Markets Test Morning Lows On Moderate Volume

December 21st, 2012
in Gary's blogging

Midday Market Commentary For 12-21-2012

By the noon hour the averages made a steady climb from the morning lows and then turned tail again making 'guessing' what Mr. Market is going to do next to impossible.

By12:30 the markets look weak and a possibility of the averages melting further down is a real concern for traders left in a long position. Most of the averages are against a support, minor, and a lot of choppiness is going on between the bulls and the bears on moderate volume.

Follow up:

I do not like to see gaps in the daily charts as they have to be closed sooner or later indicating a reversal in the current trend. SPY and the NASDAQ, to name only two, gaped down at the opening bell possibly indicating a rise to at least yesterday's low point which is 142.04 and 3034 respectively. After reaching that point I expect the averages to once again start melting downward if a compromise is not reached in the 'fiscal cliff' issue.

However, the major markets DID NOT have gaps which throws a monkey wrench into the mix suggesting a continuing melting down. It must be remembered that the current market and financial systems here and abroad have been built on Keynesian principles, dovish and loose financial policies. This house of cards could collapse at any day with the slightest of 'Black Swan' moments.


The technicians might find it interesting that the Russell 2000 is back at a "resistance level" it's touched and failed at a number of times going all the way back to 2007. Better luck this time? IWM -1.2%.”

The RRR** has been narrow at the opening bell for the past several months and continued the trend again this morning and continued into the noon hour. This continuing trend 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. I personally would not have guessed what transpired last night and continued this morning.

The DOW at 12:45 is at 13129 down 182 or -1.37%.

The SP500 is at 1423 down 20 or -1.42%.

SPY is at 142.06 down 2.03 or -1.40%.

The $RUT is at 842.65 down 9.84 or -1.15%.

NASDAQ is at 3004 down 46 or -1.51%.

The longer trend is up, the past months trend is bullish and the current bias is down.

How Oil Really Gets Priced

WTI oil was down today and is currently trading down at 88.44 trading between 90.00 and 88.00 and the bias is negative.

Gold was up this morning. Currently trading up at 1655.50, trading range is between 1634.42 and 1657.05 with a positive bias.

Dr. Copper is at 3.57 up from 3.54 earlier.

The US dollar rose from 79.07 earlier to 79.72 and is currently trading even at 79.70.


Fiscal policy will remain important in the short-term as fiscal talks continue and there is likely to be a deterioration in risk appetite which would support the dollar if there is no progress.

The Federal Reserve stance will remain an important focus throughout the next few months and the dovish policies will have a negative impact on the US currency as the Fed continues its policies of bond purchases.

There will still be expectations that the US economy will out-perform the Euro-zone which should provide some degree of dollar support. There has also been a retreat in precious metals prices which suggests that underlying dollar selling is likely to be contained.

The dollar remained on the defensive for much of the week, but did find some respite as risk appetite faded again as the Euro retreated from the 1.33 area.”

** RRR = Risk Reward Ratio

To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

Written by Gary

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