Averages On Bubble, Serious Pull Back A Real Possibility

July 11th, 2013
in Gary's blogging, market open

Opening Market Commentary For 07-11-2013

Premarket was up where the SP500 futures were up over +0.95% - impressive and indicating that we were going to have an positive opening. Bernanke said last night, among other things, said that low inflation and high unemployment means the Fed can continue with it QE stimulus. Leavitt said this morning, “I guess the market likes a weakish economy accompanied by QE than a strengthen economy and no QE”.

The markets gaped up on the opening where the SP500 has a 5 point gap to fill and the DOW also has an unusual opening gap of 6.46 points. There is also a 0.25 point gap where the USD fell this morning, almost assuring a reversal in the indices today to cover that disparity sooner rather than later. Volume is low to moderate, mostly red, as some investors are taking advantage of the trades bought two weeks ago. (as I suggested was a good time to buy)

Follow up:

Very difficult to determine where Mr. Market or the HFT computers are going to take the averages today as it appears we are sitting on a bubble. The averages have reached closing highs of May 28th and it remains to be seen if we are going to make this a double top and decline or burst through this resistance and climb on to new historical highs.

I am not willing to make a 'guess' at this point, but have my 'trigger finger' ready for a flash movement either way. Monthly volumes are also falling off reminiscent of the pre-2009 decline.

But before you get excited about this mornings bearish report of number of individuals applying for first-time jobs benefits rose to 360,000, up from last week, consider that DailyFX.com says “US Initial Jobless Claims (JUL 6) miss, but not critical - keep in mind reporting period encompassed the July 4 holiday period”. [importance is also rated low]


Bernanke Sends Stocks To New All-Time Highs

The only story this morning remains Bernanke's after hours speech, which solidly trumped the FOMC minutes in market impact, and which, in addition to ramping US equity futures to just about new all time highs, sent the EURUSD soaring by almost the same amount (+300 pips) as the actual QE1 announcement on March 18, 2009.

Such is the power of verbal currency warfare, when Bernanke hasn't [actually] done anything and merely hinted the Fed is as confused as ever about what to do.

Of course, as Commerzbank notes this morning, the U.S. economy would have to lose a lot of momentum for the Fed to cancel tapering. . . the central bank would only expand the purchase program if the economy collapses, but none of that matters to the "wealth effect" for the 1% where economic destruction simply means more wealth.

I haven't jumped on this bandwagon as the possibility of a serious pull-back becomes more relevant as each sessions melts up and volume continue to decline. The gap in the USD this morning and several in the more important averages indicate a correction is just around the corner. The SP500, for example, has a gap today at 1652.66 and one at 1631.94 that will be covered sometime, possibility in the near future. Depending on why the correction occurs, i.e. World events, also calculates if we should join the BTFD crowd.

The RRR** was narrow at the opening bell today, again, but would have been a great overnight trading session if you 'guessed' today would have been so positive.

As of right now, it is too late to jump in to catch the highs, safely anyway. Traders also need to be especially cautious how close you set your stops as we have seen lately several corrections that unnecessarily wiped out a lot of investment profits.

Correctly 'guessing', of course, is the tricky part of the successful trading equation. Any day 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.

There is a wedge between perception and reality that has been going on for some time now where the reality doesn't match this continued bull run.

The day trading range has been so narrow that way too much money has to be put on the table just to get back meager gains.

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 15430 up 138 or 0.90%.

The SP500 is at 1669 up 17 or 1.02%.

SPY is at 166.81 up 1.62 or 0.99%.

The $RUT is at 1031.11 up 10.69 or 1.04%.

NASDAQ is at 3556 up 35 or 1.01%.

NASDAQ 100 is at 3035 up 34 or 1.15%.

The longer trend is up, the past months trend is bullish, the past 5 sessions have been bullish and the current bias is up but with a slightly negative slant.

How Oil Really Gets Priced

WTI oil is trading between 107.45 and 105.17 today. The session bias is bearish and is currently trading down at 105.36.

More Widening For The Brent/WTI Spread ahead?

Brent crude is trading between 108.92 and 107.95 today. The session bias is bearish and is currently trading down at 108.31.

Gold rose from 1248.01 earlier to 1297.03 and is currently trading sideways at 1282.75.

Here’s why copper has lost its indicator role

Dr. Copper is at 3.187 rising from 3.077 earlier.

The US dollar is trading between 84.43 and 82.60 and is currently trading up at 83.35, the bias is currently positive.

** 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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