September 12th, 2012
in Gary's blogging
Opening Market Commentary For 09-12-2012
Premarket futures were mixed at first with a negative slant to them and then just a quickly started to rise. The SP500 started out at 1431 and rose to 1439 by 8:30. By 9 am futures turned bearish. By 9:15 the bull run was on again but not exceeding the previous session highs. Looking to be a choppy day with averages trading once again trading in a narrow range.
The market opened with a leg up, but on low volume - again. The DOW produced a new high of 13370 while most averages remained in the area of previous highs. By 10 am the averages abruptly ended their fractional advance and started to descend. Make that melting down on low volume. Market action something like a sparkler; very bright with promise at first but fizzles out in the end.
Most investors are remaining cautions this morning cognizant of the resistance above current levels and the FOMC meeting coming up later this week.
The markets opened with news that the German High Court approved the ESM, but limited the German exposure to 190 billion Euros. The most unsettling news is the killing of the US Ambassador to Libya and the US flag desecration In Cairo yesterday. Along with more attention to Israel’s problems related to Iran's nuclear ambitions brings forth new worry of war escalation in the Middle East.
The 8:30 low rated financial reporting for MBA Mortgage Applications came in higher at 11.1% over the last report of -2.4%. The Import Price Index for August came in at 0.7% lower than the 1.5% expected. The Import Price Index for YoY also came in lower at -2.2% while analysts were expecting and improvement to -1.5% over the last report of -3.2%. The markets had little movement with these weaker than expected numbers.
The Euro did surge to fresh highs as the German High Court approves ESM with conditions and the US Dollar fell 50 cents. Oil and gold also fell just about the time the Import Index numbers were announced.
The RRR** was very narrow, same as yesterday, at the opening bell and any trades will probably end up on the unprofitable side as long as this market remains flat and 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 10 am is at 13351 up 27 or 0.20%.
The 500 is at 1437 up 4 or 0.28%.
The $RUT is at 843.67 up 1.72 or 0.20%.
SPY is at 144.32 up 0.44 or 0.31%.
The trend is neutral and the current bias is down.
WTI oil is at 97.40 trading between 96.65 and 98.15 and the bias is negative.
Brent crude is at 116.02 trading between 114.95 and 116.70 and the bias is negative.
Gold is down today at 1736.33, trading between 1732.25 and 1746.90 with a negative bias.
Dr. Copper is at 3.69 down from 3.73 earlier.
The US dollar fell from 80.14 earlier to 79.65 and is currently trading at 79.88.
The European markets are mostly higher in afternoon trading Wednesday, after Germany's Federal Constitutional Court allowed the ratification of the European Stability Mechanism, or ESM, with some conditions.
The Federal Constitutional Court said Germany must cap its bailout fund share at 190 billion euros. Also, both houses of the Parliament must be informed of decisions on the ESM in future. Meanwhile, European Commission President Jose Manuel Barroso proposed a single supervisory mechanism for the euro area banks.
The new mechanism will give ultimate supervisory responsibility related to financial stability of all banks in the euro area to the European Central Bank. Sentiment was also influenced by the U.S. Federal Reserve's two-day meet beginning today, which is expected to throw more light on the much anticipated third round of quantitative easing.
Summary: Today, the German Constitutional Court ruled that the Eurozone’s permanent bailout fund, the ESM, and its ‘fiscal treaty’ on budget discipline do not violate the country’s ‘basic law’ and do not undermine Bundestag sovereignty over budget issues.
However, the Court added a cap to the size of the ESM. It also reinforced the effective ‘veto’ of the German Bundestag over ESM activation, and therefore in effect also over a debtor country’s access to the ECB’s bond-buying programme (OMT), since the two are linked.
However, the ruling was not unambiguous and in many ways an invitation to further court cases – over ECB bond-buying and others – and a lot more political wrangling.
** RRR = Risk Reward Ratio
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Written by Gary