Written by Gary
Closing Market Commentary For 08-22-2014
Markets closed mixed with the large caps in the red and the small caps barely hanging onto the green side.
Every financial analyst is picking a reason that varies from the Ukraine to Ms. Yellen not being dovish enough. The simple matter of fact is that investors are scared, skittish and unsure what Mr. Market is going to pull out of his hat.
We have seen this behavior before when the large caps were at historic highs and everyone was wondering where the markets were going to from there. The US economy appears to be improving and if that remains to be the main news, then the markets should rise like they did before.
However, there are ‘things’ going on that when accumulated into one, they could be the ‘Black Swan’ that takes the market on a roller coaster ride downward. I will discuss this in tomorrows weekend article.
US equity markets were led by the stodgy old low-beta Dow this week – not the high-flying muppetry of the Russell or Nasdaq – as stocks enjoyed the best week in 4 months amidst escalation of geopolitical time-bombs in Israel, Iraq, and Ukraine.
Dow and Trannies gained 2% by the close as today’s disappointment in Yellen and Draghi took the exuberant shine off an otherwise bottom-left-to-top-right Birinyi ruler-based market.
The USDollar gained 1.1% on the week – its best week since November – closing at one-year highs. Gold was slapped almost 2% lower (worst week in almost 3 months) as did WTI (back at $1280 and $93.50 respectively). Copper surged 3.2% on the week (2nd best week in a year) on China restocking chatter.
Treasuries were a mixed bag with dramatic flattening on the week (30Y +2bps, 5Y +12bps) to 2009 flat. Credit markets cratered on the day – ignoring equity’s relative shrug.
The medium term indicators are leaning towards the hold side at the close. The all important signs of reversal, up or down, have not been observed so we are mostly, at best, neutral and conservatively holding. The important DMA’s, volume and a host of other studies have not turned and that is not enough for me to start shorting. The SP500 MACD has turned up, but remains above zero at +7.18. I would advise caution in taking any position during this uncertain period although some technical indicators have starting to turn bearish.
Investing.com members’ sentiments are 48 % bearish and when it switches over to bullish, as it did on Tuesday 8-5, watch for the market bottom to fall out some are saying as the markets usually go against ‘Sheeple’ buying high and selling low.
StockChart.com Overbought / Oversold Index ($NYMO) is at 51.28. (Chart Here) (Need to type in $NYMO) It is now around the area where it turns and starts 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.
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!
The DOW at 4:00 is at 17001 down 38 or -0.22%.
The SP500 is at 1988 down 3.97 or -0.20%.
SPY is at 199.34 down 0.31 or -0.16%.
The $RUT is at 1160 up 0.31 or 0.03%.
NASDAQ is at 4539 up 6 or 0.14%.
NASDAQ 100 is at 4053 up 6 or 0.14%.
$VIX ‘Fear Index’ is at 11.47 down 0.29 or -2.47%. Slightly Bullish 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 flat and Mixed.
WTI oil is trading between 94.04 (resistance) and 92.94 (support) today. The session bias is neutral and is currently trading down at 93.58. (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 102.80 (resistance) and 101.99 (support) today. The session bias is negative and is currently trading up at 102.27. (Chart Here)
Gold fell from 1283.70 earlier to 1275.19 and is currently trading up at 1281.00. The current intra-session trend is elevated and sideways. (Chart Here)
Dr. Copper is at 3.204 rising from 3.170 earlier. (Chart Here)
The US dollar is trading between 82.51 and 82.12 and is currently trading down at 82.37, the bias is currently elevated and sideways. (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