Averages Trade In Narrow Range – Weakness Prevails

February 21st, 2013
in Gary's blogging

Midday Market Commentary For 02-21-2013

The 500 bounced off a support in the 1502 area around 10 am marking the low point of the session and proceeded to claw its way back up to nearly its opening number. All of the averages have kept trading in a narrow range as they apparently are still recovering from yesterday's decline average of 1.24%.

By noon the SP500 futures had resumed its weakness by returning to the day's lows of 1499 – 1500. If this is any guide we can expect to see additional weakness in the afternoon session but I am doubtful of any waterfall action like yesterday. Not to say that yesterday was not the opening volley of additional market weakness to come.

Follow up:

It appears the market shrugged off the news Philly Fed Plunges To 8 Months Low As Great Unrecovery Continues. A very dangerous game is playing out in the averages today as the averages jockey back and forth. It could be the HFT computers are the blame for the small recovery this morning.


The Philadelphia Federal Reserve's gauge of manufacturing activity in the mid-Atlantic region fell to -12.5 in February from -5.8 in January. The index was expected to rise to 1.0. Readings above zero point to expansion while those below indicate contraction.

The markets continued to recover from the morning lows with the 'not so good' financial news this morning.

The first column is what was reported. The second column is what the analyst's expected and the third is the last report.

The RRR** has been narrow at the opening bell for the past several months and has continued the trend into the midday 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 jump in to catch the highs, if there are anymore, and still may be too early to start shorting. If you were able to jump on the train yesterday afternoon you could have cashed in on a good scalp.

Yesterday had relatively heavy volume, however as long as market volume remains light or the trading range is narrow, one can expect successful, or at least profitable, trading to remain elusive. The RRR** has been wider on some volatile sessions lately and is expected to become more so as 2013 enters the first quarter, but unfortunately 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. 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 12:00 is at 13870 down 57 or -0.41%.

The SP500 is at 1503 down 8 or -0.56%.

SPY is at 150.57 down 0.78 or -0.52%.

The $RUT is at 907.40 down 6 or -0.67%.

NASDAQ is at 3136 down 27 or -0.87%.

The longer trend is up, the past months trend is bullish, the past 5 sessions have been bullish and the current bias is neutral to bearish.

How Oil Really Gets Priced

WTI oil is trading between 97.11 and 92.64 this morning. The session bias is bearish and is currently trading down at 93.01.

Gold rose from 1554.57 earlier to 1584.96 and is currently trading down at 1578.52.

Dr. Copper is at 3.56 falling from 3.74 earlier.

The US dollar rose from 80.68 earlier to 80.61 and is currently trading up at 81.38.


"I am as bearish on stocks as I have been in some time," writes Doug Kass. "Much of the current investor optimism expressed in a rising stock market is not consistent with the underlying economic and profit data," he continues, saying the exact same thing David Einhorn said on the GLRE earnings call yesterday.

** 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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