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Indices Make New Historical Highs As Volume Falls

March 5th, 2013
in Gary's blogging

Closing Market Commentary For 03-05-2013

Markets closed slightly lower than their highs for the day with some setting new historical highs in the process. Volume was falling all throughout the session leaving more than a few wondering if we are quickly approaching a market top. Volume has been falling since 2009 with a brief spurt in 2011; not a good sign for a continued ride for the gold ring.

Some are calling for a continued bull run while others are calling for Armageddon. However, everyone is calling for caution.

Follow up:

More on the HFT algo computers.

@zerohedge:

FBI And SEC Team Up To Take Down HFT

After exposing the stock market manipulative arsenal that is High Frequency Trading, quote stuffing, flash trading, packet churning, layering, sub-pennying, liquidity, latency and dark pool arbitrage, NBBO and Reg NMS exemptions, "hide-not-sliding", collocation, and much, much more for four years.

So long even Credit Suisse joined the chorus we started in April of 2009, we are glad to learn that finally, with a ridiculous Rip Van Winklesian delay, but better late than never.

"The FBI has teamed up with securities regulators to tackle the potential threat of market manipulation posed by new computer trading methods that have taken operations beyond the scope of traditional policing."

In other words, the SEC has finally realized it can no longer pretend it is not co-opted, but because it has no clue where to even start with HFT, has asked the help of the Feds.

Which in itself is hardly reason for optimism, but if there is one thing Hans Gruber has taught us, it is that when the Feds get involved, the first thing they do is cut the power, and in this algo-based market that will end some 99% of all daily manipulative practices we have all grown to love and look forward to every single day.

The RRR** has been narrow at the opening bell for the past several months, over a year actually, 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 is 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 might be true (for last week anyway), but difficult to deal with. 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 14253 up 126 or 0.80%.

The SP500 is at 1540 up 15 or 0.96%.

SPY is at 154.16 up 1.24 or 0.81%.

The $RUT is at 927.40 up 10.72 or 1.17%.

NASDAQ is at 3224 up 42 or 1.32%.

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

How Oil Really Gets Priced

WTI oil is trading between 91.00 and 89.35 this morning. The session bias is sideways and is currently trading down at 90.74.

More Widening For The Brent/WTI Spread Ahead?

Brent crude is trading between 107.80 and 109.93 this afternoon. The session bias is slightly bullish and is currently trading up at 109.71.

Gold rose from 1569.00 earlier to 1586.31 and is currently trading up at 1575.68.

Dr. Copper is at 3.52 up from 3.48 earlier.

The US dollar Index is trading at 82.11, down at -0.14.

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:

gary@econintersect.com

Written by Gary









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