December 28th, 2012
in Gary's blogging
Closing Market Commentary For 12-28-2012
Market closed down on relatively heavy volume, but it appears the investors at large don't want to wait for the Monday rush. Then again, maybe it is a setup for a bull run on Monday. I am through guessing for this year.
The charts show nothing of interest and the entire market is based on rumors, news and double-speak. The $VIX has been above 20 for most of the afternoon. It was as high as 23.40 and closed at 22.22. The aftermarket is quite active with the SP500 falling to 1386.
I write continually about the HFT algo computers being able to jerk the numbers around. This is a MUST read.
On December 26, 2012 at 11:02:59, the market suddenly exploded with activity (SPY dropped below 141.88 - a low set 12 days earlier on December 14). Approximately 3,800 March 2013 eMini futures contracts (S$P 500) were sold during that second.
Nanex thought the sudden explosion in activity warranted a closer look. What they found was fascinating. It appears the entire market-wide move may have been carefully orchestrated.
One thing for certain is that our regulators will never be able to see the big picture if their analysis tools (MIDAS) only looks at equity data. Analyzing price moves in futures and options is crucial to understanding market-wide moves in equities, and visa versa.
The sad truth is that 'momentum ignition' events such as this occur all the time. See this page more details, including an animation that shows where and when these events have occurred since 2007.
The RRR** has been narrow at the opening bell for the past several months and continued the trend again continuing to the closing session. 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 2012 ends and 2013 begins, but a lot of guessing 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 the past year.
I also have continuing 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 4:00 is at 12938 down 158 or -1.21%.
The SP500 is at 1402 down 6.60 or -0.47%.
SPY is at 140.94 down 15.67 or -1.10%.
The $RUT is at 832.10 down 5.30 or -0.63%.
NASDAQ is at 2960 down 25 or -0.86%.
The longer trend is up, the past months trend is bullish and the current bias is down.
WTI oil was down this morning and is currently trading down at 90.77 trading between 91.49 and 90.31 and the bias is negative.
Gold was down this morning. Currently trading up at 1656.63, trading range is between 1665.70 and 1653.78 with a neutral bias.
Dr. Copper is at 3.59 down from 3.62 earlier.
The US dollar is falling from 80.04 earlier to 79.71 and is currently trading down at 79.79 after gaping down at 79.88. That need to be closed.)
The SP500 at the close.
The DOW at the close.
** RRR = Risk Reward Ratio
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Written by Gary