Midday Market Commentary For 07-20-2012
The markets have mainly moved sideways since opening down this morning. Profit taking is contributing to the early weakness on Wall Street, as some traders cash in on the recent strength in the markets as some pundits are reporting. I think the ‘BTFD dippers’ are getting the point that this merry-go-round is about to slow down if not reverse all together. Do the bears have the upper hand finally? It looks bearish to me, but don’t count on it.
Around noon the markets showed decidedly more weakness as the indexes melted down on low volume which looks more like manipulation than an actual decent. I am always suspicious of low volume markets as you could very well see the markets surge up later in the afternoon. In the past, a melt-up has been accredited to some political head of state making a bullish flowering statement smelling like roses while actually breaking wind and the MSM loves it. This is one VERY difficult market to literally guess what is actually going on in the minds of the market movers and what direction the markets are going to take.
The DOW at 1:00 is at 12836 down 107.66 or -0.83%.
The 500 is at 1364 down 11.67 or -0.85%.
The $RUT is at 792.20 down 9.97 or -1.24% and leading the pack.
SPY is at 136.61 down 1.12 or -0.81%.
The trend is neutral to slightly negative and the current bias is down.
The price of crude oil moved down Friday morning on profit taking after seven straight days of gains that pushed prices to a two-month high.
WTI oil is at 91.12 trading between 92.31 and 90.65 and the bias is negative.
Brent crude is at 106.36 trading between 107.73 and 105.70 and the bias is negative.
Gold is down today at 1581 trading between 1586 and 1574 with a negative bias.
Dr. Copper is at 3.43 down from 3.53 earlier.
The U.S. dollar was hovering around its 2-year high versus the euro which is down.
The USD rose from 83.64 to 82.96 settling at 83.52.
Spain’s broad equity index suffered its second largest single-day drop in almost 4 years and Italy also tumbled almost 5% as everything European was sold hard. EuroStoxx (the broad Dow equivalent) is down almost 3% as EURUSD dropped to two year lows, EURJPY to 12 year lows.
AAA safe havens were massively bid with Germany, Denmark, and Switzerland all to new low (negative) rate closes. Core equity markets did suffer though with Germany down 2% but it was the periphery that saw the damage in credit-land with Spain 10Y closing at 7.27%, 610bps over Bunds (and 5Y CDS over 605bps).
Spanish spreads are +130bps from post-Summit (and pre-Summit) and Italy +78bps, but it is the front-end of the curve that is most worrisome – Spain’s 2Y is 132bps wider in the last week.
Europe’s VIX exploded by over 4 vols to 24% today and once again looks decidedly high relative to US VIX.
The European markets closed down today in the wake of more negative news coming from the EU. The FTSE 100 in London is down -1.09% while the German DAX is down -1.90%. The CAC 40 in France is down -2.14%. The Asian markets closed mixed with the Hang Seng up at 0.42. The Shanghai Composite down –0.74%. The Nikkei down -1.43%.
My feelings as well as Michael points out the obvious.
“My point was not that the markets are fool-proof. It was that they are manipulated in favor of the bulls. Should that end — and continuing deflation will end that — then a generation who has learned that you ALWAYS buy the dips will discover that only dips always buy the dips. ”
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Written by Gary