Opening Market Commentary For 03-06-2013
Premarket was up this morning added by the US private sector adding more jobs in February indicating another gap up for the cash crowd at the opening bell.
The averages did open above yesterday's close (0.14% to 0.26%) but started to immediately show weakness on increasing red volume. The NASDAQ fell from its opening high (3233) along with the DOW (14300) towards yesterday's highs signaling market weakness, at least in the short term.
By 10 am market action is looking like a sea-saw trading in a tight narrow range with the DOW and the 500 squeaking out new highs but basically trading sideways like yesterday.
This bit of news will effect the markets.
“Fed's Plosser saying the FOMC should halt QE by the end of the year, warns of higher inflation expectations.”
“Plosser: Until uncertainty is resolved, lowering interest rates is unlikely to stimulate firms to hire and invest. ... “
“US FACTORY ORDERS (JAN) FELL 0.2% VS -2.2% EXPECTED AND REVISED TO 1.3% FROM 1.8%.”
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 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 10:15 is at 14298 up 45 or 0.32%.
The SP500 is at 1543 up 3 or 0.21%.
SPY is at 154.67 up 0.39 or 0.25%.
The $RUT is at 930.32 up 3 or 0.32%.
NASDAQ is at 3227 up 3 or 0.09%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been bearish and the current bias is down.
WTI oil is trading between 90.85 and 90.09 this morning. The session bias is negative and is currently trading down at 90.12.
Brent crude is trading between 109.84 and 108.99 this morning. The session bias is negative and is currently trading down at 109.06.
Gold rose from 1572.51 earlier to 1567.68 and is currently trading up at 1576.39.
Dr. Copper is at 3.50 down from 3.54 earlier.
The US dollar is trading between 81.97 and 82.44 and is currently trading up at 82.42, the bias is currently positive.
How could investors have been so wrong in their interpretation of the VIX? My hunch is that their mistake is thinking that it is a fear gauge, with low levels indicating excessive complacency and high levels an excess of fear. But fear is not really what the VIX measures.
It instead is a measure of expected volatility, as reflected in option premiums. In the complex algorithm used to calculate the VIX, both big upside and big downside moves contribute more or less equally. Since these large up and down moves often largely cancel each other out, average market returns following high VIX levels are not higher than they are following low VIX levels.
** RRR = Risk Reward Ratio
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary