Written by Gary
Opening Market Commentary For 11-07-2014
Premarket sudden rise to +0.3% this morning has been contributed to HFT algo computers misreading the morning US financials. The US dollar fell, the oils rose, gold skyrocketed, silver halted and by the opening the futures and commodities had dropped back to the unchanged line. The prospect of future high volatility and rapid reversals is upon us.
By 10 am both the SP500 and the DOW momentarily reached a new high and then proceeded to trend down in a sea-saw fashion just below the unchanged line. Just where is Mr. Market is going today?
Today’s session is NOT for guessing. The opening was almost a bull trap, but it occurred so quickly that not many were fooled by it. The oils are climbing, gold is rising, the US dollar is falling and Dr. Copper is experiencing heavy volatility. Trader’s are rejoicing for the new increased volatility, but to others it could be a losing proposition, be cautious.
Our medium term indicators are leaning towards sell portfolio of non-performers at the opening and the short-term market direction meter is bullish, but falling. 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 sudden reversals. The SP500 MACD has turned up, but remains above zero at 21.51. 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 61 % Bearish (falling from 70% and now rising from 33%).
StockChart.com Overbought / Oversold Index ($NYMO) is at 51.21. (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 56.47 %. (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 ($BPNYA) is at 54.03. (Chart Here) Below support zone but rising. Next stop was ~57, then ~44, below that is where we will most likely see the markets crash. We are seriously below 44 and need a reversal pronto as it looks like there is nothing to stop the fall until 25 and taking the markets with it.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 23.44. (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 10,827. (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”.
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 10:15 is at 17524 down 32 or -0.18%. (Historical High 17.563.07)
The SP500 is at 2028 down 3 or -0.15%. (Historical High 2,032.36)
SPY is at 202.94 down 0.22 or -0.10%.
The $RUT is at 1166 down 5 or -0.47%.
NASDAQ is at 4617 down 20 or -0.44%.
NASDAQ 100 is at 4152 down 12 or -0.29%.
$VIX ‘Fear Index’ is at 13.88 up 0.21 or 1.54%. Bullish 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 down and sideways.
WTI oil is trading between 79.23 (resistance) and 77.47 (support) today. The session bias is positive and is currently trading up at 79.00. (Chart Here)
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 1131.92 earlier to 1156.58 and is currently trading down at 1153.60. The current intra-session trend is positive. (Chart Here)
Dr. Copper is at 3.035 falling from 3.048 earlier. (Chart Here)
The US dollar is trading between 88.30 and 87.77 and is currently trading up at 87.93, the bias is currently negative. (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
If you would like to get advanced buy/sell tweets, sign-up in the column to the right of this post by clicking on the ‘Follow‘ button. Write me with suggestions and I promise not to bite.
Real Time Market Numbers
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary