Opening Market Commentary For 08-06-2013
The 7:30 am today, the US Trade Deficit came in at $34.2 billion, the largest decline in 4 years . Analysts were expecting $43.5 billion from the last report of 44.1 billion. That raised the eyes of many investors as the premarket fell -0.20%. By 9 am the SP500 futures was off -0.17%, US dollar index off -0.13% and gold was off -1.21%.
The markets opened with the SP500 down -0.22%, the DOW down -0.39% and the NASDAQ down -011% all on low to moderate volume. By 10:00 am the direction of the averages was decidedly in a downward trend.
Are we finally seeing a market top forming or is this more market manipulation?
Does anyone really believe the government reporting anymore or market movements for that matter? At 10 am gold was sliding down along with oil and the indices too were descending at decent clip – so where is the disparity between stocks, oil and gold? For those inclined to dip your toes into the fray, there is a good chance the markets will melt back up before the session closes.
If there was any doubt that the taper would take place shortly, it can be wiped out following the just released June international trade data. It showed a surge in exports to a record high $191.2 billion, an increase of $4.1 billion compared to May, even as imports declined by $5.8 billion to $225.4 billion.
That resulted in a trade deficit of just $34.2 billion, or 22.5% lower compared to the $44.1 billion in May, which is the lowest trade deficit since October 2009.
It is also the biggest beat to expectations of -$43.5 billion since March 2005.
Whether this plunge in the deficit was the result of the new GDP methodology is unknown, however the resulting surge in revised Q2 GDP following this bean-counting addition to the last month of Q2.
This means that the economy grew even more than expected and that the Fed's tapering course is now assured. It also means Q3 GDP based on July trade data will be dragged down as there is no way this surge in the collapsing deficit can be sustained.
The RRR** was narrow at the opening bell today continuing a recent trend. This trend of low volume and narrow trading sessions makes any predictions of session movements just about impossible.
In the opinion of many it is too late to jump in to catch market highs if there are going to be any more. 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. As for shorting, it still may be too early to start picking out your best candidates, but the markets appear to building a bubble, so keep on your toes.
Correctly 'guessing', of course, is the tricky part of the successful trading equation and that has been the mainstay of traders for the past year.
The problem is that the trading range has been so narrow that way too much money has to be put on the table just to get back meager gains. Just remember traders DO NOT have to trade all the time, only when it is obvious and lately it hasn't been demonstrable trading sessions.
Swing trading is also at your own risk for all the reasons mentioned above although guessing at 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 15513 down 98 or -0.63%.
The SP500 is at 1699 down 8 or -0.49%.
SPY is at 169.90 down 0.79 or -0.46%.
The $RUT is at 1054 down 9 or -0.82%.
NASDAQ is at 3674 down 18 or -0.50%.
NASDAQ 100 is at 3130 down 13 or -0.42%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been bullish turning negative and the current bias is bearish.
WTI oil is trading between 107.23 and 105.27 today. The session bias is bearish and is currently trading down at 105.29.
Brent crude is trading between 109.22 and 107.63 today. The session bias is bearish and is currently trading down at 107.72.
Gold fell from 1306.04 earlier to 1278.80 and is currently trading down at 1282.60.
Dr. Copper is at 3.179 falling from 3.208 earlier.
The US dollar is trading between 82.01 and 81.65 and is currently trading down at 81.67, the bias is currently negative.
** RRR = Risk Reward Ratio
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Written by Gary