Market Commentary: Markets Open Fractionally Higher, SP500 Beats Record By 20 Cents

Written by Gary

Opening Market Commentary For 08-21-2014

Premarkets were unusually quiet and remained at the closing prices of yesterday’s session. Futures rose to 10% when US Continuing Claims came fractionally higher and Initial Jobless Claims reported lower numbers. Markets opened at +0.10%, faltered for a minute on very low volume and then continued to melt fractionally higher. Obviously, I am not the only one concerned with Mr. Market’s ability to continue his bullish push.

By 10 am the SP500 eased above its historic high by +0.20 and backed off on moderate volume.

Today is a potential crisis (notice the last 4 letters in crisis spell out the virus invading Iraq!) for the bulls that could spell a moderate decent and actually setup a nice dip for buying as I do not believe we have seen the last of Mr. Bull.

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 above zero at +5.63. I would advise caution in taking any position during this uncertain period although some technical indicators have 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 59.0 % bullish with the status at Bear Confirmed. (Chart Here )

StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 63.42. (Chart Here) Very close to support, but rising.

StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 72.40. (Chart Here) Remains below support, now resistance.

StockChart.com Overbought / Oversold Index ($NYMO) is at 49.75. (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. Wednesday, 8-20-2014, $NYMO climbed to +58.24 is signaling a market reversal in our near future.

StockChart.com Consumer Discretionary ETF (XLY) is at 68.52. (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. Wednesday 8-20-2014, XLY edged up to 68.68 and that is another notch in the gun signaling that we might have another reversal very soon – at least to cover the gap below. Protect thyself!

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.

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 and Israel. 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.

Also, the Margin Debt Peaks May Indicate End Of Cyclical Bull Market. (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.)

NYSE Margin Debt Explodes To Near-Record High In June: Risk Rank At No. 1

Summary

• 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’. 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. But, that is not all, Cris Sheridan writes in his article, What Happens When Quantitative Easing Ends, “Once liquidity starts to dry up at the end of this year it looks very likely that the yield on 10-year government bonds will go up. That will cause mortgage rates to go up… the property market to come down, a significant correction in the stock market, a negative wealth effect, less consumption and, I think, then the US will start moving back towards recession.”

The DOW at 10:15 is at 17019 up 40 or 0.24%.

The SP500 is at 1989 up 2 or 0.11%.

SPY is at 199.13 up 0.23 or 0.12%.

The $RUT is at 1149 down 9 or -0.74%.

NASDAQ is at 4518 down 8 or -0.18%.

NASDAQ 100 is at 4040 up 0.02 or 0.00%.

$VIX ‘Fear Index’ is at 11.89 up 0.11 or 0.85%. Neutral Movement

(Follow Real Time Market Averages at end of this article)

The longer trend is up, the past months trend is net positive, the past 5 sessions have been positive and the current bias is elevated and sideways.

How Oil Really Gets Priced

WTI oil is trading between 93.92 (resistance) and 92.63 (support) today. The session bias is positive and is currently trading down at 93.79. (Chart Here) There 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 very near future. (Chart Here) (Look at the 60 minute time scale.)

Brent Crude is trading between 102.27 (resistance) and 101.20 (support) today. The session bias is positive and is currently trading down at 101.91. (Chart Here)

Why Gold Will Rise When The Dollar Falls

Gold fell from 1292.16 earlier to 1274.54 and is currently trading down at 1279.00. The current intra-session trend is negative. (Chart Here)

Dr. Copper is at 3.179 rising from 3.150 earlier. (Chart Here)

The US dollar is trading between 82.41 and 82.18 and is currently trading up at 82.25, the bias is currently trending down. (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