March 4th, 2013
in Gary's blogging
Opening Market Commentary For 03-04-2013
The premarkets were down a 'tad' (DOW -17.00, NASDAQ -6.00 and the SP500 -1.80) and I was unable to determine a trading strategy from those meager scraps of information. There is a lot of negative news hanging around that could derail the US markets in a heart beat, but nothing today that would send it one way or another, so we once again sit on our hands and wait.
Market opened down as expected, but started melting up almost immediately. By 10 am the indices were mostly in the red, but flat on anemic volume. One could expect the HFT computers to melt the averages further up today.
The big news today is coming from China and although it won't effect the US now, it will eventually. One of the many reasons to not view the US economy in rose colored glasses this year.
China Tumbles On Real-Estate Inflation Curbs: Biggest Property Index Drop Since 2008; Japan Downgraded On Abenomics
As we have been warning for nearly a year, the biggest threat facing China has been the fact that . . . the problem of persistent [and] relentless real-estate inflation has not not been tamed . . .
After all with the entire "developed" world flooding the market every single day with countless billions in new cheap, hot money, it was inevitable that much of it would end up in the mainland
Chinese real estate market. . . it was inevitable that the issue of inflation would have to be dealt with eventually.
Tonight is that "eventually", when following news from two days ago that yet another Chinese PMI indicator missed, this time the Services data which slid from 56.2 to 54.5. . .
The immediate result was that the Shanghai Stock Exchange Property Index slumped by a whopping 9.3%, the steepest drop since June 2008, and pushing it down to -11% for the year.
The weakness also spread to the broader market, with the Composite closing down 3.65% the biggest drop in months, and now just barely positive, at +0.2%, year to date. We expect all 2013 gains to be promptly wiped out when tonight's risk off session resumes in earnest.
The big news overnight was the beating China took – mostly due to its real estate index dropped almost 10%. You’ve heard about the ghost cities in China – massive areas that are capable of housing millions of people – that are almost completely empty.
The Chinese government wants to make sure prices don’t run up, so they’re doing what they can to keep a cap on things. Will this affect the US? Not directly. They make our stuff, and if their housing market crashes, they’ll still make our stuff.
But a housing crash in China could negatively affect other countries (Australia for example) which will then ripple over to the US.
Leavitt also believes we may see weakness over the next couple of months but expects the year to close out nicely. Great optimism, but I don't completely agree because there are way too many fence posts to climb during the next 10 months or so.
The RRR** has been narrow at the opening bell for the past several months, over a year actually, and has continued the trend again this morning. 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 86% and Secondaries Confirm "Tradable" This may be true enough, but difficult to believe, 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 10:15 is at 14049 down 40 or -0.29%.
The SP500 is at 1515 down 3 or -0.20%.
SPY is at 151.97 down 0.14 or -0.09%.
The $RUT is at 915.17 up 0.45 or 0.05%.
NASDAQ is at 3165 down 4 or -0.15%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been neutral to bearish and the current bias is sideways.
WTI oil is trading between 93.12 and 90.09 this morning. The session bias is negative and is currently trading down at 90.40.
Brent crude is trading between 108.15 and 108.88 this morning. The session bias is neutral and is currently trading down at 108.43.
Gold fell from 1587.00 earlier to 1565.10 and is currently trading down at 1573.20.
Dr. Copper is at 3.51 up from 3.48 earlier.
The US dollar is trading between 82.28 and 82.52 and is currently trading down at 82.36, the bias is currently sideways.
** RRR = Risk Reward Ratio
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Written by Gary