October 8th, 2012
in Gary's blogging
Opening Market Commentary For 10-08-2012
Markets opened down where the DOW was off 43 and the 500 was off 5.40. The volume is very low today, but higher when comparing apples to apples; last week average to today. The red volume was higher than the normal for the first 10 minutes and then the 'BTFD' crowd stepped in but at even lower numbers. By 10:30 the market settled down to a very tight trading range with more sellers than buyers, but remember we are talking about the 2% crowd. I fully expect the HFT computers to take over the day now.
I don’t have anything major to add to the comments I have been making about this crazy market and like other financial analysts, I don't trust what is going on. The overall trend is up but on Friday the markets in general hit a resistance that the averages MUST break through to continue the trend upwards. This chart of the DOW clearly shows the level of resistance and today isn't a good day to penetrate it. Also, from a technical standpoint a big concern, I would think, heading into this week is the under-performance of the small and mid caps. (Chart is a slice of the 51 day, actually 20 days shown)
The World Bank has cut its 2012 growth estimate for China from 8.2% to 7.7%, saying that the economy has been hit by weak export demand and investment growth. "China's slowdown this year has been significant, and some fear it could still accelerate," the World Bank said.
European equities have begun a data-light week lower. That after the World Bank cut its growth forecast for economic growth in "developing East Asia" this year to 7.2% from 8.3% in 2011, its slowest pace since 2011 and below the 7.6% forecast in May.
The RRR** was very narrow at the opening bell and 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 10:45 is at 13583 down 26 or -0.19%.
The 500 is at 145.63 down 0.50 or -0.34%.
The $RUT is at 839.39 down 3.44 or -0.39%.
SPY is at 145.62 down 0.52 or -0.36%.
The longer trend is up, the past week's trend is neutral to bullish and the current bias is down.
WTI oil started down today and is at 89.44 trading between 89.90 and 88.20 and the bias is positive.
Brent crude also started down today and is at 111.91 trading between 112.20 and 110.54 and the bias is positive.
Gold is down today at 1774.82, trading between 179.42 and 1766.75 with a negative bias.
Dr. Copper is at 3.72 down from 3.76 earlier.
The US dollar rose from 79.40 earlier to 79.80 and is currently trading at 79.68.
When fringe-blogs highlight the reality of the US banking system and its financial engineering as nothing but overly complex three-card-Monte, it can be shrugged off; but when the head of China's sovereign wealth fund (yes the same one that will bail the world out) notes that the JPMorgan loss highlights a system that has become too complex, perhaps some should listen.
As Bloomberg BusinessWeek reports, Gao Xiqing of CIC stated that "I think we do need to slow down a little bit instead of rushing up to all these fancy derivatives." The fact that the 'whale' loss was not a rogue trader but a systemic decision gone wrong on weak risk management of an overly-complex position was "the single most revealing thing" to Gao as he expressed concern about a society in which "all the best engineers are engineering financial products."
Summing up the entire ethos of US financial innovation he concluded: "You have all the smartest kids to design these products, the only purpose of which is to get money out of other people’s pockets, that is not very good."
** RRR = Risk Reward Ratio
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Written by Gary