Opening Market Commentary For 04-17-2014
Premarkets were off fractionally this morning after a relatively heavy dumping after the markets closed last night. Reporting financial news was OK and in the green, but Goldman Sachs (GS), Chipotle Mexican Grill (CMG, Honeywell International (HON), General Electric (GE) and E. I. du Pont de Nemours (DuPont) (DD) reported disappointing quarterly reports.
Markets opened flat and in the red with the BTFDers buying like crazy pushing the green volume into high gear. Within 2 minutes the bears took charge and the averages were off -0.15% and melting. By the 15 minute mark the small caps slightly in the green, the $VIX dropping to 13.71 and the volatility was a traders paradise.
By 10 am the averages were in the red, volatility high and trending down. I would not place any bets one way or the other right now.
As the bull pushes the averages higher and higher, as it has done in the past several sessions, one begins to wonder just how far can this craziness can go. Cam Hui has some good suggestions, some insights to credit spreads relative to corporate leverage and a possible 15% correction in the future.
A Case Of ‘Risk Exhaustion’?
Stock markets have been selling off for a couple of weeks, but there has been no apparent fundamental underpinnings to the decline. While I can point to technical reasons, satisfactory fundamental explanations have been lacking.
. . . bull markets don’t usually end with such high cash and low leverage, and also rarely end with tobacco being the only subsector at an all-time high. Bears looking for that big 10%-15% correction should wait until September.
For now, the US macro fundamental outlook looks fine. In fact, we are seeing some evidence of a weather related growth snap-back from the cold winter. As well, Europe is recovering nicely. So there is no need to panic over falling stock prices.
The short 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 on the large caps have not turned, only a past 6% correction (and recovery) and that is not enough for me to start shorting. The MACD (NASDAQ) has turned down slightly and is at -53.08. I would advise caution in taking any position during this volatile transition period although Barchart.com shows a 24 % buy. (Remember this has been negative for weeks.)
