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Small Caps Lead The Way To Further Weakness

February 26th, 2013
in Gary's blogging

Midday Market Commentary For 02-26-2013

The large cap averages melted down towards yesterday's closing numbers while the small caps descended below on low and falling volume. Bernanke’s remarks this morning didn't do much in soothing investors desire to get back in the market as we watch the markets slowly continue the decline from yesterday. Direction is slanting downwards but appears to be more of a consolidation.

Follow up:

For those who want Bernanke's list of the costs/risks associated with further asset purchases, and his assessment about the severity of those risks: READ HERE.

The joke is going to be on the Italians when the dust finally settles, but the World will pay the price of foolishness of Keynesian politicians.

@SA:

U.S. stock futures ignore European turmoil following Italian election. The inconclusive Italian election, in which an anti-austerity comedian won the most votes, has sent Asian and European markets into turmoil. At midday in Europe, the main indices were uniformly lower, while yields on 10-year Italian bonds were +28 bps at 4.75%.

However, U.S. stock futures were up premarket ahead of a two-day appearance by Ben Bernanke in Congress. Are investors banking on some soothing words about money printing?

@SpiegelOnline:_____

World From Berlin: Italy's 'Childlike Refusal to Acknowledge Reality'

The Italian election, in which more than half of voters backed two comedians in the form of Silvio Berlusconi and Beppe Grillo, shows Italians are unable or unwilling to grasp the depth of their economic plight, argue German media commentators. The ungovernable nation poses a major risk to the euro zone. more...

The RRR** has been narrow at the opening bell for the past several months but has improved greatly over the past several sessions. If this continues we will have some wiggle room for quick trades in the coming days. The continuing trend of low volume 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 in fact we have already been there, and still may be too early to start shorting if this is a bear trap, be patient.

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 12:15 is at 13860 up 76 or 0.55%.

The SP500 is at 1489 up 2 or 0.14%.

SPY is at 149.30 up 0.29 or 0.19%.

The $RUT is at 895.41 down 0.44 or -0.05%.

NASDAQ is at 3110 down 6 or -0.20%.

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

How Oil Really Gets Priced

WTI oil is trading between 91.75 and 94.40 this morning. The session bias has turned bearish and is currently trading down at 92.39.

Gold rose from 1575.00 earlier to 1619.129 and is currently trading up at 1612.95.

Dr. Copper is at 3.55 rising from 3.51 earlier.

The US dollar rose from 81.20 earlier to 82.02 and is currently trading sideways at 81.93.

** RRR = Risk Reward Ratio

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

gary@econintersect.com

Written by Gary









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