Profit Taking Sucks Wind Out Of Market

October 2nd, 2012
in Gary's blogging

Opening Market Commentary For 10-02-2012

Premarkets were up slightly but nothing out of the ordinary. The markets did open up as suggested by the premarket action but like past sessions under very low volume suggesting that investors are still waiting in the hallways. Today's gain is still withing a narrow range set by previous sessions but giving a leg up on the trend line. Will this slightly bullish stance continue or is Mr. Market playing games with us.

The opening red volume was very low for the first 10 minutes as some profit taking was apparent. By the 15 minute mark, red volume increased but the declining averages held on to their early green profits as the 'dippers' jumped in to buy. This kept the averages from falling to far while the profit taking continued. By 10 am the bears out numbered the bulls by a very slight margin.

Follow up:

Unfortunately, the trading remains in a narrow range not allowing traders any room for errors. At 10 am the DOW was in the red by 3 points indicating more weakness to come in today's session. However with the volume falling off to anemic levels, the HFT computers will surely make hay and melt the averages back up sometime during the session.

The RRR** was again very narrow at the opening bell and not conducive to safe trading. 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 10:15 is at 13497 down 16 or -0.12%.

The 500 is at 1445 up 1.44 or 0.10%.

The $RUT is at 839.46 down 0.90 or -0.11%.

SPY is at 144.53 up 0.18 or 0.12%.

The longer trend is up, the past week's trend is up and the current bias is up.


WTI oil is down today and is at 92.29 trading between 92.00 and 92.90 and the bias is negative.

Brent crude is at 112.17 trading between 111.60 and 112.50 and the bias is neutral.

Gold is down today at 1773.97, trading between 1769.88 and 1783.70 with a negative bias.

Dr. Copper rose from 3.77 earlier to 3.82 and currently is at 3.79.

The US dollar fell from 79.94 earlier to 79.66 and is currently trading at 79.72.


The Disconnect Remains; Contracting PMIs Imply Dramatic Q4 Losses For Global Stocks

Economic Surprise Indices have begun to drift back lower in recent days after a short-lived scurry into positive territory as anticipation of Fed/ECB action supported equity valuations over the last few months in the face of deteriorating earnings.

Critically though, as Deutsche's Jim Reid notes, headline PMIs (and the ISM) are still well behind levels that are consistent with current equity markets as the disconnect between rich equity prices and poor fundamentals remains very wide.

Back around May/June they were broadly in line and since then liquidity has propelled markets but with the data at similar levels, and clearly the hope is that the current fundamental weakness corrects into year-end but at current levels the S&P faces a 9% correction, Europe 22%, and China 25% - hope is indeed a powerful thing.

** RRR = Risk Reward Ratio

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Written by Gary

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