Midday Market Commentary For 7-2-2012
Not that it means anything with the charts being messed up as they are, but the 100 day MA appears to be the resistance 'line in the sand' where the indexes are not advancing any further. In fact the major indexes are below their perspective 100 day MA's and appear to want to melt further down as they trade sideways this morning. In reality I expected the markets to melt down last week if it wasn't for the EU Non-Event getting in the way. The only ones benefiting by this surprise rally on Friday were the Wall Street crooks that manipulated it. A lot of us that were shorted took paper hits, but were well within the safety zone and no margin calls.
Europe is still in a death spiral and as soon as the 'Hopium' and 'Delusionol' wears off the hangover begins. The bears WILL have there day in the sun and soon. My continued believe that unemployment, regardless where it is, will dictate in the long run the validity of ANY recovery. The US unemployment is in the dumps along with other European Nations like Spain with a 25% unemployment rate. It is virtually impossible to have any Nation recover without employing its citizens. Until then, the Bears have the edge on the market.
Interesting article from Rick Ackerman explaining Friday's stratospheric rise and to confirm that our premium subscribers were notified previously to Friday. I don't believe many bears were caught on margin calls Friday as Rick claims as most of us are only placing small portions of our cash reserves on the line. Besides the RRR** is still moving in a narrow range negating massive moves in most shorted equity or ETF's.
Although we all “know” that Europe cannot possibly grow its way out of its mess, and that sooner or later the euro currency system will unravel, the mere pretense of doing something about it will always be sufficient to buy more time, at least until the day arrives that the system actually does fail.
Traders are soon to discover, or perhaps relearn, that this game is played with stocks moving down as well as up. Thus, bears who have been waiting patiently for months or even years to “even the score” are destined to see the hoped-for opportunity come and go in mere minutes. To be on board, permabears will need to have been short the night before.
More saber rattling from Iran sending oil up and military experts shaking their heads collectively. The old axiom of an improved economies through war probably means that Russia and China would welcome a Western military intervention. Friday's oil rally was dramatic compared to previous movements, current Oil inventories are up and poise a threat to further bullish actions. The World demand is well known to be in a decline and usage would need to greatly improve to send oil futures higher. I don't believe we have seen the resent lows to constitute a bottom to the decline of recent sessions unless we have a 'Black Swan' event as outlined below.
What goes down, must come up. In this case crude, which is soaring on news out of FARS that Iranian lawmakers have drafted a bill proposing a blockade of the Straits of Hormuz for oil tankers heading to sanctions supporters, i.e., embargo countries. Naturally, if implemented, this would mean an almost inevitable military retaliation on behalf of the "western world." Then again, this is not the first time Iran has postured with a blockade. If indeed willing to follow through, it surely mean Iran has at least implicit whisper support of Russian and Chinese support when the situation inevitably escalates.
DailyMarket.com says, “Oil’s sharp rally on Friday may have ended the recent down move in prices, as short-covering and fresh momentum buying has once again shown that the Oil market is unstable at prices below $80 per barrel.'
The DOW at 12:15 is at 12815 down 64.93 or -0.50%.
The 500 is at 1357 down 4.52 or -0.33%.
$RUT is at 796.48 down 2.00 or -0.25%.
SPY is at 135.74 down 0.35 or -0.25%.
The trend is up and the current bias is down.
WTI oil is at 82.46 trading between 85.00 and 82.70 and the bias is negative.
Brent crude is trading at 95.77 between 97.44 and 95.28 and the bias is negative.
Gold is down today at 1597, trading between 1599 and 1587 with a neutral bias.
Dr. Copper is at 3.46 down from 3.50 earlier.
European markets closed sharply higher today. The FTSE 100 in London is up 1.25% while the German DAX is up 1.24%. The CAC 40 in France is up 1.36%.
** RRR = Risk Reward Ratio
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Written by Gary