Written by Gary
Opening Market Commentary For 01-02-2015
Happy New Year. The premarkets were up +0.4% and promptly melted up to +0.60% before turning around on low volume. The reporting U.S. financial’s this morning were ‘not-so-good’ and pushed the averages fractionally lower
By 10 am the averages were still in the green, but trending lower on poor U.S. Financial reporting.
The US dollar has reached new highs not seen since 2005, the U.S. Markit Manufacturing PMI reported 53.9 down from what was expected and the U.S. ISM Manufacturing came in at 55.5 with analysts expecting 57.5 and 58.7 prior.
“ISM’s Holcomb: Drop in ISM has “nothing to be concerned about”; impact on oil industry could explain decline.”
Our medium term indicators are leaning towards sell portfolio of non-performers at the opening and the session market direction meter is 52 % bearish. 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 down, but remains above zero at 11.10. 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 55 % Bearish. (Interesting – goes against current thinking.)
StockChart.com Overbought / Oversold Index ($NYMO) is at +3.16. (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 52.96 %. (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 $NYA all show rounding off the tops which in the past has lead to a downturn.
Also, the SP500 10 DMA has crossed over the 20 DMA (12-11-14) always indicating a ‘correction’ underway. The 50,100, 145 and 200 DMA are all going flat which is never a good omen for a continuing bull run. Watch for the 50 DMA to cross over the 100,145 and 200 DMA to indicate how deep the correction will be.
These are not ‘leading’ indicators as such, but depicting ‘trends’ in the making showing data accumulated over the past several months, but needs to be watched.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 21.21. (Chart Here) Flattening Yield Curve Signaling Slowing Economic Growth?
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 10,866. (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 ~11,900, watch to see if these numbers decline back down. 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”.
Just when you thought the U.S. economy was roaring back to health, Former Federal Reserve Chairman Alan Greenspan is here to tell you otherwise.
“The United States is doing better than anybody else, but we’re still not doing all that well,” Greenspan, 88, said today (12-30-2014) in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “We still have a very sluggish economy.”
Greenspan said the economy won’t fully recover until American companies invest more in productive assets and the housing market bounces back.
“Almost all of the weakness in the last four, five, six years has been in long-lived investments” in capital goods and real estate, Greenspan said. “Until these pick up, we’re not going to get the kind of vibrant growth that everyone is hoping for.”
The longer 6 month outlook is now 40-60 sell and will remain bearish until we can see what the effects are from the oil slide, ECB and the U.S. Fed possibly triggering a deflationary slide. Investors should employ the first thing one learns while in a foxhole; keep their head down.
Looking out a year ahead, there is no recession foreseen for the next 12 months.
And the Leading Index for the United States also shows no recession for the next 12 months.
The DOW at 10:15 is at 17891 up 68 or 0.38%. (Historical High 18,103.45)
The SP500 is at 2062 up 3 or 0.16%. (Historical High 2,093.55)
SPY is at 205.88 up 0.34 or 0.17%.
The $RUT is at 1206 up 1.42 or 0.12%.
NASDAQ is at 4749 up 13 or 0.27%. (Historical High 5132.52)
NASDAQ 100 is at 4251 up 15 or 0.35%.
$VIX ‘Fear Index’ is at 18.40 down 0.80 or -3.96%. 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 net negative and the current bias is elevated but trending down.
WTI oil is trading between 54.85 (resistance) and 52.04 (support) today. The session bias is negative and is currently trading down at 52.61. (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 1188.24 earlier to 1167.70 and is currently trading up at 1173.00. The current intra-session trend is negative. (Chart Here)
Dr. Copper is at 2.810 falling from 2.840 earlier. (Chart Here)
The US dollar is trading between 91.34 (highest since 2005 and ~91 is a very substantial resistance) and 90.64 and is currently trading up at 91.26, 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 current level (~91 / 92) is the resistance (substantial) and could be a triple top of sorts. Historical chart Here.
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