Opening Market Commentary For 06-07-2012
Markets opened way up creating gaps for $RUT and SPY which typically are closed in short order. The red volume was front and center and heavy as some serious profit taking was in progress for the first 10 minutes with the bulls digging in keeping the trading range in a tight range. The second 10 minutes wasn’t as high, but still read and meaningful. The next 10 minutes consisted of some ‘dippers’ and the lower volume switched back and forth from green to red while awaiting Pearls of Wisdom from Dr. Ben. It ended up extremely heavy and red as ‘ol Ben started speaking.
The heavy red volume this morning is telling in that this market uptick is just that, a distraction before an approaching hurricane. But is it time to take any positions?
Federal Reserve Chairman Ben Bernanke Testimony to US Congress started this morning at 10 am in hopes that he’ll hint at new steps to boost the US economy. So far there has been nothing official from the Fed and investors are looking for guidance of any economic stimulus coming our way. It is going to be interesting because if nothing happens now, it won’t and we will see another decline like in 2011.
The rate cutting of the Chinese could be as a sign that the enormous Chinese economy is weaker than previously thought.
“The big news out this morning is China cut interest rates by 25 basis points. They often cut their reserve requirement, but this is the first rate cut since 2008. They’d only do it if they felt the economy needed it, so the hidden message here isn’t a good one. S&P futures jumped 10 points on the news – the futures entire gain.
The market got clobbered last Friday after the latest employment numbers were released. Those losses have now been recovered. The first move off a local bottom is the easy move. Sentiment is overly stacked on one side, and once sellers start to thin out, it’s not hard for the market to bounce forcefully. The combination of bottom fishing and short covering can produce some pretty quick and energetic moves. The biggest moves, after all, tend to come during downtrends. But after a couple days of bouncing, real buying needs to take place. Otherwise the bounce ends up being an innocent bounce within a downtrend instead of a the beginning of an uptrend. I’d say we’re there right now – the easy stuff is done, now it gets harder. Yesterday was easy, but for the bounce to continue today and tomorrow, that would be impressive – at least in the near term.
The current situation is not easy to trade because we don’t know if this is just a bounce within a downtrend or the beginning of an uptrend.”
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Written by Gary