April 23rd, 2012
in Gary's blogging
After Market Close:
Low midday volume and DaBoyz helped melt the market back up 50% from the lows of this morning. Still it should be another wake up call for those that missed the first bear roar last week putting the claws into the bull and making it wince. The DOW today couldn't rise above a solid resistance on the third try and faltered. The 500 fell below a weak support but didn't even come close to challenge the support below the important one. The $RUT seems to be leading the markets down in that it gaped down tested its support of 786 and closed above at 791. Follow up:
I expect the markets to melt up tomorrow a bit to “correct” for today's decline, that would of course be the 'normal' thing to do. Mr. Market has a way to lay waste to any conventional thinking you or anyone else may have, so be careful as it may start out bullish and end up down with the bears. The market volume was light to moderate and is starting to take on merit in its moves. Although the market improved during the day, caution is warranted on drawing any conclusions. I am retaining my FAZ until Wednesday for the 10 am reports. It closed at 22.81 reaching a high of 23.42 early in the morning.
The story is in the charts below.
The 500 at the close. You can see it went through a very weak support and in itself doesn't mean much.
The $RUT at the close. The important thing here is the support that it challenged and pulled back on. Need to watch that support level carefully over the next few days.
The DOW at the close. It appears to be lagging the market decline IF that is what we are seeing. It is not likely it is poised for a sudden reversal with the small caps leading the decent, but at this point you really need to make your choices carefully.
The Indexes at the close.
I would recommend that the players who are out, stay out. For those that are in start considering reducing your position of any dogs. Waiting to see what is going to happen next is probably not a good plan of action.
Flash: "After the bell Monday, Texas Instruments said it earned 32 cents an adjusted share on revenue of $3.12 billion, while analysts were looking for earnings of 29 cents a share on revenue of $3.06 billion. The shares are up about 3% in after-hours trading. "
Netflix posted a first-quarter loss of 8 cents a share on revenue of $870 million. Wall Street was expecting the company to post a loss of 27 cents a share on revenue of $866 million. In after-hours trading, the shares are off about 9% as investors may have been anticipating more robust subscriber numbers."
At The Half Way Mark:
The markets recovered to where they opened up to about 12:30 when a negative bias took over moving markets to about a 75% loss for the day. At 1 pm the DOW was at 12887 down 141, the 500 at 1363 down 14.56 and the $RUT at 789 down 14.25.
WTI oil moved down to the low 102's this morning and has stayed there while Brent has slowly up to the high 117's from very early lows in the low 117's. Gold has bounced around 1630's to 1632's also staying in narrow limits.
The European markets finished sharply lower today with shares in Germany leading the region. The DAX is down 3.36% while France's CAC 40 is off 2.83% and London's Footsie (FTSE 100) is lower by 1.85%. The USD briefly peaked at 79.75 and has settled down slightly at 79.57 while the EUR/USD pair closing Friday at 1.3220 had fallen to 1.3182 and has since risen back up to 1.3206.
As I mentioned earlier the news on the wires is not very good and the headlines speak for themselves.
“According to data leaked to French bloggers, Hollande got 28-29% of votes while Sarkozy got around 26%. They will challenge the presidency in the second round. Turnout was 80%. The first round may already have an impact on the euro, setting the stage for a bigger impact in the second round:
Hollande has already stated his opposition to the fiscal compact negotiated by Sarkozy and Merkel, and he remains in the leading position to become the next president. His election might add to uncertainty and may hurt the euro.
Yet anything can happen between the two leading candidates until May 6th, and a win of Hollande over Sarkozy in the first round will likely be shrugged off by the markets. A win of Sarkozy will be surprising, but doesn’t mean anything until the second round, and will likely be received in the same manner.
Sarkozy is quite unpopular in France, and there’s a slim chance that he will come in only third, behind extreme right wing Marine Le Pen.”
“The euro crisis casts a chill over a sunnier economic picture.”
“With France and Holland in red across Europe Markets Old Continent burn 160 billion.”
Mid-morning Market Commentary:
The news coming out of Europe is not the best I have read in some time. The Socialist Party in France appears to have the lead in the ongoing elections and in my opinion spells doom, at least gloom, for that nation. But when it comes to the French, who can ever tell if they are surrendering or don't care.
By 10 the markets have melted further down with the DOW reaching 12685, the SP500 reaching 1360 and the $RUT falling to 786 which also happens to be it next support. The other indexes are generally in between supports and resistance levels, still in the land of 'I-don't-know-where-I-am-going'. All indicators as of now point to a further melting down today as the red volume has turned from moderate to heavier. Not up to the levels reached on Thursdays roller-coaster ride, but close and 3 to 1 to the green.
