Written by Gary
Opening Market Commentary For 09-15-2014
Premarkets were down 0.1% and rose to even by the opening. The opening was flat, but in the green until the bears came in and the averages slid down -0.3%.
By 10 am the large caps were flat and the small caps were taking a beating being off -0.7%, but had stopped their decent for a while. Investors are concerned about the Fed making an about turn and have sold out, temporary at least. Which way is the red arrow going to go?
The medium term indicators are leaning towards the hold side at the opening and the short-term market direction meter is fractionally bearish. 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 getting very concerned. The SP500 MACD has turned flat, but remains above zero at 6.93. 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 69 % Bearish and it seems to be a good sign for being bullish. The ‘Sheeples’ always seem to get it wrong.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 25.83. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009.
StockChart.com Overbought / Oversold Index ($NYMO) is at –51.40. (Chart Here) (Need to type in $NYMO) It is now around the area where it turns and starts to rise, but any thing below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold.
Chris Ciovacco says, “As long as the consumer discretionary ETF (NYSEARCA:XLY) holds above [66.88], all things being equal, it is a good sign for stocks and the U.S. economy.” This chart clearly shows that dropping below 65.50 should be of a great concern to bullish investors. Wednesday, 9-3-2014, XLY edged up to 69.25 and was a signal that we might have another reversal as were are witnessing. Protect thyself!
This is so true this week.
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.
One thing to keep in mind is that stocks may not be setting up for a fearsome bear market. History shows that there are two types of corrections — sharp, brutal downturns that clear the air fairly quickly and prolonged periods of backing-and-filling that gradually remedy built-up imbalances. Time will tell which one lies ahead.
Eric Parnell, in his timely article below points out the obvious and we may very well see the starting of it right now.
A primary worry among many stock investors today is that the long running bull market may soon come to an end.
At the heart of their concern is the worry that the subsequent decline into the next bear market could quickly become swift and severe.
History has shown that the transition from a bull market to a bear market is a process filled with rallies and correction that plays out over an extended period of time.
Bull markets die long slow deaths, and it is this prolonged dying process that causes so many investors to find themselves unwittingly trapped in the next bear market.
A primary worry among many stock investors today is that the long running bull market may soon come to an end. At the heart of their concern is exactly what lies beyond the bull market peak, as many worry that the subsequent decline into the next bear market could quickly become swift and severe.
But history has shown that the transition from a bull market to a bear market is often a gradual and drawn out process filled with rallies and correction that plays out over an extended period of time. In short, bull markets die long slow deaths, and it is this prolonged dying process that causes so many investors to find themselves unwittingly trapped in the next bear market long before they even realize it.
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”.
As long-time readers know, says David Moenning, “I believe it is VITAL to have systems and/or models to guide one in their investing journey. As the late Marty Zweig used to say, ‘Those who rely on a crystal ball will wind up with an awful lot of crushed glass in their portfolio’.” This basically states our views on the market too, although it is best to be ready for the unexpected if you are bullish.
What I fear the most in relationship to the end of the infamous QE is that the FED has no backup plan to keep the markets from correcting as they have not done so for several years. As the liquidity starts to ‘evaporate’ that will in-turn deteriorate the props that have held the markets up so well. Each and every ‘correction’ will be deeper and deeper as this money phenomenon disappears.
Watch the Fund manages to keep an eye on the volume at AmeriTrade as the best indicator to what Maw and Pop ‘Sheeples’ retail trading are. Some analysts believe the Federal Reserve may raise interest rates more quickly than they have currently indicated but nothing from Janet Yellen has indicated this.
These managers are are closely monitoring any signals that Ms. Yellen is going to backtrack on exiting QE and these guys will exit the markets long before the ‘Sheeples’ if she doesn’t. Watch the the fund managers!
The DOW at 10:15 is at 16985 down 1 or 0.00%.
The SP500 is at 1983 down 3 or -0.14%.
SPY is at 198.88 down 0.22 or -0.12%.
The $RUT is at 1151 down 10 or -0.85%.
NASDAQ is at 4534 down 34 or -0.74%.
NASDAQ 100 is at 4042 down 27 or -0.67%.
$VIX ‘Fear Index’ is at 13.72 up 0.39 or 2.78%. Bearish to 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 negative and the current bias is down and trading sideways.
WTI oil is trading between 92.29 (resistance) and 89.88 (support) today. The session bias is trading up and is currently trading up at 91.42. (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)
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The general consensus is that gold prices will actually fall in the next twelve months (Sept to Aug. 2015). Goldman Sachs estimates that gold will fall to $1,050 an ounce, a drop of nearly 19%.
Gold rose from 1228.64 earlier to 1239.03 and is currently trading down at 1234.00. The current intra-session trend is negative. (Chart Here)
Dr. Copper is at 3.079 falling from 3.105 earlier. (Chart Here)
The US dollar is trading between 84.54 and 84.29 and is currently trading up at 84.38, the bias is currently negative and very volatile. (Chart Here) >>>> There is a gap below between 83.92 and 83.79, watch out below as any rise is expected to be temporary.<<<<<<
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