S&P 500 Makes Triple Top On Low Volume

March 11th, 2013
in Gary's blogging

Closing Market Commentary For 03-11-2013

Markets closed at new historic highs on low volume and something has to give. My proprietary indicators show a strong bearish factor being thrown into the mix of a bull market not wanting to go down.

The rest of the week is going to be interesting to say the least as the HFT computers apparently are the only ones trading.

Follow up:

Cam has his usual interesting perspective.

Give In To The Dark Side

. . . stocks have continued to move higher. I continue to be concerned about this advance. The negative divergence that I outlined is still not confirming this rally. Moreover, heavy insider selling is generally not a good sign for the bulls. . .

My inner investor continues to be concerned about this market advance.

Sam Stovall's analysis of what happens after the market hits a new high indicates that the upside is limited while downside risk is high.

If history is any guide. . . it may respond like the messenger from Marathon. In other words, the S&P 500 may have little time to rejoice following the setting of a new record high before collapsing again, as the median advance following the recovery to break-even from bear markets since WWII has been only 3% before stumbling and falling into another meaningful decline within only two months.

Even Richard Russell, who "should" be calling for a Dow Theory buy signal after seeing new highs in the Dow Jones Industrials and Transports, is confused and he blames the Fed for his confusion [emphasis added]:

My only answer to this is that both D-J Averages produced something never seen before, namely new highs during a post-crash upward correction.
My explanation of this unprecedented situation is that the advance to new highs was a direct result of never-before-seen manipulation by the Federal Reserve.

One technical observation -- With the breakout and confirmation by the Industrials, this places tremendous psychological pressure on the 13.108 million shorts that are now positioned on the NYSE. As a result, we should see irregular spates of short covering or buying panics, depending on the fears and psyches of the short sellers. This makes shorting stocks in this market a risky game.

The RRR** has been narrow at the opening bell for the past several months, over a year actually, and has continued the trend again today. 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 87% 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 14447 up 50.22 or 0.35%.

The SP500 is at 1556 up 5.05 or 0.32%.

SPY is at 156.06 up 0.63 or 0.41%.

The $RUT is at 942.51 up 0.01 or 0.00%.

NASDAQ is at 3252 up 8.50 or 0.26%.

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

How Oil Really Gets Priced

WTI oil is trading between 92.00 and 90.90 today. The session bias is bullish and is currently trading up at 91.98.

More Widening For The Brent/WTI Spread Ahead?

Brent crude is trading at 109.54 today.

Gold traded from 1583.20 earlier to 1576.45 and is currently trading sideways at 1581.16.

Dr. Copper is at 3.51 down from 3.52 earlier.

The US dollar is trading between 82.66 and 83.12 and is currently trading down at 82.79, the bias is currently bearish.

The 500 at the close. Notice the triple top and where do we go from here?

The DOW at the close. Not even a double top, but the falling volume is a dangerous trend.

** 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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