Written by Gary
Opening Market Commentary For 01-03-2014
Premarkets were up +0.25% at the opening this morning and generally melted down from there to the opening bell.
The markets, except the NASDAQ 100, all opened in the green around +0.20% and promptly start migrating upwards while the $VIX headed down into the high 13's.
By 10 am the averages leveled out for what may be a breather or signaling a sideways session in progress. Regardless, what the Fed has to say today will set the investors mode into a buy or sell mode.
The RRR** has been very narrow at the opening bell for months and this trend of low volume or narrow trading sessions makes any predictions of session movements nearly impossible, thus making trading futile and mostly unprofitable.
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 in this 'casino market' place.
The problem facing traders lately is that the trading range requires too much money 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 couple of years. 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 sell side at the opening, but I would advise caution in taking any position during this volatile transition period.
The longer 6 month outlook still remains 40-60 sell until we can see what the effects are in this almost nothing start of the Fed's 'Taper'. By March investors should know how the taper is going to work out in relationship to the stability of the US financial markets and their ability to not to slide downward. For now, I am continuing to expect weak to negative markets for the foreseeable future.
Here is the quandary some investors have now. They have bet on the QE program to bolster their profits and knowing full well they may see some eroding of profits over the next few months, so what should they do? Start reducing positions now, my choice, or let profits ride a bit longer? I would be afraid that if a serious 'Black Swan' popped up, the market decent would wipe out a lot of profits. This 'house of cards' the Fed has built is fragile and would not take a lot to tear it down.
I would also take chart and other technical indicators with a grain of salt for the time being and watch what the Fed does over the next 4 months. Removing 10 billion from the bond buying program each month isn't going to do much in reducing the QE program in the beginning, but halving it in 4 months certainly will - IF - the Fed's continues the taper program.
My instincts tell me that the Keynesian's are going to be reluctant to stop their grand financial experiment and will want to taper the taper within the next several months - especially if the employment rate increases.
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', even if it has been reduced somewhat! I would like to see a blowout candle (shooting star) to verify a top along with heavy volume to signify a market top.
The DOW at 10:15 is at 16495 up 55 or 0.33%.
The SP500 is at 1836 up 5 or 0.25%.
SPY is at 183.40 up 0.50 or 0.27%.
The $RUT is at 1155 up 4 or 0.38%.
NASDAQ is at 4148 up 5 or 0.11%.
NASDAQ 100 is at 3561 down 3 or -0.08%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been positive and the current bias is up but sideways.
WTI oil is trading between 95.05 and 95.74 today. The session bias is sideways with a negative bias and is currently trading up at 95.19.
Brent Crude is trading between 108.64 and 107.56 today. The session bias is sideways with a negative bias and is currently trading down at 107.78.
Gold is currently trading sideways from 1221.40 and 1238.10 and is currently trading down at 1232.90.
Dr. Copper is at 3.354 falling from 3.387 earlier.
The US dollar is trading between 80.64 and 80.91 and is currently trading up at 80.91, the bias is currently positive.
** RRR = Risk Reward Ratio
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Written by Gary