Wednesday, January 29, 2014 Zeb’s Vue

General Information and Analysis

This will be a very interesting (maybe frustrating) day for the day-traders and the Federal Reserve.  The markets have gone into a tailspin world wide with the problem in Turkey and all the emerging markets.  Gold has taken a significant jump. 

However, everyone - be cautious here.   No one has any idea if this is the real deal in the collapse, or it is just a temporary scare.

US

Comment for 1/29/2014	Measure	Indicator	Ranking
Weekly RSI	WeeklyRSI	59.3	Neutral
Long Term MVA (200 day MVA)	200 MVA	5.89%	Bullish
5 Day Slope of 55 day MVA	Slope55MA	0.15%	Neutral/DT
Intermediate Trend (Using ADX)	ADX(14)	20.52	Bearish
Short Term Trend (Daily RSI 3)	RSI(3)	33.22	Neutral
Relative Volatility ATR vs. 1Stdev	ATR(90)	0.96%	Watch Out
VIX - MACD 10/30 (slope down)	MACD	0.590	Neutral

 

Comment:

 

The market technical signals are neutral to bearish.  The long-term direction (200 Day MVA) is still bullish. 

An significant number of professional short-term traders look for a market to revert to mean (meaning if it is in a bull configuration, it will revert to the MVA after a drop).  I noted that very short term, the RSI 3 day indicator provides a way to indicate when a market is liable to bounce.  Also the market on S&P 500 was nearing a significant support number (1770).  The two indicators gave warning we may see a bounce.

What is not clear is which way the market will go now.  A short term swing trader should look for a bounce to at least the 50 Day MVA.

The wild card is the FOMC announcement at 2:00 PM EST (11:00 AM PST).  FOMC policy is expected to remain the same as it is.  However, all eyes will be watching if the FOMC tapers further.  The expectation is built in (according to Reuters) that FOMC can taper another $10 billion per month.  More than that, and the market will take a swan dive at least. 

 

The 200 day MVA and the shorter moving averages are bullish.

 

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. Note on VIX:  VIX closed at 13.77.  That is not a "bearish" indication.  VIX is moving up albeit not strongly, but 20 is considered to be a bearish sign, and it is a long way from that.   

S&P PIVOT ES Mini March Contract - Tuesday- Useful on Friday 1/10/2014

Yesterday 1-28-04					1/27/2014
High		1797.00			High			1792.00
Low		1771.00			Low			1767.00
Close		1788.25			Close			1775.75
R2		1811.50			R2			1803.25
R1		1800.00			R1			1789.50
Pivot		1785.50			Pivot			1778.25
S1		1774.00			S1			1764.50
	S2		1759.50				S2		1753.25

 

Stocks –

Zeb's VUE:

After yesterday's price rise in the USA stock markets, the rhetoric about the coming fall has calmed a bit.  Information regarding the intermediate term trend of the market is still in conflict, with no clear direction.

Therefore, the FOMC meeting will be #1 focal point.  During the day, we can expect the market to go nowhere on pretty low volume until the 2:00 PM (EST) announcement. 

The S&P 500 on futures started down at 5:00 AM PST (8:00 AM PST).  The fall has been significant (without NY stock market opening).  I'm not wealthy enough to have access to real-time news, but the news coming from my German friends in Stuttgart suggests the DAX turn to the downside comes from emerging market problems such as Turkey and South Africa.  South Africa hiked rates this morning. 

The reaction to this news is a flight to safety in US bonds, Chinese Yaun (from London), and Gold. 

Turkish stocks are collapsing.  The Hungarian Forint is collapsing. 

In turn, US Stocks on the futures markets are getting slammed down.

http://www.marketwatch.com/story/turkey-gains-fade-as-wall-street-turns-to-fed-2014-01-29?siteid=rss&rss=1

 

There is no way to really tell what will happen in NY when it opens, but as already noted from the technical indicators, the market may stall until the FOMC.  All bets are off, however, if Europe (France, Germany, UK and others) panic.  Is this the "big meltdown"?  If so, Dr. Yellen's first reign at the helm of the Federal Reserve is going to be very very difficult. 

The consensus on Bloomberg is that the FOMC 2-day meeting will taper another $10 billion to $65 billion per month.  Again, that is very already built into market pricing.  Emerging market and Europe's reaction is not built in.  The Treasury will sell $15 billion of 2 year floating rate T-notes for the first time in history.  25 S&P 500 companies will report earnings today.

7:48  S&P, DOW, and NASDAQ have gone into a wait and see mode...

If you ever wanted to view how certain levels of price affect the stock market, today is a good example.  Price was at 1801 last night on S&P futures where the Resistance level was 1800 (a significant round number).  

It did not stay at 1801 even for a few minutes, and retreated below 1800 almost immediately.  Every time the S&P reached Yesterday's (YD) PIVOT number yesterday (see above), there was a bounce; sometimes a significant bounce. 

During the early morning PST (4:00 AM or so) the Turkish problems began to surface as a concern.  The market was well above YDClose (1788.25), and hardly stopped when the market fell. 

It rebounded at YDPivot.  It spent 8 minutes there before falling.  The next real support was going to be YDLow at 1771.00  At 6:05 (PST) until 6:29 (PST) the market bounced around YDLow. 

Since then price has not threatened that low, and has remained choppy. 

What is there to learn?  Day Traders (and overnight traders in the US stock futures) use Yesterday's (YD) High, Low, and Close as significant areas to trade.  They also track the floor traders Pivot points, because market behavior changes at Pivot, R1 and S1 on a regular basis.  Does that mean YOU can make money at those points?  Possibly, but probably not.  It is very difficult in practice to take advantage of those support/resistant areas.  Momentum traders would likely take advantage of breakouts in the large trend, and do well if they maintain discipline.  If one was a trend trader on a daily basis, that is less clear that a day like today could make money. 

I find the intellectual exercise of planning 2 to 3 turning points ahead of the support and resistance levels entertaining.  I also wonder how many day-traders really are able to make consistent money.  My guess is not many, and that the "big" money is made in slow long-term investing.