Written by Gary
Opening Market Commentary For 12-11-2013
Premarkets were quiet and didn't vary much from yesterday's closing numbers. Minutes before the opening negative numbers started rolling in and by the opening bell the averages were starting to plummet. By the 15 minute mark the markets were down -0.35%.
By 10 the averages were reporting down 0.50% to 0.60% and no bottom in sight. Volume is mixed for the opening and we are probably looking at a down day.
The session is likely to repeat itself by recovering by the midday and 'might' lend itself into a trade session, but I wouldn't bet on it. Is the last two sessions the start of the 'taper' fear among investors or is it something more sinister as we watch the numbers erode?
Absent the "obvious" bubble in the late 90s, the US equity market is at its most expensive valuation since right before the '30s crash.
As Bloomberg notes, thanks to the exuberance of stocks in the last quarter, Pavilion Global Markets has calculated Tobin's Q (a valuation indicator based on market 'price' versus 'asset value' for non-financial companies) has only been higher at the peak of bubble exuberance.
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Today the RRR** was narrow, but normal, at the opening bell 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.
The problem facing traders is that the trading range, which has been so narrow during the trading day lately, that way too much money has to be put on the table just to get back meager gains.
The short term indicators are leaning heavily towards the sell 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 15923 down 51 or -0.32%.
The SP500 is at 1796 down 7 or -0.39%.
SPY is at 180.05 down 0.73 or -0.40%.
The $RUT is at 1114 down 6 or -0.53%.
NASDAQ is at 4045 down 16 or -0.40%.
NASDAQ 100 is at 3501 down 14 or -0.40%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been mixed and the current bias is negative.
WTI oil is trading between 98.62 and 97.78 today. The session bias is negative and is currently trading down at 97.86.
Brent Crude is trading between 109.71 and 108.63 today. The session bias is negative and is currently trading up at 108.97.
Gold rose from 1253.39 earlier to 1262.67 and is currently trading down at 1258.60.
Dr. Copper is at 3.283 rising from 3.256 earlier.
The US dollar is trading between 80.05 and 79.85 and is currently trading up at 79.90, the bias is currently negative.
** RRR = Risk Reward Ratio
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Written by Gary