October 2nd, 2012
in Gary's blogging
Midday Market Commentary For 10-02-2012
Markets continued their downward melt as selling pressure mounts from escalating EU fiscal concerns. Red volume remains low increasing the chances that the algo machines will melt the markets back up before the end of the session.
By noon, market weakness has prevailed and the major averages were in the red and flat. The noontime trend looked negative, but the anemic volume may play into the HFT hands and melt the markets back up. Nothing in this crazy market place is assured in the lackluster market casino.
The QE∞ introduced September 13th has not produced the positive market response most of the pundits promised. Instead the markets reached up to near previous highs and balked refusing to go any higher. This could be good or bad news depending on how you shuffle the teas leaves around and we probably won't have a definitive answer for some time.
The good view would be that the markets are building a solid base in which to mount an advance that would send the markets higher. The bad news could be that the World economies are in such poor shape that investors are not willing to jump on the bull's party wagon. Either way is completely unknown at this juncture and would be a gamble to guess the outcome.
However the persistent rumors that China was going to bail out the EU has finally been laid to rest and the EU is about to implode for the lack of cash. This news will play out negatively over the coming weeks as it becomes apparent that the ECB will unable to patch the gaping holes in the sinking ship. It is amazing how long the ship has remained afloat.
Just in case there are still any hopes that the FT, or any other credible media outlet, may come up with a story, like it used to do almost daily back in 2011 and early 2012, that China, whose stock market continues to plumb 3 year lows, has some capacity to inject cash (that it doesn't have) into a broke continent (which would never repay said cash even if it existed), here comes none other than China's Sovereign Wealth Fund to make sure there is never again a rumor that China will bail out Europe.
From Reuters: "China would be interested in buying into a Eurobond backed by core euro zone countries and considers investment in bonds issued by heavily indebted European countries unrealistic, a senior official with China's $480 billion sovereign wealth fund said. Jin Liqun, chairman of the supervisory board of the China Investment Corporation (CIC), said until fundamental problems of fiscal, social and monetary policies in euro zone countries burdened by debt are solved, there could be no investment." They never will be so scratch that possibility out. Now we can limit the universe of idiotic Europe is saved (it isn't - it is only a matter of time now before the ship sinks) rumors to at least one less.
The RRR** was again very narrow at the opening bell and is not conducive to safe trading continuing into the midday session. Any trades will probably end up on the unprofitable side as long as this market has low volume and 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 12:15 is at 13444 down 70 or -0.52%.
The 500 is at 1441 down 2.65 or -0.18%.
The $RUT is at 839.23 down 1.08 or -0.13%.
SPY is at 144.17 down 0.18 or -0.12%.
The longer trend is up, the past week's trend is up and the current bias is down.
WTI oil is down today and is at 92.43 trading between 92.00 and 92.90 and the bias is neutral.
Brent crude is at 111.87 trading between 111.60 and 112.50 and the bias is negative.
Gold is down today at 1779.40, trading between 1769.88 and 1783.70 with a neutral bias.
Dr. Copper rose from 3.77 earlier to 3.82 and currently is at 3.80.
The US dollar fell from 79.94 earlier to 79.66 and is currently trading at 79.63.
This following article might be a wake up call for those still on 'Hopium'. The issues in the EU are numerous and plentiful without calling the recent bond-buying program illegal.
The markets have celebrated Mario Draghi's announcement that the European Central Bank will embark on unlimited purchases of sovereign bonds from crisis stricken countries. But are such purchases really legal? Draghi's own justification for the program leaves plenty of room for doubt.
** RRR = Risk Reward Ratio
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Written by Gary