Friday, January 17, 2014 Zeb’s Vue

General Information and Analysis

US

Comment for 1/17/2014	Measure	Indicator	Ranking
Weekly RSI	WeeklyRSI	73.5	OverB
Long Term MVA (200 day MVA)	200 MVA	9.65%	Bull
5 Day Slope of 55 day MVA	Slope55MA	0.47%	Neutral
Intermediate Trend (Using ADX)	ADX(14)	15.74	Chop
Short Term Trend (Daily RSI 3)	RSI(3)	55.51	Chop
Relative Volatility ATR vs. 1Stdev	ATR(90)	0.71%	Quiet
VIX - MACD 10/30 (slope down)	MACD	0.010	Chop

Comment:

Do you find the choppy market exhausting? I do. 

Long term, the bulls are still in control.  The market is undecided. Yesterday's trading was choppier (in my way of measuring) than any day this month.  The market has been in a trading range for all of January (albeit some of the moves were significant.)  I will use ES mini as the example.  12/31/2013 was the high at 1846.50.  The low was on 1/13/2014 at 1809.50.  Prices have been contained between 1846.40 and 1809.50.  The lower price (1809.50) seems to be support back from 11/29/2013 where the market hit a top and then made a significant correction on 12/16/2013.  If you agreed with my analysis, then this would be an example of where resistance at 1812.50 on 11/29/2013 becomes a support zone for January 2014. 

Basically, some kind of significant storm is coming.  Joe Ross has taught that this kind of choppy market lasts between 15 and 20 days before a breakout.  The trouble is, one cannot tell which way it will break out with any accuracy.  Also, one cannot predict that the first break out will end up being a false breakout.

Technical information from price only is inconclusive, as there has been no trend since December 26, 2013.  Basically, short term swing traders should step aside for now. 

 

 

The table above is a rating for intermediate and long term trend in the S&P500.  I used the S&P 500 as the indicator for the USA stock market.  For day traders: You may find it useful to trade in the direction of the trend.  However, looking at any daily chart over lots of years, the trading direction for the day is pretty random.

Yesterday			Day Before Yesterday
High	1843.75		High	1845.75
Low	1834.50		Low	1831.50
Close	1836.25		Close	1841.50
R2	1847.50		R2	1854.00
R1	1842.00		R1	1848.00
Pivot	1838.25		Pivot	1839.75
S1	1832.75		S1	1833.75
S2	1829.00		S2	1825.50

 

Stocks –

Zeb’s View:

There was a tidal wave of economic news yesterday, and the S&P500 retreated slightly.  Before the market opened, weekly unemployment claims showed improvement.  The price overnight was down, but that news showed the price moving up (before the opening).  Core inflation was unchanged, which could have indicated that the Federal Reserve will continue QEinfinity. 

Some of the big banks, however, showed earnings that disappointed.  The range (high to low) was very low. 

Volume was above the 50-day moving average, which on a down day would suggest more down move.  EXCEPT: volume was lower than the large up day and it was lower than the three previous days.  That would suggest volume is not going to reveal what happens next. 

The CPI from the Buereau of Labor Statistics for December shows inflation rate at 1.72%; well below the Federal Reserve's target.  However, the Federal Reserve uses Core PCE as its inflation gauge; 1.12%.  FOMC since the inception of QE has stated that the target rate for inflation is between 2-2.5%.  In December, the PCE core recorded a .95% rate - an all-time low.

Core PCE is too low (according to FOMC), and the deflationary trend raises serious questions about the effectiveness of the Fed monetary policy since the start of the Great Recession.  While the PCE is downward, it excludes food and gasoline.  Therein, lies great unrest among the masses, because the volatile price of gasoline makes planning difficult and seems inflationary to the consumer pocket book.  These gyrations do not mean anything significant to the Rich in Congress and the Senate, but mean everything to those in the blue collar worker and the lower middleclass. 

This disconnect between those that have (every single one of the rich people on the Federal Reserve) and those that struggle to meet ends meet show up when discussing inflation - where the consumer struggles, it is not meaningful to those setting monetary policy. 

 

The following is a monthly chart of the e-mini for Gasoline (QG).  It shows how volatile Gasoline prices are. 

 Esignal

For investing, it would seem we should follow PCE even though PCE may actually be disconnected from consumer inflation.  Would you agree then, that major tapering is not anywhere near because inflation is so low, and that the FOMC could decide tomorrow to not only add the tapering they have started back, but follow Japan's lead to stimulate far beyond the current $75-$85 billion per month? 

Today, expect the stock market to open down. It will open within yesterday's range.  Housing starts were reported, and they have not moved the market.  At 10:00 (7:00 AM PST) the JOLTS report will be reported.  Sometime the Job Openings and Labor Turnover Report (JOLTS) moves the market.  Expectations are that little will change, and therefore, unless the report surprises, the market may remain choppy until more earnings next week.

7:18 PST As thought, JOLT did not move the market much.  Possibly, it turned price to the upside from the downside move it had for the first 1/2 hour.  JOLT's report was positive for the economy.  Basically the market is really choppy, and day-traders may be feeling a great deal of anxiety.