The Market Manipulators Have Run Out Of Steam And The Bears Have Control

March 22nd, 2012
in Gary's blogging, midday post

Midday report.   As the major indexes tried to continue advancing to the upside, on flat or declining volume, the market manipulators have finally run out of steam in my opinion. For indexes, any jump in volume could mean the trend higher is nearly over as the uninformed buyers have exhausted themselves. We may have see that this morning.

Today the Indexes fell while a small spike in early buying occurred and then fizzled out as the day progressed. The rise which started about 11:15 is strictly the algo traders moving things around and should be discounted for determining trends although I wouldn't count out a positive trend up tomorrow only to close out any gaps down from today.

The DOW is at 13058, the 500 is at 1394, SPY is at 139.28, SSO is at 57.19. The WTI is at 106.85 which is near its lows in late February, Brent is at 122.21 well below its highs in March 2011, GLD which as risen from yesterday is at 159.42 and SLV is at 30.48.

The big question today is, of course, where are the markets going to go next? Difficult question to answer and I have only been right a paltry 10% of the time over the last 3 months as Mr. Market does his best to confuse me. Having said that let me point out some of the thinking that I see as 'on point' to a define a declining market place. One of my favorite authors is David Moenning and he writes a compelling article for any investor or trader to contemplate.

Daily State Of The Markets: Get It Off The Books (The Cash, That Is) by David Moenning

“The news greeting investors on Tuesday morning clearly wasn't good. There were problems in China, which in turn, meant problems for the global growth thesis. There were new worries about Greece (I know, how the heck is that possible?). There was a lot of chatter about Portugal becoming the next Greece and that EU leaders had best deal with this quickly before another round of debt restructuring begins. And with Shanghai, Hong Kong, and most of the European bourses down more than 1%, it looked like the bears might finally get back in the game yesterday.

Since China is the second biggest economy on the planet and the biggest consumer of energy in the world, any and all data relating to the growth outlook for the Chinese clearly warrants some attention.

But the story that got the most attention was a PowerPoint slide in a BHP Billiton (BHP) presentation. BHP, which is the world's biggest mining company, said in its presentation yesterday that growth in China's demand for iron ore will fall "to single digits, if it is not already there" as steel production is slowing and growth rates have flattened. “

Another insightful article that helps put into perspective the woes that surround us. He points out that we have had an extended rally and that any 'Black Swan” event, such as a war with Iran, could REALLY upset the AAPL cart literally and figuratively.

The Market May Be Escaping, But The Economy Isn't by Kevin Flynn

“Much like 2007, we have an extended rally, with eyes on exits, news flow that regularly fails to support the myth that all is well, yet no obvious, hit-you-in-the-face disaster yet (though clues abound). So a story that is less than encouraging may cross the morning tape, and nervous traders start to take some money out.

In other ways it does feel like 1987, in the sense that the market is on a runaway train and the investment fund community is overwhelmingly overconfident. The bond market started signaling that things were going wrong in the spring of that year, yet prices drove past every danger sign in an orgy of self-infatuation.

For the investor right now, prices are starting to say that nothing can go wrong this year. That isn't likely. Facing the slowdown in China and perhaps the rest of the emerging markets, the recession in Europe and its disintegrating periphery, the quite modest nature of the U.S. recovery, the debt burden hanging over the developed world, impending budget battles and automatic spending cuts, oil prices that will realistically recede only if traders believe that the economy is turning down - it simply isn't possible that the market can sail through all of these perils untouched. “

An interesting comment made to the above article has a lot of merit only I prefer cash to gold in the short term. His felling of the 401K holders is one that I have been wondering about too. Is this the cause of low volumes?


“Many people who used to put money away are now living on it and not building up their 401K Plans. People are not worried about stock prices as much as everyday gas and grocery prices.

After being burned with their 401K Plans, many people have looked at alternative places (like Gold) to put their money into.

With house foreclosures, jobs that pay 50% less than what they were making 5 years ago, and other financial reductions, many people are looking at monthly survival more than long-term growth.”

And finally, here is the reason for having short term cash at hand. If the Euro goes down the USD always follows by going up, which in turn brings the markets down.

Head and Shoulders Forming on EURUSD

“This is a top reversal pattern, or a bearish signal. Of course, this trade setup is still in the making and is only confirmed if prices follow the direction of the red arrow, breaking below the neckline. The pattern is however void once prices break the high of 1.3484.

You can expect many traders to go short if prices break below the neckline level of around 1.3017.”

Add it all up and I don't see a favorable outcome for those in long positions, but I am not quite ready to throw in the towel and go completely short. Although I feel that time is quickly approaching.

In case you do not read my market closing article this afternoon, I will be taking a vacation day tomorrow, Friday the 23rd and back on Monday the 26th. A short interlude that my wife feels necessary for my sanity.

Written by Gary

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