Opening Market Commentary For 07-15-2014
Premarkets were up +0.20% at one time and slowly dropped to flat after morning financial numbers didn’t come in what analysts had predicted. Markets opened at +0.05% and the DOW quickly moved up +0.30% to set a new high at 17104 on moderate volume while other averages trailed.
By 10 am the DOW melted up to 17120 then fell of as some investors decided to jump ship moving the averages back close to opening numbers and becoming very volatile.
Everyone is watching the Fed as we have all learned, it is the only game in town.
Janet Yellen will present testimony regarding the Federal Reserve’s monetary policy this morning. Fed watchers are looking for clues to the timing of future interest rate hikes after data in the second-quarter displayed the economy gaining momentum. Investors are still predicting that policymakers are in no rush to raise rates. The expected news will probably keep the market rally going today, but any hints of hawkishness will likely trigger a negative reaction.
Read at dailyfx.com.
Fed’s Yellen: Housing shown little progress, disappointing this year.
Fed’s Yellen: FOMC anticipates growth at moderate pace.
Fed’s Yellen: Too many Americans unemployed, Inflation sub-target.
Fed’s Yellen: Significant Slack Remains in Labor markets. Says U.S. economic recovery is not yet complete.
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 59 % bearish and Investors Intelligence sets the breath at 67.7 % bullish with the status at Bear Correction. (Chart Here )
StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 72.73. (Chart Here )
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 84.40. (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.
