September 11th, 2012
in Gary's blogging
Midday Market Commentary For 09-11-2012
By noon the averages remained in the green with opening low volume sinking further as the session progresses. There have been no worthy news events this morning and none are expected later today.
The markets are still trading within a narrow range and are mixed in regard to new high levels reached. The large caps and low caps have reached new highs while the mid caps have not reached previous sessions highs. Markets are at a standstill because of the uncertainty while awaiting news from the German High Court tomorrow.
Reading now a report that the German constitutional court makes its ruling on the ESM, it is revealed that a commission of legal experts of the German parliament say that the ESM law violates the budgetary rights of the German parliament (Bundestag). What was a given for passage is now in doubt. I have said all along that passage and that would give Brussels sovereign rights over German banks would not go over well with the German populace.
. . . the German Constitutional Court will decide on the legality of the European Stability Mechanism (ESM) tomorrow, in what is expected to be a highly contentious decision.
The Court is expected to ratify the decision, but not with a pure "YES" stamp of approval; instead, like all other measures with German involvement, a heavy helping of conditionality is to be expected.
In turn, if the Court believes that the federal government (Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble) is overreaching its bounds (by abusing the Bundestag's and Bundesrat's legal right to control budget outlays), then it is likely that Germany will be forced to curb its charge forward as the head of Europe's bailout fund (ultimately, saving Europe from a fiscal standpoint lays with Germany).
The RRR** was very narrow, again, at the opening bell and continued throughout the morning and any trades will probably end up on the unprofitable side as long as this market remains flat with low volume. 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 12:15 is at 13326 up 73 or 0.55%.
The 500 is at 1434 up 5.54 or 0.39%.
The $RUT is at 841.89 up 2.51 or 0.30%.
SPY is at 144.05 up 0.56 or 0.39%.
The trend is up and the current bias is up.
WTI oil is at 96.96 trading between 96.08 and 97.32 and the bias is positive.
Brent crude is at 114.81 trading between 114.35 and 115.20 and the bias is neutral.
Gold is up today at 1732.59, trading between 1725.85 and 1738.05 with a negative bias.
Dr. Copper is at 3.69 up from 3.65 earlier.
The US dollar fell from 80.60 earlier to 79.95 and is currently trading at 80.01.
We completely disagree with [CNBC's] article. . . If anything, this rally is getting overbought because of too much optimism.
Many assume this is a hated rally because so many managers have underperformed . . . However, it was a terrible year for money mangers beating this benchmark. 84% of managers did not beat the S&P 500.
This underperformance by most managers is nothing new. It is a continuation of a trend that started in 2010.
In today’s highly correlated world, company specifics take a back seat to macro considerations. All that matters is risk-on and/or risk-off.
. . . the actions of people like Ben Bernanke or Mario Draghi matter far more than any specific fundamental of a company. It’s as if every S&P 500 company has the same Chairman of the Board that only knows one strategy, resulting in a high degree of correlation between seemingly unrelated companies.
Winners must be rewarded and losers must fail. High correlations among markets leading to poor performance are an indication that this is not happening today and it is hurting the economy.
** RRR = Risk Reward Ratio
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Written by Gary