Markets Soared Then Sunk

Midday Market Commentary For 10-01-2012

Well, finally I got internet connection again, so I’ll give you a recap of the days activity so far. Markets opened slightly higher and it looked like we going to be doing the same thing we have been doing for the past several weeks – nothing! Low volume, lackluster and no direction from the get-go. The markets have been presented with some good news and it failed to react. The markets have been presented with some terrible news and they didn’t react. This morning, at 10 am, the financial news was very good reporting the Institute for Supply Management Manufacturing PMI gauge rose to 51.5 in September from 49.6 in August. Anything reading above 50 point to expansion and the last reading was at 49.6 with expectations of 49.7.

So what did the market do?

The first colum is what was reported today. The second is what was expected and the third is the last reporting.

It tanked, dropping like a rock to the opening numbers. For the most part the DOW melted back up recovering about ½ of its decline while the SP500 about ¼ and the Russell 200 remains up 2 points. The green volume at 10 this morning was low to medium and fell off immediately to anemic levels once again. There was one brief red spike around 2 pm and the the markets became quiet again.

The HFT are in the process of melting the averages back up slightly but nowhere near the morning highs. This crazy market action doesn’t bode well for confidence for the cash crowd and they are remaining on the sidelines.

If you have a bag full of money like I have, the question becomes ‘what are you going to do with it’? Sure the near term looks like we may see the averages move a few points higher, but this scenario has happened before. It is the longer term that has me concerned because the financial futures are cloudy and uncertain. Do I take a chance and gamble 10% or 20% and ‘hope’ that the markets move up as so many bullish pundits predict? Or do I continue to sit on my cash and wait for a divining sign. You know, where the finger emerges from a cloud and points the direction. Well, don’t hold your breath on that one.

The problem is that the entire group of financial advisors and pundits have completely missed the ‘big picture’ concerning the market. The ‘cash crowd’ is now much smaller than it used to be and have hidden their monies under the mattress. Those temperamental ‘sheeples’ that in the past used to move the market numbers are absent and that accounts for the low volume that continues to plague the markets.

The article ‘Investors’ Long-term Quandry ‘ shows the household financial investors in the US have a 46% stake in our ‘markets’. These figures come from 2010 data and I firmly believe the numbers are quite a bit lower today than they were in 2010 and is reflected in the daily anemic volume.

Long term investing at this juncture is not advised and fool hardy for those that can’t follow the markets. There is a lot move downside pressure than upside pressure as we saw this morning and continues to rear it big ugly head throughout the session.

The RRR** was very narrow at the opening bell, opened up briefly after the 10 am announcement, but almost immediately closed itself off again slapping any traders hand who went long.

Today any trades will probably end up on the unprofitable side as long as this market has low volume and remains flat. Swing trading is at your own risk and being the market is at a crossroads of sorts, I would prefer to sit on my hands rather than risk guessing incorrectly.

The DOW at 2:30 is at 13545 up 108 or 0.78%.

The 500 is at 1447 up 6.45 or 0.44%.

The $RUT is at 840.05 up 2.61 or 0.31%.

SPY is at 144.69 up 0.72 or 0.52%.

The longer trend is up, the past week’s trend is neutral and the current bias is up.

WTI oil is up today and is at 92.54 trading between 91.30 and 93.30 and the bias is negative.

Brent crude is up today and is at 112.11 trading between 111.53 and 113.30 and the bias is positive.

Gold is up today at 1778.75, trading between 1764.00 and 1790.50 with a positive bias.

Dr. Copper is at 3.78 up from 3.72 earlier.

The US dollar rose from 79.66 earlier to 79.93 and is currently trading at 79.90.

What is turning the market sour is the report from Goldman.

@zerohedge:

Goldman Lowers Q3 GDP Forecast Again, From 1.9% To 1.8%

It seems like it was only Friday that Goldman’s daily GDP forecast adjustment team revised its GDP lower. Oh wait, it was. Since it is another day ending in -y, here comes Hatzius’ crack commando team with yet another downward revision.

** RRR = Risk Reward Ratio

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Written by Gary