Seeing Further Market Losses Some Investors Cashed In

Closing Market Commentary For 07-23-2012

Markets opened down on moderately high volume and as the volume trailed off during the day the markets melted up as they usually do when volume becomes anemic. The markets generally eased back up as the SP500 gained 9.49 points of its 25 point drop towards the close. If the charts can be trusted, the line in the sand is the 50 day MA’s and the up-trend line (see charts below). Around 3 pm the markets started a slow melt down and then Mr. Market decided for a last minute run that fizzled out.

The markets remained down for the day as European weakness is awash in falling Euro’s. McDonalds who is experiencing market losses in the EU printed out a 0.06 cent loss on 20M less revenue this quarter. This not so much a wake-up call to MCD loosing market share as it is pointing to the losses other multinational companies are experiencing or will be soon. When the EU goes down so will US companies that get up to 40% of their revenue from the EU. Some smart investors cashed in their chips today as it became apparent there is more sliding to come.

The Russell 2000 also gaped down today unrealistically in an almost 10 point drop (9.41) which will certainly be covered in the next few days I suspect. The USD in comparison gaped up this morning 0.11 cents, while not that unusual, gaps in the FOREX world tend to be covered sooner than later meaning that the US market will go up as the FOREX USD falls to cover the gap. Should be a great trigger for a scalp assuming the fall doesn’t happen while the crooked ‘Five-Fingered-Economist’s’ working the midnight shift and DaBoyz are doing their thing during the ‘non-trading’ hours.

The DOW at the close is 12721 down 101.11 or -0.79%.

The 500 is at 1350.52 down 12.14 or -0.89%.

The $RUT is at 778.90 down 12.64 or -1.60%. The big loser of the day.

SPY is at 135.05 down 1.41 or -1.03%.

The trend is down and the current bias is slightly positive. After market action show considerable selling with the SP500 off 5 points. We will have to see how this translates in tomorrow’s opening.

@foxnews

Texas Instruments reported second-quarter results that were below expectations. The semiconductor giant saw profit fall to 38 cents a share, down from last year’s 45 cents a share, as revenue slipped to $3.34 billion, down from year-ago sales of $3.46 billion.

WTI oil is at 88.29 trading between 91.60 and 87.95 and the bias is negative.

Brent crude is at 103.57 trading between 106 and 102 and the bias is neutral.

Gold is up from this morning at 1576.95 trading between 1582 and 1563 with a neutral bias.

Dr. Copper is at 3.38 down from 3.44 earlier.

Earlier the USD gaped from 83.61 to 83.72 then climbed to 84.13 and is at 83.75. Remember that gaps are usually closed on the FOREX sooner than later and look for a USD decline to 83.61 with the US market responding in a positive demeanor. So this mornings decline will soon have an up-tick, watch for it and trade accordingly.

@SA

Market recap: Stocks pared early losses but still fell sharply as Spanish and Italian 10-year yields each spiked close to 20 points and the countries announced short-selling bans. Weekend reports suggested Greece may see aid cut off if it doesn’t meet its commitments. Energy stocks sank as crude oil slid 4%; Treasury yields all along the curve hit new lows. NYSE losers led winners nearly four to one.

The 500 at the close. The 50 day MA and the up-trend seem to be the support that has to be broken before any additional downside is realized.

The $RUT at the close. Notice the uptrend has been solidly broken with 2 gaps down indicating a continued bearish trend for the small caps. I expect the last gap to be covered before continuing down. A possible covering of the first gap as a test of the up-trend line before heading south again is also possible. Most likely this gap will be covered later in the year. A bear trend HAS NOT been established and caution is advised before jumping to any conclusion.

The DOW at the close. The 50 day MA and the up-trend seem to be the support that has to be broken before any additional downside is realized.

To protect the innocent I won’t divulge the authors name as he wrote:

“Just yesterday, the American Association of Individual Investors (AAII) released its latest sentiment readings. Apparently, the bulls – not the bears – have gone into hibernation. Bullish sentiment dropped a full eight percentage points to 22.19%, the largest weekly decline since April 12.

I’m shocked, considering the S&P 500 Index rallied more than 2% over the last week. But now that virtually no one is optimistic about the stock market, that’s all the more reason we should be bullish.”

The problem this pundit and other like him spouting their bullish claims of further upside action in the near future is that they are not looking at the whole enchilada to help guide them in the black art of prognostication. In one word, VOLUME, is the key here. There is little volume lately compared to last year and what there is, it is falling giving us lower highs on each march. This in itself is bearish trend when the insiders and traders alike ease up on selling and buying. Caution is warranted.

Nicely said Mr. Leavitt. I agree although I would add to be very cautious in jumping in until the trend is established – bull or bear. The RRR** is still very narrow during the trading day making trades risky to the unprofitable side.

@leavitt:

“Two weeks ago I did a video highlighting some negative divergences I did not like. Those divergence remain in place, and a few more have popped up.

No matter how I look at the market, I don’t like what I see, yet the S&P made a new higher high last Thursday. It’s as if the US markets don’t care what’s going on in the world, it’s as if investors assume the market will move up because this is an election year.

It’s not wise to fight the movement; it’s also not wise to be completely oblivious to what’s going on in the world. When the market drops, it won’t give you a second chance to get out. It’ll just drop and drop and drop. Again, there will be no second chances.

I’ve been conservative for a couple weeks. That has meant smaller position sizes and quicker exits. Trailing stops are out. You gotta take profits when you have them. Swinging for singles has been the only way to go.”

@ino:

Global economy in worst shape since 2009

“Mounting fears about Spain’s financial health help illustrate why the global economy is in its worst shape since 2009. Six of the 17 countries that use the euro currency are in recession.

The U.S. economy is struggling again. And the economic superstars of the developing world _ China, India and Brazil _ are in no position to come to the rescue. They’re slowing, too. The lengthening shadow over the world’s economy illustrates one of the consequences of globalization: There’s nowhere to hide. Investors drove up Spain’s borrowing rates Monday over concern that the government’s debts might force it to seek a bailout.

The interest rate on Spain’s 10-year bond touched 7.56 percent _ the highest since the euro began in 1999. Stocks around the world tumbled in response [as] worries about Spain intensifies.”

If you have any doubts to the situation in Greece getting any better the Telegraph reports:

“The result of this Great Depression – as the Greek prime minister calls it – is in implosion in tax revenues. The budget deficit has remained stuck near 9pc of GDP despite draconian wage cuts and hospital closures.

Roughly speaking, the Troika has misjudged the scale of economic decline over three years by 12pc of GDP.”

(Unapproved Trivia)

For the past 3 weeks, every Monday, we have seen a downtrend for the session. Hummm, I can hardly wait for next Monday to try my hand at a scalp.

** RRR = Risk Reward Ratio

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Written by Gary