Opening Market Commentary For 07-20-2012
Happy Friday, looking forward to a nice quiet weekend after this tumultuous week of surprises. Again this morning in the premarket action I see where the DOW is down 65 points and the SP500 is down 9 something like the Tuesday and Wednesday sessions only to have them turn around at the open and rise to new highs on low to pathetic volume. It is pretty obvious to me that there is some hanky-panky going on behind the scenes when you see the markets move right back up after the opening.
So you can understand why I was mildly surprised to see the markets actually open down at premarket levels. The opening volume was low to moderate and green as the ‘BTFD dippers’ came in usual. The question now is the market going to end up as it has under similar situations. I wouldn’t bet on a down market today as I see the markets starting to swing up at 10 am.
I can understand the premarket losses as China reported its July Flash Business Sentiment Survey coming much lower at 49.63 from the previous 53.21. Credit card spending is up significantly in New Zealand a full point for the YoY and up 0.8% over the last report of 0.4% MoM. Germany Producer prices, rated high in importance, came in lower at 1.6% while economists were expecting 1.8% against the last report of 2.1%. The list goes on with Canada’s Consumer Price Index’s both down significantly.
And on the other side of the Pond the Telegraph reports the dismal state of affairs there.
And those Spanish borrowing costs just keep on rising. The yield on ten year government debt is now at 7.22pc.
Stock markets in Spain and Italy have taken a nosedive this afternoon. The IBEX 35 in Madrid has fallen 3.7pc to 6,393.05, while the FTSE Mib in Milan is down 3.5pc at 13,187.33.
Unemployment in Spain will remain close to its current level of 24.6pc until the end of 2013, the government has said.
In a statement published today after a cabinet meeting, the government said that the Spanish economy would not return to growth until 2014.
It forecasts that the economy will contract by 0.5pc in 2013, compared with previous estimates of 0.2pc growth.
Finland’s two-year borrowing costs turned negative this month, meaning investors are effectively willing to pay to lend to the country.
One record that has already been broken today is the difference between Spain and Germany’s borrowing costs.
The “spread” between Spanish and German 10-year yields widened to 590 basis points – a euro-era high.
The DOW at 10:15 is at 12878 down 64.33 or -0.49%.
The 500 is at 1370 down 7.03 or -0.51%.
The $RUT is at 795.00 down 7.20 or -0.90%.
SPY is at 137.07 down 0.67 or -0.49%.
The trend is neutral and the current bias is down.
WTI oil is at 91.07 trading between 92.31 and 90.65 and the bias is negative.
Brent crude is at 106.32 trading between 107.73 and 105.70 and the bias is neutral.
Gold is down today at 1577 trading between 1586 and 1574 with a negative bias.
Dr. Copper is at 3.44 down from 3.53 earlier.
The USD rose from 83.64 to 82.96 to 83.56.
Leavitt has some interesting thoughts going into the weekend although I remain a bit more cautious as the RRR** is razor thin and not acceptable to profitable trades in my opinion.
I looked at many charts yesterday and didn’t come away with a strong bias. There are more long set ups than shorts but not enough to get me excited about being aggressive. The market is trending up, but it’s not a strong trend.
The bulls have had the upper hand, but they are not totally in control. Because of this, I’ve had a defensive posture lately, and I see no reason to change. We’re playing baseball here. The current nature of the market is we’re not getting great pitches to swing at, so be content to hit mostly singles and an occasional double.
Don’t even think about swing for the fences. Even if you get a great pitch, the wind is blowing in.
** RRR = Risk Reward Ratio
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Written by Gary