Profit Taking Is Keeping Markets From Advancing

Midday Market Comments For 06-29-2012

Markets at noon have reached a plateau of sorts and the volume has dropped off to near anemic levels which just may mean an upward push by DaBoyz this afternoon. There could also be those who see the light and decide to jump ship while it is still possible. It is really hard to believe the markets have continued to push higher in the light of unsteady World Economics, yet it is happening right now. Caution is alarming high now as we watch this economic showdown of the bulls and the bears take place.

Seasonally, July is an up month compared to June and on par with May. So far today that appears to be the way the markets want to go as the final day of June we see a positive push upwards. So considering this scenario, 1400 is entirely possible on the 500 and 13272 is possible on the DOW. Assuming this ‘trend’ continues and it also marks the 100 day MA’s which is another meaningful resistance point and psychologically a difficult one to ease through. But I get ahead of myself in thinking out loud.

What I do see on the horizon is this big resistance zone for both the 500 starting at 1356 and a lessor one at 12850 for the DOW. This rise could also be a technical widening of the range bound channels that were started around the first week of May. If so, we could continue to see market movements continue to range where they are now throughout July. Today’s hesitation does indicate the bulls in the pack do not have enough membership to buy into pushing the metrics further up today.

The way I plan to play this market is that it will be a decent within 2 sessions as this current rise can not be supported and cover my shorts. Then if the market wants to proceed up in July, let it, while being ready for a ‘Black Swan’ moment that would reset the already screwed up charts in a heart-beat. The RRR** has returned to negative as we watch the volume fall off to the low levels seen in past sessions, so be careful in placing your bets.

The one caveat to this theory is that the Russell 2000 is leading the parade today and has punched through its resistance at 787. If we do not get a pull back and a close below that mark, then we could very well mark July as another seasonal ‘up’ month before we traditionally ease on down to the September / October lows. This would of course screw up my shorting aspects for the month of July and require some extended time in swing trades when the bears once again enter the markets. I have not exceeded 25% of my cash reserves which will/may come into play come September. I have also not purchased different named stocks to short as I may very well have to use the IRS 30 day ‘Wash Rule’ if I have to take a small loss. The reasoning is the markets WILL turn down again within 30 days and I may see better entry point during July.

Which brings us to the ‘Hopium’ being injected into the markets during yesterday’s session. It is just that, ‘Hope’ that the bailouts will get things better while ignoring the really serious issues like a faltering Chinese economy on the move, rampant and out of control unemployment in the EU, poor employment numbers in the US, several EU states in deep recession and EU banks teetering on insolvency. The EU Summit leaders, aka Hollande, can spout all the fine rhetoric they want, but until these really basic problems are at least addressed, there isn’t enough money in the world to bring the EU members back into solvency.

@dailyfx

• Bulls Capitulate in Early June, Bears in Late June
  Bottom line, I didn’t expect the rally we saw today. CME volume suggests capitulation by bears as Europe is saved for the 20th or so time in the last 3 years. I’m not buying it.

Plus it is just more of the same as we have seen all of grandiosity talk before, on many occasions, and the idiot politicians were unable to solve these very same issues. It is very doubtful that they will be on any track to recovery in the near future as they, in reality, kick the can down the road some more.

@telegraph:

More from David Cameron:

“Europe is changing, there’s a change taking place as the countries of the eurozone follow the remorseless logic of having a single currency. My job is to make sure we ensure all the safeguards we need… so that our say in the single market is safeguarded.

Britain is not going to cede more powers to Brussels… I think there are powers that should be going in the other direction.

I completely understand why some people want an in-out referendum. some people just want to get out: ‘stop the bus, I want to get out’.

We used to be part of those bailout schemes, and I got us out of those bailout schemes, and that’s saved us real money.”

@foxnews:______

A final reading on consumer sentiment for the month of June came in at 73.2, the lowest level since December 2011 and down from a reading of 74.1 in early June, according to a survey by Thomson Reuters and the University of Michigan. Economists expected the gauge to hold steady at 74.1.

The DOW’s high was at 12832 at noon it is at 12821 up 219 or 1.74%.

The 500 high was at 1355 at noon it is at 1354 up 25.35 or 1.91%.

The $RUT high was at 794 and at noon it is at 794 up 18.25 or 2.35%.

SPY high was at 135.59 and at noon it is at 135.45 up 2.66 or 2.01%.

The trend is up and the current bias is neutral.

WTI oil is at 81.21 trading between 78.40 and 82.08 and the bias is neutral.

Brent crude is at 95.29 trading between 91.84 and 95.70 and the bias is neutral.

Gold is down today at 1595, trading between 1568 and 1600 with a negative bias.

Dr. Copper is at 3.48 up from 3.34 earlier.

** RRR = Risk Reward Ratio

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Written by Gary