November 19th, 2012
in Gary's blogging
Midday Market Commentary For 11-19-2012
The one thing to takeaway from this mornings action is that the Russell 2000 left a gap up, a really big one, of 5.29 points that will probably be closed shortly, like in days. The $RUT also did not penetrate a resistance at 787 for long and quickly fell back below. SPY also gaped up 1.18 points and that gap is also expected to be closed. I would view this as a telling sign that we haven't finished with the market decent just yet. Or in other words we will be going down before we go any further up.
SPY and the 500 remained just at the 200 day MA and not going above this line in the sand is also a negative omen.
By noon the market was moving sideways on low volume.
As I mentioned this morning, I would have expected the markets to be subdued all this week in light of Thanksgiving Day on Thursday effectively making this a 2 day week. I will be taking a vacation starting Wednesday, but will try to keep an eye on the going on's via my 'smart phone'. If I spot anything important I’ll find a way to report it all to my readers while visiting Mickey at WDW and relatives nearby.
You could probably short the market at this point safely. The single 'monkey wrench' thrown into the mix this time around is the what some investors are going to do in light of increased capital gains taxes.
Are they going to sell this month – like right now and then buy back at the end of December or what? Many questions need to be answered, but we should know by November 29th because these traders need to comply with the IRS 'Wash Rule'.
Your shorting now may not go exactly right and one may have to wait until January to cover your trade, so I would be careful at this point and wait and see if we are going to get a Santa Claus rally or a continuing descending market.
Greece, Fiscal Cliff Would Only Be The Beginning
Here's what everyone must understand, regardless of the current focus on the Fiscal Cliff and Greece. By themselves, taken either separately or together, they are not lethal threats to markets or the global economy.
The consensus worst case result of Fiscal Cliff is a 4% hit to GDP. Painful but not expected to crash markets or the global economy.
Similarly, at its current debt levels, a Greek default is painful but can be absorbed. It's arguably more a bigger threat than the US Fiscal Cliff because of the contagion risk it implies, but at this stage most expect the EU to prevent a default that prevents contagion.
However, if near term uncertainty about these isn't removed in the coming weeks, the risk of a major pullback or crash rise significantly.
Why? Spain. (Read More)
The RRR** was narrow at the opening bell, but the gap created from Friday's closing was significant. It is getting wider lately, but a lot of guessing still remains and of course that is the tricky part of the successful trading equation. Any trades today will probably end up on the unprofitable side as long as this market remains flat or continues to have low volume.
Best Stock Market Indicator Ever Update: At 48% and Now Below the Crucial 50% Level “Luckily, OEXA200R should give us ample advance warning of the next major correction however we want to trade it. Buckle up!”
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 as the markets are currently untradable. Guessing where the market is going to be tomorrow or next week, at this time anyway, is a foolish endeavor.
The DOW at 12:00 is at 12750 up 163 or 1.29%.
The SP500 is at 1381 up 21 or 1.57%.
The $RUT is at 788.87 up 12.58 or 1.62%.
SPY is at 138.54 up 2.18 or 1.59%.
The longer trend is up, the past months trend is bearish and the current bias is neutral.
WTI oil is up today and is currently down at 89.40 trading between 87.00 earlier and 89.46 and the bias is positive.
Brent crude was up this morning and is now trading at 111.76 ranging between 109.90 and 111.80 and the bias is positive.
Gold was up this morning. Currently trading even at 1733.45, trading range is between 1713.84 and 1735.20 with a sideways bias.
Dr. Copper is at 3.54 up from 3.45 earlier.
The US dollar fell from 81.25 earlier to 80.83 and is currently trading up at 80.90.
** RRR = Risk Reward Ratio
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Written by Gary