Market Commentary: Santa Claus Rally Sends Investors Into Party Mode

Written by Gary

Closing Market Commentary For 12-19-2014

The averages started climbing late in the afternoon to +0.5% only to fall precipitously, losing session gains, but closing out its second-best week of the year. The oils rose plus 5% for the session and gold fell below 1194.00.

By 4 pm investors were enjoying the ‘spoils’ of the Santa Claus rally and are in a party mode.

The disconnect between the oils and the markets was very disconcerting until late this afternoon when the oils started moving back up. The question is whether or not they will continue to climb. Prevailing wisdom thinks not and that the Santa Clause rally will be short-lived.

NEW YORK (MarketWatch) reports: “The U.S. stock market ended a turbulent week with the biggest weekly gain since October. Stocks rose for three straight session in the wake of the Federal Reserve’s reassurance that the rate increases would be slow and measured, while the central bank said it would be “patient” on the timing of the initial hike.

Calmer currencies and commodities markets provided reasons to bid up prices, especially in the beaten-down energy and materials sectors.”

Our medium term indicators are leaning towards sell portfolio of non-performers at the midday and the short-term market direction meter is very, very bullish. We remain mostly conservatively bullish, neutral in other words. Right now now I am getting very concerned any downtrend could get very aggressive in the short-term and any volatility may also promote sudden reversals. The SP500 MACD has turned up, but remains above zero at +1.68. 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 warnings 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 67 % Bearish.

Investors Intelligence sets the breath at 51.4 % bullish with the status at Bear Confirmed. (Chart Here ) I expect a market reversal at or before ~25.0 should the markets start to descend.

StockChart.com Overbought / Oversold Index ($NYMO) is at +3.64. (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.

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.

StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) is at 50.99 %. (Chart Here) 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.

Many indicators are showing markets leveling off or rounding indicating market softness that could lead to lower values and investor’s should watch carefully. The SP500 MACD, $BPNYA, $BPSPX, $TNX and the $NYA all show rounding off the tops which in the past has lead to a downturn.

Also, the SP500 10 DMA has crossed over the 20 DMA (12-11-14) always indicating a ‘correction’ underway. The 50,100, 145 and 200 DMA are all going flat which is never a good omen for a continuing bull run. Watch for the 50 DMA to cross over the 100,145 and 200 DMA to indicate how deep the correction will be.

These are not ‘leading’ indicators as such, but depicting ‘trends’ in the making showing data accumulated over the past several months, but needs to be watched.

StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 57.31. (Chart Here) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash.

StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 72.40. (Chart Here) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction.

StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 21.76. (Chart Here) Flattening Yield Curve Signaling Slowing Economic Growth?

StockChart.com Consumer Discretionary ETF (XLY) is at 70.86. (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 65.00 / 62.75 (and staying there) should be of a great concern to bullish investors.

StockChart.com NYSE Composite (Liquidity) Index ($NYA) is at 10,903. (Chart Here) Markets move inverse to institutional selling. We are above the resistance (10,301) but is this a test of the next resistance (triple top) at ~11,109, watch to see if these numbers decline back down. Next stop down is 10600, 9750, then 9250, and 8500.

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The DOW at 4:00 is at 17805 up 27 or 0.15%. (Historical High 17,991.19)

The SP500 is at 2071 up 9 or 0.46%. (Historical High 2,079.47)

SPY is at 206.44 up 0.88 or 0.43%.

The $RUT is at 1196 up 4 or 0.32%.

NASDAQ is at 4765 up 17 or 0.36%. (Historical High 5132.52)

NASDAQ 100 is at 4282 up 14 or 0.33%.

How the Popular ‘VIX’ Gauge Works

$VIX ‘Fear Index’ is at 16.49 down 0.32 or -1.90%. 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 net positive and the current bias is elevated and trading down.

Gundlach: Rates not going anywhere; oil headed lower

Everything You Need To Know About The Geopolitics Surrounding Crude Oil

WTI oil is trading between 58.38 (resistance) and 54.41 (support) today. The session bias is Trending up and is currently trading down at 57.83. (Chart Here)

Brent Crude is trading between 62.66 (resistance) and 59.08 (support) today. The session bias is Trending up and is currently trading down at 62.10. (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 fell from 1201.42 earlier to 1193.88 and is currently trading down at 1194.30. The current intra-session trend is trending down. (Chart Here)

Can Dr. Copper Heal Thyself

Dr. Copper is at 2.893 rising from 2.852 earlier. (Chart Here)

The Consequences Of A Strengthening U.S. Dollar

The US dollar is trading between 89.87 (highest since 2009 and ~89.85 is a very substantial resistance) and 89.40 and is currently trading up at 89.83, the bias is currently trading sideways and quiet. (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 next resistance is at ~88.85 set in June, 2010. Breaking that barrier can not be good for the markets.

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