Written by Gary
Opening Market Commentary For 12-16-2013
Premarkets were up +0.55% this morning rising a day before the US Federal Reserve opens policy meeting. Financial reporting was slightly better than expected this morning, but the futures didn't rise any further which leads me to believe there is some insider-trading going on. (Nah, really?)
Markets opened up with some gaping on low volume which increased in the first few minutes. The small caps were up +0.30% and the large caps up by +0.50% increasing to +0.45% and +0.80% respectively. In the first 5 minutes.
By 10 am the market trend was upwards (+1.00%) but slowing as the opening euphoria wore off. Volume became moderate and that too started to decline as investors are deciding what to do next.
Today's unexpected bullish action may turn out to be a traders Christmas gift if the Fed 'Speak' is 'let's-do-the-taper' dance becomes a reality, be prepared fellow traders.
"Priced In" appears to be the meme of the day but the overnight collapse in S&P 500 futures - perfectly tagging the 50DMA - was met with a slowly building avalanche of BTFATH-ers unable to resist missing out of the December Triple Witching seasonality.
While stocks are screaming higher, the USD is practically unchanged, gold and silver have rallied back to unchanged, and Treasuries are modestly lower in yield.
The latest talk on the street is that analysts do not expect the Fed to begin pulling back on its monthly $85 billion bond-buying program by very much if any. However, many economists feel that economic data has been very strong of late increasing chances of tapering sooner, Fed policy makers may leave hints about when that wind-down could begin and the wording of that statement will be key.
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 of right now, it is too late to jump in to catch the market highs, safely anyway. Traders need to be especially cautious how close you set your stops as we have seen several corrections that unnecessarily wiped out a lot of investment profits. As for shorting, it is still a moment of chance as long as the Fed 'stimulates' the markets there will be few overnight shorting opportunities.
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 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. Even the swings have been narrow confusing traders and investors alike with faux bull and bear moves.
Swing trading is also risky 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 short term indicators are leaning towards the hold 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 this week 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 many believe it will, the markets are going to price that in by declining sooner. 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 10:00 is at 15921 up 165 or 1.05%.
The SP500 is at 1791 up 15 or 0.86%.
SPY is at 179.63 up 1.51 or 0.85%.
The $RUT is at 1117 up 10 or 0.87%.
NASDAQ is at 4037 up 36 or 0.90%.
NASDAQ 100 is at 3489 up 33 or 0.95%.
The longer trend is up, the past months trend positive bullish, the past 5 sessions have been negative and the current bias is positive.
WTI oil is trading between 96.52 and 97.86 today. The session bias is positive and is currently trading sideways at 97.62.
Brent Crude is trading between 108.53 and 110.40 today. The session bias is now negative and is currently trading sideways at 109.72.
Gold rose from 1227.28 earlier to 1237.75 and is currently trading up at 1235.40.
Dr. Copper is at 3.322 rising from 3.300 earlier.
The US dollar is trading between 80.36 and 80.06 and is currently trading down at 80.25, the bias is currently positive.
** RRR = Risk Reward Ratio
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Written by Gary