Written by Gary
Opening Market Commentary For 12-09-2013
Premarkets were up (+0.15%) after relatively quiet weekend, financial news wise. Markets opened up and the SP500 climbed on moderate volume to post a new (almost) historical high, but it remains to be seen if the day candle will support this record.
By 10 am the averages were showing signs of weakness and unless the BTFDers jump in we may see the markets start to melt down. Today is not supportive of good trading.
An interesting article about my favorite complaint regarding the HFT computers puts some new light on what is going on behind the closed doors.
Having discussed market microstructure and the parasitic impacts of high-frequency-trading for the last 5 years, it comes as no surprise that the block-trade-sniffing algos have had very significant impacts on the way institutional investors trade now.
As WSJ reports, in fact the big boys are conducting more "upstairs trades," in which deals are executed among big institutions, bypassing the broader market, because the proliferation of algorithmic trading and other structural issues, including the fragmentation of the market, are hurting their ability to get the best prices and execute large trades quickly.
While the concerns aren't all new, big investors say the cat-and-mouse games are growing more elaborate - and counterproductive - by the day.
The RRR** has been very narrow at the opening bell for months and this trend of low volume and narrow trading sessions makes any predictions of session movements nearly impossible, thus making trading futile and mostly unprofitable.
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. Correctly 'guessing', of course, is the tricky part of the successful trading equation.
The short term indicators are leaning towards the buy side at the opening, but I would advise caution in taking a position because of the Fed's cryptic utterances in hinting when the taper will begin and by how much. I would also take chart and other technical indicators with a grain of salt for the time being and watch what the Fed does WHEN it actually does something.
The longer 6 month outlook remains 40-60 sell until we can see what the Fed is actually going to do, simple as that. If we get some Fed tapering in December (17th. -18th. meeting) the markets will certainly react in a negative fashion, how much of course depends on much bond buying takes place. If the tapering begins in March 2014, like some believe it will, the markets are going to price that in by declining sooner. However, 74% of Bloomberg surveyed economists believe tapering will believe either in December or January as of 12-09-2013, but Fisher says it will take place in the first quarter. I am expecting weak to negative markets for the foreseeable future.
Members of the FOMC believe the US economy has shown signs of improvement, but they have assured short-term interest rates would remain low for quite some time to come. Alpari Market Analyst, Craig Erlam, said: "Many members of the Fed now appear eager to start winding down its asset purchases and are looking for ways to do it that will create the least disruption in the financial markets, such as setting simple thresholds for reductions, or even more simply, providing a timetable for tapering that is not data dependent."
ADVFN reported, "The rally in question has been built on the back of the Fed's promise of a stimulatory environment. If any catalyst points to the Fed giving up its accommodative stance, there is a danger of a pullback and near term support for the index lies around the 15,965, 15,890 and 15,804 levels."
Personally, I think it could go a lot lower.
Also, many pundits have stated that we may have seen the top - but I wouldn't count it as long as the Fed continues to hand out 'Market Viagra'! I would like to see a blowout candle (shooting star) to verify a top along with heavy volume.
The DOW at 10:15 is at 16035 up 14 or 0.08%.
The SP500 is at 1808 up 3 or 0.15%.
SPY is at 181.28 up 0.36 or 0.20%.
The $RUT is at 1127 down 4 or -0.34%.
NASDAQ is at 4070 up 8 or 0.19%.
NASDAQ 100 is at 3517 up 12 or 0.35%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been positive and the current bias is negative.
WTI oil is trading between 97.96 and 97.33 today. The session bias is negative and is currently trading down at 97.43.
Brent Crude is trading between 111.75 and 109.98 today. The session bias is negative and is currently trading down at 110.03.
Gold rose from 1226.69 earlier to 1236.71 and is currently trading up at 1235.10.
Dr. Copper is at 3.254 rising from 3.231 earlier.
The US dollar is trading between 80.32 and 80.17 and is currently trading down at 80.22, the bias is currently sideways.
** RRR = Risk Reward Ratio
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Written by Gary