Italian Voters Scare US Markets – Will It Continue Down?

February 25th, 2013
in Gary's blogging

Closing Market Commentary For 02-25-2013

Averages at one point fell below last Thursday's close and by 3 pm evened out to the mid point of Thursday's close and Friday's opening on low volume. By 3:15 the markets took a nose dive on relatively heavy red volume which I suspect the 'dippers' will bring it back up some tomorrow, but we will see.

I still think we are due for a serious correction and maybe, for the second time, this will be the start. When the percentages start hitting the 1.50% mark, it is time to pay serious attention. This is especially important if you are still long.

Follow up:

About 3:15 pm the market started to sell off because of Italian election, but that is just an excuse to the real issues out there which are far too numerous to cite here.


The markets are skidding deep into the red as traders fret about Italian election results suggesting the eurozone’s No. 3 economy may not be able to forge a government.


Market Plunges As European Crisis Is Back

JPY saw a massive correction today - gaining 3% against the USD - its biggest single-day gain since May 2010 (and implying a 6% correction in the Nikkei 225 from last night's closely correlated close).

S&P 500 futures volume exploded to its highest since the rally began in November as it broke its uptrend and slumped 40 points from its intraday highs. VIX's term structure collapsed to its flattest in 18 months as spot surged above 19% (no - everyone wasn't hedged).

The Dow, S&P, and Nasdaq are all red for the month and even the Trannies are almost unch. Treasuries soared with 10Y ending -10bps (after being +4bps at its worst of the day).

Gold and Silver surged (with the latter testing near $1600 again) as WTI dropped 1%. Homebuilders (not helped by lumber's price collapse) dropped 3.5% but every sector was ugly today and closed at its lows.

Risk assets led this downswing all day long and cross-asset-class correlation surged as the slump accelerated.

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 jump in to catch the highs and still may be too early to start shorting.

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. Best Stock Market Indicator Ever: Rises to 85% 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 13784 down 216 or -1.55%.

The SP500 is at 1487 down 27.75 or -1.83%. (That is impressive)

SPY is at 149.19 down 2.72 or -1.78%.

The $RUT is at 895.84 down 20.32 or -2.22%. (That actually looks like a selloff.)

NASDAQ is at 3116 down 45.57 or -1.44%.

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

How Oil Really Gets Priced

WTI oil is trading between 93.38 and 94.45 this morning eventually dropping to 92.15 this afternoon. The session bias is bearish and is currently trading down at 92.35.

Gold rose from 1575.80 earlier to 1596.92 and is currently trading up at 1594.45.

Dr. Copper is at 3.53 down from 3.57 earlier.

The US dollar fell from 81.74 earlier to 81.16. This afternoon it rose dramatically to 81.99 and is currently trading up at 81.82.

The 500 at the close.

The DOW at the close.

** 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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