July 9th, 2012
in Gary's blogging
Midday Market Commentary For 07-09-2012
Expresso reports that “The disappointing employment report may have capped the recent rally in equity index futures, as traders gear up for what may be a continued period of sub-par economic growth prospects.” On that note we will have to wait until after the close for the Alcoa earnings report. “Alcoa Inc. (AA), the largest U.S. aluminum producer, may report an 84 percent decline in second-quarter earnings as the eighth straight year of surplus global production drives down the price of the metal”, reports Bloomberg. But the markets occasionally in the past shrugged of news like this and gone on to new highs because investors believe additional QE's is in the making. So there is no real way of predicting tomorrow market action as indicated by today's depressed trading.
Follow up:I continue to believe there is some real 'Doom and Gloom' in the future, but most likely it will be slow to rear its ugly head. Sensible, conservative and moderation are the key words in today's investing climate. I will continue to ride the market waves as they are presented to me if possible and depending on RRR**. Some 2% moves are not predictable like the sudden market rise the MSM hyped on 6-29-2012 and can't be avoided if short. Short term trading is not as easy as it was several years ago and has some inherited risks because of jumps like this but I continue to believe that sudden one day 1% movement will not be the norm for the next several months. Now that I have made my mark in the sand, watch tomorrow morning as the markets jump unrealistic one way or the other.
I will say this if the markets make a large rise I will position myself for more shorts. I am only off 2 points on one 3X and even on another while staying below my 75% cash reserves.
“. . . . amid continued concerns about the global economic outlook. . . . Trading on Monday may continue to be negatively impacted by last Friday's disappointing U.S. jobs report, which contributed to considerable weakness on Wall Street.
Developments in Europe are also likely to remain in focus, as euro zone finance ministers are scheduled to hold another meeting in Brussels later in the day.
Ahead of the meeting, Spanish ten-year bond yields climbed above the key 7 percent level, adding to concerns about the high cost of borrowing.
Nonetheless, trading activity may be somewhat subdued ahead of the release of aluminum giant Alcoa's second quarter results after the close of trading. The release of results from Alcoa is seen as the unofficial start of the earnings season.
A relatively quiet day on the U.S. economic front may also keep some traders on the sidelines, although the Federal Reserve is scheduled to release its report on consumer credit at 3 pm ET. Economists expect the report to show that consumer credit rose by $8.5 billion in May.
With the disappointing employment data adding to recent concerns about the economic outlook, stocks saw significant weakness during trading on Friday. The markets extended Thursday's downward move after reaching nearly two-month highs on Tuesday.”
The RRR** is not favorable for trading but continues to be moderately bullish for swing trades.
The DOW at 1:00 is at 12710 down 61.83 or -0.49%.
The 500 is at 1349 down 5.57 or -0.41%.
$RUT is at 803.47 down 3.67 or -0.45%.
SPY is at 134.99 down 0.49 or -0.36%.
The trend is down and the current bias is down.
WTI oil is at 85.84 trading between 88.92 and 84.12 and the bias is positive.
Brent crude is at 99.78 trading between 99.95 and 98.02 and the bias is positive.
Gold is up today at 1588, trading between 1576 and 1589 with a positive bias.
Dr. Copper is at 3.43 up from 3.40 earlier.
European markets closed today in the wake of unpopular news coming from the EU. The FTSE 100 in London is down -0.62% while the German DAX is down -0.35%. The CAC 40 in France is down -0.38%. The Asian markets closed decidedly down with the Hang Seng at -1.88. The Shanghai Composite down -2.37%. The Nikkei down 1.37\%.
Some news to digest before committing to any long positions.
Wall Streeters Lose $2 Billion in 401(k) Bet on Own Firms (Bloomberg)
Eurozone crisis will last for 20 years (FT)
Chuckie Evans: "Please suh, can I have some moah" (Reuters)
Situation in Egypt getting worse by the minute: Egypt parliament set to meet, defying army (Reuters)
Chinese goalseek-o-tron speaks: China’s inflation eased to a 29-month low (Bloomberg)
And all shall be well: Brussels to act over Libor scandal (FT)
Bank of England's Tucker to testify on rate rigging row (Reuters)
Euro zone fragmenting faster than EU can act (Reuters)
It appears that Nouriel Roubini may be on the right track predicting the 'Perfect Storm'. There is a lot going on throughout Asia, Europe and the US and not much of it is good news.
Nouriel Roubini :" If perfect storm occurs difference btw 2008 & now is: then we had all the policy bullets; now we running out of rabbits to pull out of the hat "
Roubini wrote in twitter " 2013 perfect storm scenario I wrote on months ago is unfolding: EZ crisis, US stall speed, China hard landing, EM stall, MidEast time bomb " He added.
Leavitt maybe puts Roubini's comments into perspective, but no matter how you cut it, the financial mess wrapping around the World is in dire shape. I have serious doubts the politicians can do anything about it before some 'Black Swan' crisis does it for them. Leavitt does complement my investing views in that we don't do 'stupid' things – all in moderation.
“I guess we’ll see. Good thing we don’t have to be good at predicting such things to make money trading. Regardless of what’s going on in the world, if the trend is up, we go long. We aren’t reckless. We don’t go all in or on margin.
Economists are either 1) always right but their timing is way off and therefore their opinions are useless or 2) they’re just flat out wrong so often they should be ignored.
Roubini has been very bearish for a very long time, but there have been periods where the market trended up for months at a time while he was super bearish. In time he’ll probably be right but not until anyone who listens to him gets wiped out.”
Risk sentiment continued to wane on Monday amid the ongoing turmoil in Europe and the flight to safety may gather pace during the North American trade as the fundamental outlook for the euro-area turns increasingly bleak.
** RRR = Risk Reward Ratio
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Written by Gary