October 23rd, 2012
in Gary's blogging
Opening Market Commentary For 10-23-2012
Premarkets took quiet a plunge from yesterday's after market action rising to premarkets highs. The market opened down but in line with the decent ratio seen over the past several sessions. The morning negative numbers make the markets appear to have fallen off a cliff which is not accurate. Red volume is low and the large caps are taking the brunt of this mornings fall. I would use caution in taking on any short position as it is entirely possible for the markets to experience an upwards correction later in the session because the $RUT gaped down on the opening. I do expect this gap to be closed before markets continue to fall possibly today.
By 10 am profit taking had moved the averages further down mostly due to poor earnings reports of MMM, DD, TXN and UTX. The low importance rated Richmond Fed Manufacturing Index reported at 10 am was significantly down at -7 while expecting +5. The last report was +4 and the markets didn't appear to have even noticed.
Markus Huber, head of German HNW Trading at ETX Capital, said this morning: "While so far the downgrade of the five regions had a fairly limited impact on the markets, traders are still expected to keep a close eye on periphery yields today with any spike to the upside most likely to hit stock markets too."
Nevertheless, with few economic data on the agenda today, US corporate earnings will continue to take centre stage with many constituents of the Dow Jones scheduled to report.
"Range trading will most likely continue with further losses possible as stocks are struggling to find any positive news that would give them a new push to the upside, however downside potential should be limited as similar as seen yesterday in the US bargain hunting is likely to set in as traders take advantage of cheaper prices," Huber said.
The RRR** was very narrow at the opening bell, just as it has been for the past month. Any trades today will probably end up on the unprofitable side as long as this market remains flat or continues to have low volume.
I have issues with some traders in that they are saying there are setups for day trading. This is true enough, but the trading range is so narrow that way too money has to be put on the table just to get back meager gains.
Swing trading is also 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. Eric Parnell said it correctly “all of the prevailing economic forces today point to a stock market that should be in decline” and “unstable economic and market conditions are becoming increasingly tumultuous”. He goes on to say in his article, 50 Shades Of Stock Market Grey, “How can you best participate in any further upside while keeping things as clean and risk controlled as possible?”.
Guessing where the market is going to be tomorrow or next week, at this time anyway, is a foolish endeavor.
The DOW at 10:15 is at 13155 down 192 or -1.44%.
The 500 is at 1415 down 18.74 or -1.31%.
The $RUT is at 810.78 down 9.77 or -1.19%.
SPY is at 141.57 down 1.85 or -1.21%.
The longer trend is up, the past week's trend is bearish and the current bias is down.
WTI oil was down today and is at 86.99 trading between 89.32 and 86.63 and the bias is negative.
Brent crude was down today and is at 108.33 trading between 115.20 and 108.05 and the bias is negative.
Gold is down this morning. Currently trading down at 1712.17, trading range is between 1737.30 and 1707.54 with a neutral bias.
Dr. Copper is at 3.56 down from 3.64 earlier.
The US dollar rose from 79.54 earlier to 80.12 and is currently trading at 80.04.
“At first glance, earnings are terrible. Here are the highlights.
Texas Instruments (TXN) said quarterly revenue fell and the company forecast more weakness this quarter. The stock is down 2% before the open.
United Technologies (UTX) reported a decline in earnings. They said the stronger dollar was on reason. The stock is up 2.7% in premarket trading.
Radio Shack (RSH) is down 15.5%…they reported a much wider loss than expected.
Western Digital (WDC) reported worse-than-expected numbers…stock is down 4.5%.
At best the market is in consolidation mode. At worst, a downtrend is underway. . . . I lean to the downside. The news has been very bad . . . So far, the market’s reaction has been just as bad. Stocks that aren’t posting good numbers are getting hit hard. Little by little pieces of evidence have popped up the drop off the highs will end up being a little more than an innocent correction within an uptrend.”
U.S. stock-index futures are down sharply two hours ahead of the opening in New York. Blue-chip chemical maker DuPont reinforced concerns about the global economy when it posted a steep drop in quarterly profits, and issued a full-year guidance well below analysts’ expectations. Dow futures are off 113 points, or 0.85%, while S&P 500 futures are down 1.1%.
3M unveiled a third-quarter profit of $1.65 a share, matching expectations. The company’s sales of $7.5 billion came in short of the Street’s forecast of $7.6 billion. The Dow component also cut its full-year outlook to a range of $6.27 to $6.35 a share from $6.35 to $6.50 a share, partially due to an acquisition-related charge. Shares slumped 2.8% in pre-market trading.
United Parcel Service’s adjusted third-quarter profit of $1.06 a share came in line with estimates. However, the package delivery company’s sales came in at $13.07 billion, missing forecasts of $13.31 billion. The company, which is seen as an economic bellwether, also updated its full-year guidance to a range of $4.55 to $4.65 a share, compared to estimates of $4.56 a share. Shares edged up in pre-market trading.
** RRR = Risk Reward Ratio
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Written by Gary