The Markets Are Still Disillusional And Running On Hopium

Opening Market Commentary For 06-18-2012

Markets opened with a brief downturn and just a quickly turned back up to the opening numbers, but still below Friday’s close. Great caution is urged for the day traders today as the RRR (Risk Reward Ratio) is thin and could reverse on a dime. Swing traders have a bit more leeway as the markets are in a downturn but waiting a few days for the Hopium and Disillusional to wear off.

Volume is green and moderate on the first 10 minute mark but the ‘dippers’ are not able to make much of a bull run, By the 20 minute mark volume was red, but at anemic levels. The US NAHB Housing Market Index (JUN) sentiment gauge, rated as a low indicator, reported in at 29 up slightly from the expected 28 and is the highest sinse April 2007. I can’t figure if the market is delusional, happy or still running on Hopium. But I think it is the latter as the volume is very low and no one willing to take a stand. At 10 am, after the financial report of US NAHB Housing Market Index, the DOW found itself at 12738 off 25.24 or -0.20%.

The 500 is at 1341 down 1.58 or -0.12%.

The $RUT is at 768 down 2.46 or -0.02%.

SPY is at 134.06 off 0.13 or -0.12%.

The trend is neutral to bearish and the current bias is up.

WTI oil has fallen to 82.10 from the 85 area and is currently at 82.65.

Gold is up from several sessions ago and stable at 1621 waiting for direction.

The Asian markets closed up with the Nikkei up 1.77% as the European markets are now mixed after opening slightly up. The DAX is currently higher by 0.13%, while the CAC 40 is leading the London FTSE 100 lower. They are down 0.69% and 0.10% respectively.

Premarket Commentary For 06-18-2012

Last night, like every financial analyst, I kept my ear close to what was happening in Greece. The announcement that the New Democracy, pro-bailout party, had won and the Asian Markets went nuts and skyrocketed upwards. The European markets opened with a bit more somber reaction as reality started to set in that not really much happened except that the can was once again kicked down the road.

The SP 500 futures fell from the get-go as soon as the premarket were able to open. The SP 500 fell from 1342, Fridays close, to 1328 and recovering to 1330. The DOW and NASDAQ are also down and looking a a flat to negative opening with news with Fitch changing its outlook for India from stable to negative.

The German foreign ministry spokesman correctly says the possibility of a Greek standstill following the elections should be considered. The most damaging news to effect the markets is the interest rate on Spain’s 10-year bonds, an indicator of market confidence in how well a country can pay down its debt, hit 7.06 percent and Madrid stocks fell 1.3 percent. Today could see the markets go either way in a small direction.

I see a bit more upside as the charts, for what they are worth, indicate a possibility of the 500 climbing another 9 points, the $RUT climbing another 12 before bumping to serious resistance and completing the run-up. SPY has already reached it resistance and the DOW pushed above its resistance by 64 points, but that only represents a minor penetration and should not be counted as a significant move. Remember the light volume greatly exaggerates movements sometimes and trashes the charts making them unreliable for prognosticating.

Michael Hewson of CMC Markets, said this morning, that he warns investor highs after Greek election result have worn off. And by the looks of it, it certainly has, but caution on a daily basis still reigns high for day trading.

I mentioned on Friday that it would not have been so bad for day trading if the RRR (Risk/Reward Ratio) range was wider. Today, FAZ for example, has only moved down from 25.58 on Friday to opening at 20.50 this morning. Five points isn’t bad but it gaped up to 21.00 giving you a little one point advantage. I still say this is going to turn out to be a classic ‘Bear Trap’ in the making.

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Written by Gary