December 19th, 2012
in Gary's blogging
Opening Market Commentary For 12-19-2012
Premarket was up a few points and immediately started to melt down at the opening bell. Relatively heavy low red volume indicated investors shyness concerning the prospects of a successful fiscal cliff compromise in the making.
The major averages are in the red having melted down sightly after the opening and the red volume has fallen off by 10 am.
I remain semi bullish for the next week or so, but very, very cautious.
Here is a summary of the four market valuation indicators . . . these indicators aren't useful as short-term signals of market direction. . . But they can play a role in framing longer-term expectations of investment returns. At present market overvaluation continues to suggest a cautious long-term outlook and guarded expectations.
However, at the today's low annualized inflation rate and the extremely weak return on fixed income investments (Treasuries, CDs, etc.) the appeal of equities, despite overvaluation risk, is not surprising.
U.S. housing starts fell 3% in November from October to an 861,000-unit rate, missing economists' estimates of an 873,000-unit rate. Permits to build new homes jumped 3.6% to an 899,000-unit rate, topping estimates of an 875,000-unit rate and marking the fastest pace since July 2008.
The RRR** has been narrow at the opening bell for the past several months and was a bit wider than usual this morning. However, this continuing trend, in spite of this morning, makes predictions of session movements nearly impossible making trading futile and unprofitable.
As long as market volume remains light or the trading range is narrow, one can expect successful trading to remain elusive. The RRR** has been wider on volatile sessions lately and is expected to become more so as the year ends, but a lot of guessing still remains. Correctly 'guessing', of course, is the tricky part of the successful trading equation. Any trades today will probably end up on the meager side of profitability if you are lucky as most trades have been less than optimal 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. Watch for increasing volume to signal improved trading.
Swing trading is also at your own risk for all the reasons mentioned above. Because the market is at a crossroads of sorts, I would prefer to sit on my hands 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 13338 down 12 or -0.09%.
The SP500 is at 1443 down 3 or -0.22%.
SPY is at 145.07 down 0.32 or -0.23%.
The $RUT is at 845.51 down 2.18 or -0.26%.
NASDAQ is at 3050 down 4 or -0.12%.
The longer trend is up, the past months trend is bearish and the current bias is down.
WTI oil was up early this morning and then fell. It is currently trading down at 88.11 trading between 88.60 and 87.80 and the bias is negative.
Brent crude last report was 109.15 .
Gold was down this morning. Currently trading down at 1665.74, trading range is between 1676.95 and 1664.00 with a negative bias.
Dr. Copper is at 3.60 down from 3.66 earlier.
The US dollar fell from 79.56 earlier to 79.02 and is currently trading up at 79.16.
** RRR = Risk Reward Ratio
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Written by Gary