August 14th, 2012
in Gary's blogging
Opening Market Commentary For 08-14-2012
Better than what economists predicted the financial reporting this morning at 8:30 am pushed the futures up to where the DOW was up 31, the 500 was up 3.20 at 1409 and the NASDAQ was up 5.50. However, 15 minutes later all of those gains were reversed returning to the earlier 8 am numbers where the 500 futures dropped to 1405. Within 15 minutes after that the futures popped up again reminding us that swings are inevitable in the face of conflicting events.
Markets opened higher on moderate red volume surprising me a bit as the markets immediately started a decline but remained fractionally in the green. Suspecting a bear trap in the making and waiting for a 'real' trend to start, I waited patiently for the 10 am financial reporting of the Business Inventories and the IBD/TIPP Economic Optimism. At 10 am the reports came in and the Business Inventories foe June rose only 0.1% vs. 0.2% expected. The markets reacted in a moderate negatively manner and volume continued to fall lower leaving one to wonder as to what will happen next.
As you can see the reports this morning were better than declining numbers, however they are certainly not earth shaking either as they reported fractional gains. We will have to see how Mr. Market digests this 'so-so' news. The left column is what was reported this morning. The center column is what economist's expected and the third is what was reported last time.
The RRR** at the opening was O.K., not good but O.K. and may be a good swing trading opportunity depending where you think the market will go from here. Still narrow and potentially a profit losing situation if you guess incorrectly. I am going to continue to sit on my hands until I see where the break comes in. As I have mentioned before the 500 could melt up to 1415 without violating any trends and I am reluctant to call a movement either long or short at this time.
If you traded for an up tick for the morning you were on the wrong side and would have seen an unprofitable scalp and now need to wait what may turn out to be a swing trade. In this market you can not hurry things along, just wait a while longer, the trend will sooner or later reveal itself.
Leavitt feels this sideways channel that has been forming may be a 'foundation' for a fall rally. I am not so sure about the fall, but perhaps in the November / December time frame.
“…very small range the last week. Don’t fight it. This is normal and healthy action. Remember the market has been moving straight up and straight down for a couple months. The fact that it can hold its gains near its highs shows a change in character may be under way. Have patience. The foundation for a fall rally may be forming.”
The DOW at 10:15 is at 13187 up 17.35 or 0.14%.
The 500 is at 1406 up 2.16 or 0.15%.
The $RUT is at 800.62 up 1.09 or 0.14%.
SPY is at 141.00 up 0.26 or 0.18%.
The trend is fractionally positive and the current bias is down.
WTI oil is at 93.57 trading between 92.60 and 93.94 and the bias is negative.
Brent crude is at 113.72 trading between 113.20 and 114.29 and the bias is negative.
Gold is down today at 1598 trading between 1614 and 1590 with a negative bias.
Dr. Copper is at 3.36 up from 3.38 earlier.
Earlier the USD rose from 82.26 to 82.58 and currently trading in a very choppy fashion and is at 82.50.
Headlines from Europe read, Eurozone Contracts For Second Time In Three Quarters and yet the US markets seem to forget the inexorable ties the US shares with the EU.
Germany's economy defied the eurozone downturn, posting modest growth in the second quarter, but France stagnated, suggesting the eurozone as a whole contracted over the three months.
La Dolce Vita is no longer so sweet. Bloomberg reports that a crackdown on luxury goods combined with budget cuts that have pushed Italy deeper into recession are souring demand for sporty cars and other symbols of the country's carefree lifestyle.
This is an interesting take on the French GDP figures, which showed there was flat growth in the second quarter. FT Alphaville cites a note from economist Fabrice Montagne at Barclays, pointing out that the figure has been rounded up. His note reads:
…we note that this is a “negative” 0.0% growth as it is in fact a -0.045% (even though that would go beyond the precision of the release) and that Q4 11 was revised downward from an initial +0.2% q/q release. Hence, we would not exclude the risk of a slight downward revision of Q2 growth.
Annalisa Piazza of Newedge Strategy said,
Looking ahead, the picture remains very clouded. Not only business confidence continued to edge lower in July but the August sentiment indicators also show further depressed figures. In details, the German ZEW index fell by another 6 points in August, down to -25.5, the weakest since the start of the year.
Confidence declined despite the "hope" that the ECB could help the troublesome EMU countries with additional monetary policy accommodation. The ZEW industry breakdown shows that the sentiment has improved a touch in the financial sector related industries whilst the effects of easing demand weigh on the "real" economy sectors.
German economic growth slowed to 0.3 percent in the second quarter from 0.5 percent in the first, new figures showed on Tuesday. The numbers have economists warning that the euro-zone slowdown and weaker global growth are about to catch up with Germany, where the economy may even shrink in the third quarter. more...
** RRR = Risk Reward Ratio
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Written by Gary