August 27th, 2012
in Gary's blogging
Opening Market Commentary For 08-27-2012
Premarket was higher this morning as the SP500 rose to 1415.73 and backed off fractionally to 1412.43 just before the opening bell. The news in the US is nonexistent and from Europe is light and non-revealing. The markets opened up fractionally and flat. Red volume was low indicating today is going to be more of the same action we have been witnessing. Oil is down and the markets seem to be on vacation while movements are again subdued.
The selling pressure is on the rise, but it is impossible to figure out just who is selling AND why. By the 10 minute mark selling was prevalent although the 500 remained in the green while the DOW, $RUT and SPY turned red. Another do-nothing session.
According to SpiegelOnline, German Chancellor Angela Merkel has told members of her coalition on Sunday to curb their rhetoric in the euro crisis. Further, they report a member of the CSU party had said Greece would be out of the euro in 2013 and that the head of the European Central Bank was on his way to becoming the "currency forger of Europe. Other than that, there is not much other news as the market is going to wait for the Jackson Hole speech on Thursday from Ben Bernanke.
The near term trend is neutral with a bearish slant the longer term is up fractionally. Keep in mind that low volume skews charts and other technical data that in normal times can sometimes foretell emerging trends.
Today isn't expected to be anything but what it has been for the past several weeks including low volume and the antics of the HFT crowd.
Like a lot of pundits, Leavitt keeps forgetting the serious ramifications of the German High Court's decision on the ability to make certain comments to the ESM expected on September 12th. Personally, that news will cast a shadow on the September 13th meeting and move the markets. A lot is riding on the Germany High Courts decision.
“Wall St. will be looking for hints of QE3, which, if it’s gonna happen, it’s gonna happen at the Sept 13 meeting, not the Oct 24 meeting which is too close to the election. Some market participants are expecting QE3, so there could be a big let down if it’s not received. But it’s possible the rally off the June low has been in anticipation of QE3, so there could be a “sell the news” scenario anyways.”
The RRR** looks very narrow at the opening bell and any trades probably will end up on the unprofitable side if this market remains flat. Swing trading is at your own risk and being the market is at a crossroads of sorts, I would prefer to sit on my hands rather than risk guessing incorrectly.
The DOW at 10:00 is at 13128 down 29 or -0.21%.
The 500 is at 1410 down 0.41 or -0.03%.
The $RUT is at 808.51 down 0.66 or -0.08%.
SPY is at 141.48 down 0.02 or -0.01%.
The trend is neutral but within an up channel and the current bias is down.
WTI oil is at 94.89 trading between 97.76 and 94.45 and the bias is negative.
Brent crude is at 112.31 trading between 115.50 and 111.60 and the bias is negative.
Gold is at 1670.20 trading between 1676.80 and 1666.08 with a negative bias.
Dr. Copper is at 3.47 down from 3.50 earlier.
Earlier the USD tumbled from 81.72 to 81.50 and is currently at 81.61.
One of the main events for the week mentioned above is going to be the Jackson Hole Economic Symposium and the Initial Jobless Claims later this week. Ben Bernanke is going to have his hands full and must speak VERY carefully as to not upset the market's apple cart. His speech could drive the equity markets to new highs when we are facing numerous bearish signs of an exhausted market place. The part I am afraid of is a rally on false sentiment and then crash even harder than it would otherwise.
James Brodie points out about Ben Bernanke, “. . . he faces a tough backdrop of exhausted equity markets and increasingly bearish signals for global growth from numerous diverse indicators.” Very true!
“ . . . the S&P is right up against a strong resistance level with multiple tops at 1,419 and it's unable to close above there. It is also right at the top of 10 week trend channel, and is just starting to retrace towards the mean from extreme standard deviation levels (Bollinger bands).
Another concerning signal is the VIX at a 5 year low. Whenever this index has moved below the 15 level in that 5 year period, the S&P has always followed this with a sharp move lower.
There has also been a clear breakdown in the correlation between the S&P and the Copper price, both of which are regarded as barometers of future economic activity. Copper is trading heavily because the Chinese economy is slowing down, possibly even a hard landing. China has been the global growth driver since the financial crisis and for equities to blindly ignore this is dangerous.”
“Prepare for the onslaught of 'bulls' eliciting in fine detail why your wrong, but I expect we'll roll-over soon. Sentiment has already shifted.”
** RRR = Risk Reward Ratio
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Written by Gary