Market Commentary: Averages Fall Off Morning Highs, Further Weakening Expected

Written by Gary

The morning session drifted lower and started to regain losses by 11:30 am. The market trend is now melting up, but the averages remain in a mixed state fluctuating between the unchanged line.

By noon the DOW and small caps were in the green and volume was falling fast touching on anemic at times. Indicators show market weakening and lower values forthcoming, caution is warranted.

We thought we would see the markets correct before marching up to the next $NYA resistance, but feel confident we will see some sort of near-term correction before the expected Santa Claus rally.

Trouble does NOT come until Institutional Investors start Selling ...

Take a look at today's updated chart that shows the trend of Institutional Selling levels as of yesterday's close. The trend lines are still showing sideways, NEUTRAL action.

By not being aggressive sellers, Institutional Investors have let other investors drive the market higher with their buying. With serious selling out of the way, a smaller amount of buying can still push the market higher.

If you look at the red blue trend lines for the Institutional Selling, they are essentially at the same level as they were on November 11th.

Unless the trend lines start moving into a clear down trend, the upcoming test level of 11,108.39 on the NYA Index could pose a problem. That's the focus now ... the 11,109.39 triple top test on the NYA Index.

Our medium term indicators are leaning towards sell portfolio of non-performersat the midday and the short-term market direction meter is Very Bearish moving from bullish this morning. We remain mostly conservatively bullish, neutral in other words. Right now now I am getting very concerned any downtrend could get very aggressive in the short-term and any volatility may also promote sudden reversals. The SP500 MACD has turned flat, but remains above zero at 25.64. I would advise caution in taking any position during this uncertain period and I hope you have returned your 'dogs' to the pound.

Having some cash on hand now is not a bad strategy as market changes are happening everyday. As of now, I do not see any leading indicators that are warning of a 'long-term' reversal in the near-term. There may be one later in 2015, but any market fluctuations we see now are more of a internal market rectification than a bear market. members' sentiments are 65 % Bearish (falling from 70% and now rising from 33%).

Investors Intelligence sets the breath at 55.7 % bullish with the status at BearCorrection. I expect a market reversal at or before ~25.0 should the markets start to descend. Overbought / Oversold Index ($NYMO) is at 30.39. But anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold.

This $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. NYSE % of stocks above 200 DMA Index ($NYA200R) is at 58.48 %.  The next support is ~37.00, ~25.00 and ~15.00 below that. December, 2011 was the last time we saw numbers in the 20's. NYSE Bullish Percent Index ($BPNYA) is at 61.29. Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. S&P 500 Bullish Percent Index ($BPSPX) is at 75.60. In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 10 Year Treasury Note Yield Index ($TNX) is at 22.96 Consumer Discretionary ETF (XLY) is at 70.85

Chris Ciovacco says, "As long as the consumer discretionary ETF (NYSEARCA:XLY) holds above [66.88], all things being equal, it is a good sign for stocks and the U.S. economy." This chart clearly shows that dropping below 65.00 / 62.75 (and staying there) should be of a great concern to bullish investors. NYSE Composite (Liquidity) Index ($NYA) is at 11,030.  Markets move inverse to institutional selling. We are above the resistance (10,301) but is this a test of the next resistance (triple top) at ~11,109, watch to see if these numbers decline back down. Next stop down is 10600, 9750, then 9250, and 8500.

The DOW at 12:15 is at 17828 up 9 or 0.05%. (Historical High 17,894.83)

The SP500 is at 2068 down 1.29 or -0.07%. (Historical High 2,074.21)

SPY is at 207.13 down 0.13 or -0.06%.

The $RUT is at 1185 down 2 or -0.21%.

NASDAQ is at 4758 up 3 or 0.06%. (Historical High 5132.52)

NASDAQ 100 is at 4290 up 6 or 0.15%.

$VIX 'Fear Index' is at 12.61 down 0.01 or -0.08%Bearish to Neutral Movement

The longer trend is up, the past months trend is positive, the past 5 sessions have been positive and the current bias is mixed and trending down.

WTI oil is trading between 76.57 (resistance) and 74.26 (support) today. The session bias is negative and is currently trading down at 74.38

Brent Crude is trading between 80.43 (resistance) and 78.19 (support) today. The session bias is negative and is currently trading down at 78.47.

The general consensus is that gold prices will actually fall in the next twelve months (Sept to Aug. 2015). Goldman Sachs estimates that gold will fall to $1,050 an ounce, a drop of nearly 19%.

Gold fell from 1203.00 earlier to 1190.56, reversed course and is currently trading down at 1197.90. The current intra-session trend is volatile, trending sideways.

Dr. Copper is at 2.976 falling from 3.024 earlier. 

The US dollar is trading between 88.40 (highest since 2009) and 87.87 and is currently trading up at 88.02, the bias is currently volatile and trending up. Resistance made in Aug., 2013 (~85.00) has been broken and now is support. This support has gotten much stronger since August, 2014 and isn't likely to fall easily. The next resistance is at ~88.72 set in June, 2010.

"Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation inequities, they should try to be fearful when others are greedy and greedy only when others are fearful." - Warren Buffett

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