February 14th, 2013
in Gary's blogging
Closing Market Commentary For 02-14-2013
For a while I thought the averages were actually going to end up slightly in the green. By 3:50 the numbers started to reverse and the DOW was the first to record red, then the rest just went to flat status. Red volume was the relevant player as some late in the day profit taking took place but overall it smacks of HFT computers screwing the numbers around - again. Yahoo, what an exciting day, what is going to happen tomorrow?
If the 'action' for the last year (or two) proves anything about being a trader this article below proves the point. I do not know when trading will return, it will eventually, but it appears that 'swing trades' has been the only effective trading possible. I can 'guess' that tomorrow will be another non-trading event.
With central banks sponsoring their own (and each other's) bond markets, and every financial entity owning its own and each other's bonds, Santelli pops his lid over the Pollyanna business leaders (like Bob Lutz - proclaiming GM's European business is troughing because Goldman Sachs is buying European bonds) are pointing to market-based bond prices as indicative of optimism and that economically the worst (must) be over.
"Forget the wall of worry, this is the wall of weakness", Rick rants, and the interconnectedness of global markets now means if Goldman is right (as we noted yesterday) that Treasuries are 200bps rich then how does that reconcile with growth that is just bumbling along as evidenced with today's GDP prints from around the world (and surging unemployment).
Just what is the Fed going to do to save the world this time? - buy $160bn more per month if we see global weakness restart? How do traders react to slowing global growth? Buy Treasuries?
Indeed, the good is bad but bad is better meme seems back and being a trader is, as Rick notes, nigh on impossible.
The RRR** has been narrow at the opening bell for the past several months and has continued the trend into the closing session. This continuing trend makes predictions of session movements nearly impossible making trading futile and unprofitable. As of right now, it is too late to catch the highs and may be too early to start shorting.
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 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 several years.
I also have continuing issues with some pundits, writing almost every day, that there are setups for day trading. Best Stock Market Indicator Ever: Unchanged at 87% and Secondaries Confirm "Tradable" 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. I keep hoping for increasing volumes to signal improved trading.
Swing trading is also at your own risk for all the reasons mentioned above although guessing overnight trades would have been most profitable over the past year. Again, 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 13973 down 9.37 or -0.07%.
The SP500 is at 1521 up 1.06 or 0.07%.
SPY is at 152.26 up 0.10 or 0.07%.
The $RUT is at 923.75 up 3.17 or 0.24%.
NASDAQ is at 3198 up 1.78 or 0.06%.
The longer trend is up, the past months trend is bullish and the current bias is neutral with a bearish slant.
WTI oil was fluctuating this morning and is currently trading down at 97.35 trading between 95.04 and 98.02 and the bias is neutral.
Gold was down this morning. Currently trading down at 1636.73, trading range is between 1668.25 and 1633.75 with a negative bias.
Dr. Copper is at 3.74 up from 3.73 earlier.
The US dollar rose from 80.12 earlier to 80.70 and is currently trading down at 80.37.
Leavitt has some good advise from this morning.
By itself, the extent of the rally off the November low is not a surprise – the market is fully capable of such upside progress. The surprising thing is the steadiness and consistency. Other than a move down on very light volume at the end of 2012, the market has barely pulled back. Every little dip gets bought.
If you’ve been waiting for a buy-able dip, you are probably pretty frustrated right now because one hasn’t materialized. If this describes you, send me a quick email when you decide to throw all caution to the wind and buy because that’s when the market will top.
Is this harsh? Yeah. Sorry, that’s the way Wall St. works. Rallies don’t let you in; sell-offs don’t let you out. Sooner or later you’ll realize playing guessing games is not wise. Read the charts and trust them.
Given this, the risk/reward for chasing stocks higher right now is not good. Building gains on top of gains is hard. I get the sense a decent move is coming. We could get a blow-off top that brings the last of the bears over to the bull’s side or a quick move down that catches the “market never drops” bulls by surprise. Be on your toes.
The 500 at the close.
The DOW at the close.
** RRR = Risk Reward Ratio
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Written by Gary