March 18th, 2013
in Gary's blogging
Closing Market Commentary For 03-18-2013
Markets closed down but recovering from a 1% fall at the opening at the very negative news from Cyprus over the weekend.
Difficult to guess what Mr. Market is going to do over the next few sessions, but expect the averages to show a nice recovery beating out today's loss and perhaps challenging the highs of last week. From there I do foresee a correction and baring any Black Swan moment it probably won't be more than 10%.
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 91% and Secondaries Confirm "Tradable" This might be true (and difficult to believe), but challenging to deal with. The trading range is so narrow that way too much 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 14452 down 62 or -0.43%.
The SP500 is at 1552 down 8.60 or -0.56%.
SPY is at 155.13 down 0.71 or -0.46%.
The $RUT is at 947.20 down 5.28 or -0.55%.
NASDAQ is at 3237 down 11.48 or -0.35%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been bullish to neutral and the current bias is down.
WTI oil is trading between 93.94 and 91.78 today. The session bias was bearish and now is bullish and is currently trading up at 93.74.
Brent crude is trading between 109.16 and 107.32 today. The session bias is now bullish and is currently trading up at 108.99.
Gold rose from 1591.00 earlier to 1610.80 and is currently trading sideways at 1604.62.
Dr. Copper is at 3.41 down from 3.51 earlier.
The US dollar is trading between 82.33 and 83.10 and is currently trading sideways at 82.86, the bias is currently bullish. There is a gap from this morning at 82.35 which will probably be closed when the indices rise and recover. BUT, watch out after that technically is finished.
I am sure the 'noise' from this morning Cyprus fallout will subside over the next few trading sessions, but be assured this may be only the first act of a tragic end to the Euro as we know it today. Never the less, a lot of Innocent folk are going to be hurt regardless which way this bastardization of government regulations goes goes.
The Cyprus bailout package tax on bank deposits is a deeply dangerous policy that creates a new situation, more perilous than ever.
It is a radical change that potentially undermines a perfectly reasonable deposit guarantee and the euro itself.
Historians will one day explore the dark political motives behind this move. Meanwhile, we can only hope that the bad equilibrium that has just been created will not be chosen by anguished depositors in Spain and Italy. The really worrisome scenario is that the Cypriot bailout becomes euro-systemic – in which case the collapse of the Cypriot economy will be a sideshow.
This will happen when and if depositors in troubled countries, say Italy or Spain, take notice of how fellow depositors were treated in Cyprus.
All the ingredients of a self-fulfilling crisis are now in place: It will be individually rational to withdraw deposits from local banks to avoid the remote probability of a confiscatory tax.
As depositors learn what others do and proceed to withdraw funds, a bank run will occur. The banking system will collapse, requiring a Cyprus-style programme that will tax whatever is left in deposits, thus justifying the withdrawals. This would probably be the end of the euro.
The 500 at the close.
The DOW at the close.
** RRR = Risk Reward Ratio
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Written by Gary