October 24th, 2012
in Gary's blogging
Midday Market Commentary For 10-24-2012
By noon the markets, which had been sliding sideways under very low volume started to show stronger bearish tendencies by dipping just under the morning lows. Mostly down and flat.
Today is definitively going to be a consolidation of sorts as I do not see any real action happening today. The HFT computers may bump the averages up some as they usually do in low volume situations but either a sell-off or rally isn't in the cards.
I’m not sure what the Fed can say in today’s statement to influence Wall St. Rates are already at a rock-bottom level, and they’re not going higher for a long time. They’ve already announced QE unlimited, so other than accelerating their bond purchase plan, there’s not much else they can do there either. The last Fed meeting was big. This one seems more like a formality.
Briefly the market will focus on the Fed, but then it’s back to earnings which are much more important right now.
For months I have been bitching and moaning how crazy this market is and how difficult it is to trade. I have repeatedly written that the pre-2008 methods will not work in today's new 'normal' and we have to find new ways for trading. Trying to find patterns to trade using the old methods is nearly impossible and Michael Harris of PriceActionLab.com, wrote a blog piece last weekend that has peaked my interest. Read with caution as I am not fully in his camp of reasoning as I see technical flaws in that this approach isn't necessarily transferable to other ETF's quantifying his hypothesis .
"This is not a market for technical methods of the past century. This is a market for true believers in the ability of strong hands to squeeze out weak hands and speculators.
Whether this pattern will continue [triggering technical sell signals] largely depends on fundamental developments. It is possible that bears will get crashed once again because based on the charts above there are not yet conditions in place to support a trend reversal.
In the meantime, fast short-term traders and strong hands are profiting at the expense of those who use old methods to spot a trend reversal."
The problem I have is the enormous amounts of cash that must be allocated to squeeze out a small profit not mentioning there is a lot of guessing put into this equation.
My gut feeling is that HFT and their algo computers will eventually be reigned in by law. The SEC is almost obligated to do something to level the playing field against the damn HFT computers.
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.
Let me repeat, I have issues with some traders in that they are saying there are setups for day trading. This may be 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 10:00 is at 13109 up 7 or 0.05%.
The 500 is at 1412 down 1.03 or -0.07%.
The $RUT is at 813.47 down 2.71 or -0.33%.
SPY is at 141.33 down 0.10 or -0.07%.
The longer trend is up, the past week's trend is bearish and the current bias is down.
WTI oil was up today and is at 85.25 trading between 87.46 and 85.12 and the bias is negative.
Brent crude was down today and is at 107.19 trading between 109.34 and 107.05 and the bias is negative.
Gold is down this morning. Currently trading down at 1703.05, trading range is between 1713.95 and 1698.50 with a negative bias.
Dr. Copper is at 3.56 down from 3.59 earlier.
The US dollar fell from 80.24 earlier to 79.24 and is currently trading at 80.16.
** RRR = Risk Reward Ratio
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Written by Gary