September 6th, 2012
in Gary's blogging
Opening Market Commentary For 09-06-2012
Premarkets moved higher at the positive, O.K. Semi positive, ADP employment data and the opening bell sent the markets sky rocketing and that should have excited everyone but for one thing – NO VOLUME! The SP500 almost reached 1420 before it started to show weakness and slid sideways. After catching its breath melted higher to 1422 with falling volume. This is one train ride that is sure to not going to end well unless the bulls jump on. The only ones playing in this session are the HFT computers and all the humans are scared to death and don't know what to do. The trend is up and could move higher but I wouldn't count on it.
This high in the SP500 marks a triple top of sorts depending on how you interpret the tea leaves. The first made in May 2008 at 1440 and that ended badly and the volume was twice as high than today. The second was in April this year and that was at 1422 and a decent occurred shortly thereafter. The April volume was more than twice the 2008 volume which leads me to believe a solid top is forming and the SP500 can in reality only melt up to 1440 before reaching a resistance that will be just about impossible to penetrate. In my opinion that resistance has already begun.
The RRR** was very narrow at the opening bell despite the large move up in the averages. Any trades will probably end up on the unprofitable side as long as 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.
Having made the cautionary comments, there is a good chance the markets will retract a bit tomorrow, especially if the financial reporting is 'not-so-good. SPY has penetrated the upper Bollinger band and typically moves sideways and down from its highs. I am just not sure if the RRR** will be profitable enough to take a chance.
The DOW at 10:30 is at 13240 up 192 or 1.47%.
The 500 is at 1424 up 20.90 or 1.49%.
The $RUT is at 832.33 up 11.10 or 1.35%.
SPY is at 143.02 up 2.11 or 1.50%.
The trend is up and the current bias is up.
WTI oil is at 97.08 trading between 95.58 and 97.50 and the bias is positive.
Brent crude is at 114.57 trading between 113.30 and 114.80 and the bias is positive.
Gold is up today at 1704.06, trading between 1693.15 and 1714.00 with a neutral bias.
Dr. Copper is at 3.52 up from 3.50 earlier.
The US dollar fell from 81.67 yesterday to 81.02 earlier and is currently trading at 81.25.
Remember rule #1 of central planning: when in doubt, baffle with BS.
Sure enough, after a very ugly Manufacturing ISM hit the tape two days ago, today we get a big beat out its sister tracker, the Non-manufacturing ISM, which printed at 53.7 on expectations of a decline from last month's 52.6 to 52.5, in the process topping the highest Wall Street forecast for the August number.
Compounding the 'confounding' is that while the mfg Employment indicator dropped, the non-manfucaturing employment rose from 49.3 to 53.7. Perfectly logical? Exactly. At least there was some symmetry in the Prices Paid indicator, which jumped both here as it did two days ago, from 54.9 to 64.3: the largest component bounce of the August series.
And finally, whereas the manufacturing respondents were uniformly bearish, those who rely on services are still full of hopium.
Stock futures add to gains - S&P 500 +0.6% - following the strong ADP jobs report, even as the data may make less likely further ease by the Fed. Market eyes, however, remain mostly focused across the pond where the ECB press conference is about to begin.
There's no buy the rumor, sell the news action today as stocks soar following Draghi's expected official announcement of a new ECB bond purchase program.
Jokes aside, this [Mario Draghi] conference [this morning] provides little information beyond what was expected and I really see downside risks to $EURUSD.
** RRR = Risk Reward Ratio
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Written by Gary