“The European Investment Bank is including a legal clause in new contracts with Greek businesses that allows repayment in non-euro currencies, but a spokeswoman denied that it was preparing for an eventual Greek exit from the eurozone.
Markit chief economist Chris Williamson said:
The flash PMI signalled a faster rate of economic contraction in the eurozone during April, extending what appears to be a double-dip recession into a third consecutive quarter. The situation deteriorated across the region. Germany saw growth weaken to near-stagnation, while France saw a worryingly steep downturn, linked in part to increased uncertainty due to the ... presidential elections.
The Bank of Spain has estimated that the country's economy shrank 0.4pc in the first quarter, putting it firmly back into recession. The news briefly pushed the ten-year bond yield above 6pc, but it's since slipped back underneath the dangerous milestone.
We have German economic data out this morning which shows that manufacturing shrank at its fastest rate in three years. Markit's manufacturing PMI (based on a survey of business activity) has fallen to 46.3 from March's 48.4 (any value under 50 shows contraction). Data out for France is equally gloomy: the flash composite PMI (which includes services and manufacturing) fell to 46.8 from 48.7 in March.
The yield on French ten-year bonds has been edging up in response to the presidential election results, just as markets have slid the other way. They're currently up to 3.106pc, from 3.081pc late Friday - as investors demand higher returns on the risk of lending to the nation.
Francois Hollande (Socialist Party), who now looks set for victory [over Sarkozy], has said he'll re-negotiate terms of a pact that bound eurozone governments to reduce deficits and debt.”
Opening Market Analysis:
As you read from my premarket commentary, the market did indeed gap down. The DOW in the first few minutes slithered down in quick fashion to 12895. The 500 also dipped to 1364 with the Russell 2000 dropping down to 793. SPY opened down at 136.35, gold is at 1628.
The European news had an effect on the premarket and opened lower from Friday’s close, but didn't continue to fall after the first few minutes as it stabilized, waiting for the investors to figure out a game plan for the day. The red volume started out light and The $VIX jumped above 20 within the first 5 minutes.The 10 minute volume was solidly red and moderate.
The markets have stabilized for the moment and are trading in a narrow tight band, recovering slightly from the morning lows. The 'Dippers' are active grabbing up what may or may not be bargains and keeping the markets from falling further. The 10 minute volume finally turned green as the bulls won back some territory from the bears.
The morning trend is in a negative slant suggesting more negativity to come after the 'Dippers' have had their way. The MACD is reversing and we might actually see the markets melt up as the volume has fallen off. Today could actually become a lackluster one too as the volume isn't high enough to call a trend.
The premarkets are down as suspected they would / might be on Friday but honestly not for the reasons I thought would be the case. The morning financial out of the Eurozone are not really very good, in fact they look terrible. I guess the Italy consumer confidence for April should not have been a big surprise as the Italians have been complaining regularly as reported by the Italian press.
All of the numbers seen in the graph are way off the mark of what was expected and that in turned has driven the markets down. The US doesn't have reports today and typically DaBoyz drive the markets up under low volume, today will be different if we have high volume.
Premarket volume is very weak, so we have to wait for the opening. The test-of-the-waters purchase of FAZ Friday afternoon for 22.19 has been a successful buy as it opened at 23.16 and is currently on the most active list, up at +5.0%.
WTI oil is down to 102.81, Brent is down to 117.33, SP500 is down to 1360 off 18 from Friday's close. The Dow is 131 points at 12989 and the NASDAQ is down 22.75 points.
The European markets are sharply lower today with shares in Germany off the most. The DAX is down 2.98% while France's CAC 40 is off 2.33% and London's FTSE 100 is lower by 1.83%. The Asian markets closed down with the Hang Seng sharply down -1.84%.
“The reason for today’s weakness is Europe. Election news in France…a failure to agree on budget cuts in the Netherlands…a German manufacturing number that shrank at its fastest pace in almost three years…debt held by the 17 euro countries hit its highest level ever since the adoption of the Euro…Spain is officially in a recession…Italian consumer confidence dropped to its lowest level in 15 years – all have added to the selling pressure.
Trading is not hard when “the coast is clear,” but at times like this when sentiment has shifted and there are so many major unknown factors outside our control, it can be very hard. Don’t push it. “
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Written by Gary