Markets Sleeping Today, Watch For Reversals

Opening Market Commentary For 07-30-2012

Today is my wife’s birthday so there will be only one post this morning. Just as well for me as this is probably going to be a good time to sit on your hands and wait. Fridays close showed some high selling volume that was obviously profit taking. The premarket today was flat with a bearish tinge to it but as the opening bell was sounded we saw the dippers try to push the markets up only to see red as the session remained flat to the 15 minute mark. Green volume starting out was low to moderate, but fell to anemic red at the 20 minute mark. By 10 am the markets were in the green again by small percentages.

I mentioned last Monday that today could very well be down as Mondays seem to start off the week in negative fashion. So far it has remained flat by last weeks Thursday and Friday’s action. The only report today is the Dallas Fed Manufacturing Activity (JUL) which is rated low in importance and investors seem to have been waiting for that. It came in down at -13.2 vs +2.0 expected, from +5.8 the previous listing and the market didn’t move much. Slightly negative, some red volume but not much of a reaction but watch for a sneaky reversal.

@SA

July Texas Fed Manufacturing Outlook: Business Activity Index -13.2 vs. consensus of 2.5, 5.8 prior. Manufacturing production 11.1 vs. 11.2 prior. New orders -0.3 vs. 5.8. Capacity utilization 12.3 vs. 10.0. Shipments 8.6 vs. 4.2. Employment 21.7 vs. 25.2.

Last week provided some fireworks toward the end of the week and the intensity was a bit unexpected, but not the reversal. I have mentioned repeatedly that are probably going to stay around a narrow trading zone for a while as the markets go sideways for the foreseeable future. The key events that will certainly effect the markets direction are the Greek suspected default on August 30 and the German High Court decision on Sept 12. Possible the market will price these events in early with more downside, again watch for market reversals. And the negative chatter in Germany has already started but will it drive down the market in any meaningful manner? I remain bearish for the next several months and the crystal ball doesn’t quiet see into the next year, but it isn’t looking good either.

One of the many ‘indicators’ we watch is SSO (Proshares Ultra S&P 500). It had a gap in early May which I forgot about, but was covered on Friday’s session. It almost appears the market is cleaning itself up before moving down. It is almost acting normal again by covering gaps and making other technical moves to clean up the charts. Most likely my imagination as this market place is NOT normal.

Our longs, Walmart (WMT), McDonalds (MCD) and other longs shared with our premium subscribers have done well, but our recent shorts got hammered last week. They have not gone below covering levels which leaves me to believe we are about to see more downside. Today’s RRR** is not conducive to trading unless you want to guess at which way the market is going to go. The margins are very thin and unlikely to provide a meaningful profit.

The DOW at 10:40 is at 13117 up 49.19 or 0.32%.

The 500 is at 1390 up 4.08 or 0.29%.

The $RUT is at 796.00 up 0.00 or 0.00%.

SPY is at 139.13 up 0.42 or 0.30%.

The trend is positive and the current bias is up.

WTI oil is at 90.23 trading between 90.75 and 89.40 and the bias is neutral.

Brent crude is at 106.19 trading between 106.96 and 105.56 and the bias is neutral to negative.

Gold is up today at 1619 trading between 1626 and 1614 with a bearish bias.

Dr. Copper is at 3.42 up from 3.41 earlier.

Earlier the USD tumbled from 83.05 to 82.40 and recovered to 82.92.

@leavitt:

“The market was weak Mon, Tues and Wed last week and strong Thurs and Fri. The Dow and S&P are at higher highs. The Nas, small caps and mid caps are lagging. Energy is at a higher high; the financials and tech are lagging. The market took a step in the up direction last week, and a few indicators support the move, but there’s lots of proving to do. There are numerous divergences that need to be negated. When the market is healthy, money flows into the small and mid caps. It’s not happening to the same degree as the large caps; this needs to change.”

** RRR = Risk Reward Ratio

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Written by Gary