December 3rd, 2012
in Gary's blogging
Opening Market Commentary For 12-03-2012
First day back from 10 day's of vacation and I can report I like being on vacation better than going to work. <grin> I did watch some of the averages sneak up last week and tickle the bottom of the 50 DMA while others couldn't make up their minds what to do when they passed that mark. While I was expecting the markets to rise somewhat, I did not foresee the degree in which they climbed. Way to much in a short period of time, watch out for a sudden reversal coming your way soon.
Helping the markets opened up higher this morning was the medium importance of the US market PMI Final for November coming in at 52.8 versus 52.1 the analysts expected but up from the 52.4 in October.
On thin volume the averages skated along a thin trading zone for the first 30 minutes as investors remain skittish on resolving 'fiscal cliff' hopes. The important 10 am ISM Manufacturing Survey came in at 49.5 while analysts were expecting a small contraction from the last report of 51.7 to 51.4 which melted the averages down. However, the medium rated US Construction rose 1.4% Vs. the 0.5% expected and slowed the decent down to Friday's closing numbers. At 10:15 there were more sellers than buyers and the volume was still low but a tad higher than Friday's average.
The market is somewhat overextended and based on 'hopium' being doled out by both political parties that the 'fiscal cliff' will be avoided. But I am not so sure Mr. Market is going to be happy with the January first solution. We may have just witnessed the 'Santa Claus' rally I was touting just a week ago or the last gasp for the year remains unclear. The financial engines of the World are choked with debris of bad government; bad debt and bad money so I wouldn’t expect to see much more bullish market behavior.
“Despite today’s expected gap up, we need to be careful chasing stocks long. The market needs to undergo a mini correction or, at the very least, grind sideways for a week or so to allow stocks to reset.”
Now that the investors who wanted to sell stocks and buy them back before year's end have taken advantage of the IRS “Wash Rule' last month. We now turn to those who want to sell because of the uncertainty of the pending rise of capital gains tax providing an interesting month to end this miserable trading year.
The RRR** has been narrow at the opening bell for the past several months and continued the trend again this morning. This trend makes predictions of movements during the session nearly impossible and trading becomes futile.
As long as volume remains light or the trading range is narrow, one can expect successful trading to remain elusive. The RRR** has been getting wider lately and is expected to become more volatile during this last and next years first quarter, 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 they have during this past year.
I also have issues with some pundits writing almost every day that 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. Do not fall into the trap of money burning a hole in your pocket, sit tight better days are coming.
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, can be a foolish and costly endeavor.
The DOW at 10:15 is at 13034 up 8.41 or 0.06%.
The SP500 is at 1419 up 2.71 or 0.19%.
The $RUT is at 821.36 down 0.56 or -0.07%.
SPY is at 142.40 up 0.24 or 0.17%.
The longer trend is up, the past months trend is bearish and the current bias is flat to bearish.
WTI oil is up today and is currently up at 89.75 trading between 88.67 and 90.32 and the bias is flat.
Brent crude is up today and is currently down at 111.75 trading between 110.99 and 112.33 and the bias is negative.
Gold was very volatile this morning. Currently trading up at 1719.01, trading range is between 1721.00 and 1713.80 with a positive bias.
Dr. Copper is at 3.65 down from 3.66 earlier.
The US dollar falling from 80.21 earlier to 79.80 and is currently trading down at 79.95.
** RRR = Risk Reward Ratio
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Written by Gary