Written by Gary
Opening Market Commentary For 11-06-2014
Premarkets were up +0.4% and dropped into the red just at the opening. The ECB kept it rates the same and that accounted for the drop, however the averages all melted up into the green during the first several minutes and both the DOW and SP500 set new highs before showing signs of reversal.
By 10 am the averages were trending down after disappointed that there was no European type QE coming. The DOW was down to flat status and dropping and volume was falling on investors frustrations and the markets may be heading further down than expected.
The ECB kept rate the same as expected, but the US Dollar pushed up to new highs as the Euro made a significant decline. (Chart Here) The main message, promises Draghi, is the ECB assets are ready to expand as others contract.
FRANKFURT, Germany (AP) – European Central Bank head Mario Draghi opened the door for further stimulus on Thursday, saying the bank is preparing the technical groundwork for new support measures that it can deploy if needed. Stocks rallied and the euro slumped on the news.
The ECB did not announce any new monetary support after its governing council meeting Thursday, at which it left its key interest rate at a record low of 0.05 percent.
But Draghi’s comments on the preparations for more measures jolted markets. The euro fell to $1.2394 from $1.2520 before Draghi started speaking. It is the first time it has traded below $1.24 since August 2012, when Draghi famously promised to do “Whatever it takes” to save the euro.
Central bank stimulus measures can weigh on a currency. In stock markets, Germany’s DAX index jumped 1.4 percent.
MarketWatch.com said, “Most analysts expect few fireworks.
There are too many political obstacles right now for the ECB to push ahead with a full-blown quantitative easing program, though many economists seem to expect Draghi will continue to drop hints in that direction despite signs of discord.”
Our medium term indicators are leaning towards sell portfolio of non-performers at the opening and the short-term market direction meter is bearish. We remain mostly, at best, negative and conservatively bullish, neutral in other words. Right now now I am getting very concerned any downtrend could get more aggressive in the short-term and volatility may also promote a sudden reversal from where the market is now. The SP500 MACD has turned up, but remains above zero at 19.34. I would advise caution in taking any position during this uncertain period and I hope you have returned your ‘dogs’ to the pound.
Having some cash on hand now is not a bad strategy as market changes are happening everyday. As of now, I do not see any leading indicators that are warning of a ‘long-term’ reversal in the near-term. There may be one later in 2015, but any market fluctuations we see now are more of a internal market rectification than a bear market.
Investing.com members’ sentiments are 59 % Bearish (falling from 70% and now rising from 33%).
StockChart.com Overbought / Oversold Index ($NYMO) is at 53.31. (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. (Now were are high enough to descend again – watch out!)
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 55.65 %. (Chart Here) The downside decent has reversed, but will it continue to rise above 50%? The next support is ~37.00, ~25.00 and ~15.00 below that. December, 2011 was the last time we saw numbers in the 20’s.
StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 53.17. (Chart Here) Below support zone but rising. Next stop was ~57, then ~44, below that is where we will most likely see the markets crash. We are seriously below 44 and need a reversal pronto as it looks like there is nothing to stop the fall until 25 and taking the markets with it.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 23.55. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009.
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 65.00 / 62.75 (and staying there) should be of a great concern to bullish investors.
StockChart.com NYSE Composite (Liquidity) Index ($NYA) is at 10,809. (Chart Here) We are above the resistance (10,301) but is this a test of the next resistance at ~10600/800, watch to see if these numbers decline back down. If they don’t then there an excellent possibility for the markets going higher now that we have topped 10800. Next stop down is 10600, 9750, then 9250, and 8500.
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”.
Was the March 2009 low the end of a secular bear market and the beginning of a secular bull? Without a crystal ball, we simply don’t know. One thing we can do is examine the past to broaden our understanding of the range of possibilities.
An obvious feature of this inflation-adjusted is the pattern of long-term alternations between up-and down-trends.
The longer 6 month outlook is now 30–70 sell (probably should be 20-80 sell) and will remain bearish until we can see what the effects are in the Fed’s game plan. Sooner or later brighter skies will return over the market. Until then, investors should employ the first thing one learns while in a foxhole; keep their head down.
The DOW at 10:30 is at 17469 down 16 or -0.09%.
The SP500 is at 2018 down 5 or -0.25%.
SPY is at 201.92 down 0.40 or -0.20%.
The $RUT is at 1164 down 3 or -0.26%.
NASDAQ is at 4608 down 13 or -0.28%.
NASDAQ 100 is at 4137 down 15 or -0.36%.
$VIX ‘Fear Index’ is at 14.87 up 0.70 or 4.94%. 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 positive and the current bias is trending down.
WTI oil is trading between 79.33 (resistance) and 77.13 (support) today. The session bias is negative and is currently trading down at 77.31. (Chart Here)
Monday, October 20, 2014 For those traders who really take a long view of market trends, looking at the monthly continuation chart for Gold futures, we notice that the bull market that began back in 2001 when Gold prices were… Read More…
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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 1137.78 earlier to 1148.48 and is currently trading up at 1144.90. The current intra-session trend is sideways. (Chart Here)
Dr. Copper is at 3.009 rising from 2.993 earlier. Very volatile today. (Chart Here)
The US dollar is trading between 88.02 and 87.23 and is currently trading down at 87.87, the bias is currently positive. (Chart Here) Resistance made in Aug., 2013 (~85.00) has been broken and now is support. This support has gotten much stronger since August, 2014 and isn’t likely to fall easily.
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