Written by Gary
Opening Market Commentary For 08-26-2014
Premarkets were up +0.07% after positive US financial data was reported this morning. Markets opened flat and begin melting upwards where the SP500 tested yesterday’s new historic high by besting it by +0.18 and then backed off.
By 10 the SP500 was again seriously testing yesterday’s highs moving fractionally higher (2002.77), but on very low volume, suggesting HFT algo computer manipulation. Caution.
Without a doubt the US economy is improving, but at a snails pace and I doubt the market will increase proportionally in the months ahead, especially with the recessionary headwinds flowing in from the EU.
LONDON (AP) – Global stocks edged higher on Tuesday after upbeat U.S. economic data and as investors were heartened by the S&P 500’s foray to record highs.
KEEPING SCORE: By early afternoon in Europe, Germany’s DAX was up 0.2 percent at 9,526.71 and France’s CAC-40 was up 0.6 percent at 4,367.54. Britain’s FTSE 100 added 0.4 percent to 6,801.34 after being closed Monday for a public holiday.
Wall Street was expected to open higher, with Dow and Standard & Poor’s 500 futures up 0.1 percent. On Monday, the S&P briefly rose past the 2,000-point mark and closed at a second record high in a week. HIGHER ORDERS: Trading sentiment was buoyed further on Tuesday by figures showing orders of durable manufactured goods surged by a record 22.6 percent in July on the back of a jump in aircraft sales.
Looking ahead, investors will keep an eye on official U.S. economic growth figures due Thursday.
WASHINGTON (AP) – Business orders for long-lasting manufactured goods shot up by the largest amount on record in July but much of the strength came from a huge surge in demand for commercial aircraft. Outside of transportation, orders actually fell.
Orders for durable goods rose 22.6 percent in July on a seasonally adjusted basis, the largest one-month gain on record, the Commerce Department reported Tuesday. The strength came from a 318 percent increase in orders for civilian aircraft which helped lift orders for transportation equipment by a record 74.2 percent. (Read More >>)
Excluding transportation, orders fell 0.8 percent, and a key category that serves as a proxy for business investment plans dropped 0.5 percent, but this dip came after a sizable 5.4 percent rise in the previous month. (Read More >>)
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, but now I am very concerned. The SP500 MACD has turned up, but remains above zero at +10.74. I would advise caution in taking any position during this uncertain period although some technical indicators have starting to turn bearish. The mornings market direction meter is slightly bullish, but the $VIX is ‘slightly’ trending from neutral to bearish. In other words, anything could happen.
Investing.com members’ sentiments are 55 % bearish and when it switches over to bullish, as it did on Tuesday 8-5, watch for the market bottom to fall out some are saying as the markets usually go against ‘Sheeple’ buying high and selling low.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 23.77. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009.
StockChart.com Overbought / Oversold Index ($NYMO) is at +35.40. (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. Monday, 8-25-2014, XLY edged up to 68.98 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 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.
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.
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.
The DOW at 10:15 is at 17119 up 43 or 0.26%.
The SP500 is at 2001 up 3 or 0.16%.
SPY is at 200.41 up 0.22 or 0.11%.
The $RUT is at 1169 up 4 or 0.32%.
NASDAQ is at 4562 up 5 or 0.10%.
NASDAQ 100 is at 4067 down 1 or -0.03%.
$VIX ‘Fear Index’ is at 11.73 up 0.03 or 0.26%. 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.
WTI oil is trading between 94.27 (resistance) and 93.38 (support) today. The session bias is positive and is currently trading up at 94.25. (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 103.24 (resistance) and 102.52 (support) today. The session bias is positive and is currently trading up at 103.22. (Chart Here)
Gold rose from 1276.18 earlier to 1291.71 and is currently trading up at 1287.60. The current intra-session trend is elevated, but sideways. (Chart Here)
Dr. Copper is at 3.228 rising from 3.213 earlier. (Chart Here)
The US dollar is trading between 82.65 and 82.47 and is currently trading up at 82.55, the bias is currently neutral and volatile. (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