Market Commentary: Remarkable Recovery, But It Is All HFT Hyperbola

Written by Gary

Closing Market Commentary For 10-03-2014

Markets opened up nicely and continued to melt upwards in a tight, narrow trading zone on something below anemic volume. Unbelievably quiet. This session was totally controlled by the HFT algo computers and I hazard a guess to what will happen on Monday.

By 4 pm all of the averages were at the +1.2%, the DOW up over 200 points and that would be great news if we had human buyers instead of computers.

My best guess for market direction will be a negative day on Monday, but just below today’s closing and above 100 DMA, nothing drastic. I think investors want and expect the markets to fall further and it may in the coming sessions.

Warning, the markets may fall further as I believe we need a correction in order to climb again, but this isn’t going to be the one where brokers jump out of windows. This market is NOT ready to do the really big one that may come around this time next year. It is building, but for now sit tight, the party isn’t over just yet, BTFD days are just around the corner.

The medium term indicators are leaning towards the hold side at the close and the short-term market direction meter is bearish. We remain mostly, at best, neutral and conservatively holding. The important DMA’s, volume and a host of other studies have not turned significantly 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 below zero at -6.22. 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 66 % Bearish and it seems to be a good sign for being bullish. The ‘Sheeples’ always seem to get it wrong. Now they are moving towards the bullish side which is interesting.

Investors Intelligence sets the breath at 49.2 % bullish with the status at Bear Confirmed. (Chart Here )

StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 53.17. (Chart Here) Below support zone and apparently going further down. Next stop was ~57 and now it is ~44, below that is where we will most likely see the markets crash.

StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 64.80. (Chart Here) In support zone and falling – doesn’t look good. ~62, ~57, ~45 at which the markets are in a full-blown correction.

StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 24.47. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009.

StockChart.com Overbought / Oversold Index ($NYMO) is at -53.47. (Chart Here) But anything 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.

StockChart.com Consumer Discretionary ETF (XLY) is at 66.96. (Chart Here)

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.

This $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% – 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages.

Today it represents the lowest levels seen since the beginning of the October, 2011 rally. Eric Parnell says, ‘ If nothing else, given that relatively fewer stocks are trading above their 200-day moving average at a time when the market is just off of its all-time highs suggests that an increasingly narrowing group of stocks is driving the rally at this stage, which does not bode well for the future sustainability of the uptrend.” It also strongly suggests there has been a ‘stealth bear market’ underway in recent months.

StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) is at 42.54 %. (Chart Here) Unless this downward trend reverses itself soon, we are going to see further downside

The DOW at 4:00 is at 17010 up 209 or 1.24%.

The SP500 is at 1968 up 22 or 1.12%.

SPY is at 196.48 up 2 or 1.10%.

The $RUT is at 1105 up 8 or 0.76%.

NASDAQ is at 4476 up 45 or 1.03%.

NASDAQ 100 is at 4027 up 41 or 1.04%.

How the Popular ‘VIX’ Gauge Works

$VIX ‘Fear Index’ is at 14.60 down 1.56 or -9.65%. Neutral Movement

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

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

How Oil Really Gets Priced

WTI oil is trading between 91.78 (resistance) and 89.39 (support) today. The session bias is negative and is currently trading up at 89.80. (Chart Here)

Brent Crude is trading between 94.05 (resistance) and 91.52 (support) today. The session bias is negative and is currently trading up at 92.19. (Chart Here)

Why Gold Will Rise When The Dollar Falls

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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 fell from 1215.90 earlier to 1190.41 and is currently trading up at 1192.30. The current intra-session trend is negative. (Chart Here)

Currency Corruption Weighs on Copper

Dr. Copper is at 3.000 falling from 3.016 earlier. (Chart Here)

The US dollar is trading between 86.86 and 85.53 and is currently trading down at 86.79, the bias is currently elevated and sideways. (Chart Here) Resistance made in Aug., 2013 has been broken.

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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Real Time Market Numbers

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Written by Gary