Suspect Market Opens UP On Low Volume

August 7th, 2012
in Gary's blogging

Opening Market Commentary For 08-07-2012

Premarket indicated a repeat of yesterday as the SP500 numbers were at the same high and progressing sideways. There is no news until 10 when the JOLTs Job Openings (JUN) (low rating) is announced and at 3 pm the Consumer Credit (JUN) (rated medium) is announced. Unless there is some rumor or news from Europe I expect to see another low volume day so DaBoyz and the HFT crowd can play their games.

The market opened with next to nothing volume and the small caps jumping up a bit. At 10 am the low rated financial JOLTs Job Openings (JUN) came in higher at 3762 while expecting 3717 over the prior 3657. Futures made small jump at this news but was quickly sedated and melted back down a few points and continued its slightly bullish sideways trend on low green volume. Low volume sessions can not be trusted to show a trend.

Follow up:

The $RUS has for the moment broken out of its triangle being formed since early June in an upward fashion and that could be news if it continues. The SP500 broke into the 1400 range for the first time since April 30 matching that high along with the DOW's high made in early May.


Until small stocks move to the front of the pack on a sustainable basis, many investors will remain skeptical of the current rally. The Russell 2000 fell 1.5% in July while the S&P 500 rose 1.3%, but it jumped 3.4% in the last two trading days, outpacing the Dow and S&P 500. Analysts say continuing that momentum will be an important trend if the market is going to power through its 2012 highs.”


Kathleen Brooks brings us a little insight into the market gains we've been seeing today:

So what is driving the rally in risk and is it a sign of a true change in trend? There are a couple of opposing answers to this question: 1, the rally is on exceptionally low volume so you can’t trust it for the long term. 2, Germany’s backing of the ECB to buy up Spanish debt if and when it applies for official EFSF/ ESM aid is enough to change the tone of the sovereign debt crisis, which is risk positive. Both arguments are valid right now. We won’t hear much from European government ministers or ECB members in August (it is full blown holiday season in Europe) so there is a chance that we could meander higher for the next few days.

The RRR** is narrow and risky. It is not conducive for profitable trading although another sharp reversal could come at any time.

The DOW at 10:15 is at 13192 up 75 or 0.57%.

The 500 is at 1403 up 9.67 or 0.69%.

The $RUT is at 801.51 up 7.12 or 0.90%.

SPY is at 140.53 up 0.93 or 0.67%.

The trend is up and the current bias is up.


WTI oil is at 92.75 trading between 91.78 and 93.05 and the bias is positive.

Brent crude is at 110.71 trading between 109.10 and 110.85 and the bias is positive.

Gold was up this morning but fell to 1612. Trading has been between between 1608 and 1618 with a negative bias.

Dr. Copper is at 3.44 up from 3.37 earlier.

Earlier the USD tumbled from 82.43 to 82.06 and recovered to 82.15.

I have been talking about the declining small caps while the large caps are in vogue. Here is another view on the subject that clearly shows the divergence.


Tale of Two Charts: S&P500 and Russell 2000

Interesting divergence between the S&P500 and Russell 2000 in the month of July.   The S&P is in a classic short-term uptrend, making higher highs and higher lows since bottoming in early June.  The Russell, however, after making a short-term high in July broke its uptrend line and has been making lower highs.

What does it mean?  Who knows for certain and could be just noise as the sell-off in the Russell is less than 4 percent.  It does show, however, big cap is in vogue and the economically sensitive small caps not faring as well this summer.   Keep it on your radar.

The SP500 daily chart.

The Russell 2000 daily chart.

** RRR = Risk Reward Ratio

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Written by Gary

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