Opening Market Commentary For 07-16-2014
Premarkets were up +0.40% on not so good financial reporting this morning. Markets did open up at that range with the DOW again setting a new high (17139) and then promptly started to melt downward all on moderated volume.
By 10 am the markets remained elevated and trading sideways in moderate volume. Who is going to win today’s tug of war?
Today’s morning activity is active and could result into some volatile action on the part of the bears as we wait for Ms. Yellen’s dovish remarks to set in.
The medium term indicators are leaning towards the hold side at the opening. The all important signs of reversal, up or down, have not been observed so we are mostly, at best, neutral and conservatively holding. The important DMA’s, volume and a host of other studies have not turned and that is not enough for me to start shorting. The SP500MACD has turned down, but remains above zero at 11.75. I would advise caution in taking any position during this uncertain period.
Barchart.com shows a 88 % buy. (Been at 88% for the last 5 sessions, I think their meter is broken) Investing.com members’ sentiments are 58 % bearish and Investors Intelligence sets the breath at 67.3 % bullish with the status at Bear Correction. (Chart Here )
StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 72.43. (Chart Here )
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 84.60. (Chart Here )
Why You Should Not Be Comfortable With The Level Of The Stock Markets
Summary
The Dow Jones has set a new record above 17,000.
The NFP came out with a stronger than expected number of 288,000 new jobs for June.
Wage growth remains low, well below the level the Fed would like to see.
The U.S. economic recovery is not on sure footing yet. There are foundation issues, especially in the housing market and with wages. The Fed should take into account these problems before raising rates. The Fed is in the middle of tapering its massive bond buying program, hoping to end it by end of October 2014. They have continued to keep short term rates near zero, amid speculation they will raise them soon. The Fed is correct in keeping them as is. It is still too early to raise rates. While 200K new jobs a month is a good thing, a print of 300K would point to a stronger economic recovery.
There are reasons to be concerned. While there is a feeling of euphoria over the Dow Jones hitting 17,000 and closing above it, do not expect it to stay at this level. There is no real economic growth supporting it.
