing the net drop to seven percent and so on.
Investors are currently unhappy, unenthusiastic, skittish and ready to jump ship every time it nudges against a small financial iceberg. They remain long for now unable to afford to sell and live off cash savings that have negative real rates thanks to the Feds. They feel in their guts, correctly, that a real ‘correction’ is coming and can’t do anything about it until it is too late. Greed rules the day and investors should be very cautious.
The DOW at 10:30 is at 16801 up 141 or 0.85%.
The SP500 is at 1969 up 14 or 0.71%.
SPY is at 197.16 up 1.44 or 0.74%.
The $RUT is at 1153 up 11 or 0.97%.
NASDAQ is at 4499 up 34 or 0.76%.
NASDAQ 100 is at 4015 up 28 or 0.70%.
$VIX ‘Fear Index’ is at 12.58 down 0.57 or -4.33%. Bullish Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is net , the past 5 sessions have been positive and the current bias is positive.
WTI oil is trading between 97.41 (resistance) and 93.73 (support) today. The session bias is negative and is currently trading down at 93.83. The is a very large gap at 97.06 and these types of gaps are usually filled sooner rather than later. It would not surprise me to see the oils move back up in the near future. (Chart Here) (Look at the 15 minute.)
Brent Crude is trading between 103.65 (resistance) and 101.45 (support) today. The session bias is negative and is currently trading down at 101.58. (Chart Here)
Gold fell from 1311.30 earlier to 1296.68 and is currently trading down at 1298.50. The current intra-session trend is negative. (Chart Here)
Dr. Copper is at 3.115 rising from 3.094 earlier. (Chart Here)
The US dollar is trading between 81.64 and 81.48 and is currently trading down at 81.63, the bias is currently positive. (Chart Here)
The markets are still susceptible to climbing on ‘Bernankellen’ vapor, use caution!
“Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation inequities, they should try to be fearful when others are greedy and greedy only when others are fearful.” – Warren Buffett
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Written by Gary
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