Opening Market Commentary For 10-09-2012
Premarkets were up this morning but descended sharply at the opening bell under low volume – again. The international news is negative where the IMF says the recovery has deteriorated and cut forecasts seems to be the catalysts for the sour grapes market this morning. The major averages are turning increasingly red, flat and looking slightly bearish by 10 am. We could be in for another day of sideways trading within a tight and narrow range if the markets recover like they did in yesterday’s session. Hard to guess this market place of late as it does what it wants, mostly because of HFT manipulations.
The US NFIB Small Business Optimism sank to 92.8 while expecting 93.5. Today’s reading is lower than the previous report of 92.9 further cementing negative feelings of increasing woes of the the US economy. This number came in at 7:30 am and the premarkets actually rose on this news – go figure.
The US IBD/TIPP Economic Optimism, also rated low in importance, rose to 54.0 over the last report of 51.8 and the market failed to react one way or the other, but not entirely surprising either.
The IMF has cut global economic growth forecasts for this year and next because “prospects have deteriorated further and risks increased”. The IMF said: “The recovery has suffered new setbacks, and uncertainty weighs heavily on the outlook. Downside risks have increased and are considerable.”
According to its “World Economic Outlook”, the IMF now expects the world economy to grow 3.3% in 2012 compared to the prior 3.5% July estimate and just 3.6% in 2013, down from the previous 3.9% forecast. Forecasts for the Eurozone, UK and emerging markets were all cut.
Losses were seen in the US last night ahead of the start of the third-quarter earnings season as investors fretted about how a subdued global economy will affect corporate profits, while strong gains were seen on the Hang Seng in Asia.
I too have been concerned about the divergence between the large and small caps and expecting a reversal. It may be we are going to see a reversal, but in slow motion because of the dampening effect of low volume. We are so near the topside of the major averages forming double and triple tops has me concerned about ever being able to broach those levels. The recent failing attempt at the resistance for the DOW at 13607 and the 500 at 1465 is further proof that some really tough sledding is ahead for the markets.
My biggest concern heading into this week was the movement of the small and mid caps relative to the large caps. Divergences between the groups almost always lead to a reversal, and although the large caps did not make a higher high last week – so technically a divergence did not form – the upside progress of the small and mid caps lagged enough to be noticeable.
The RRR** was very narrow at the opening bell and 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 10:00 is at 13575 down 8 or -0.06%. (Late posting, server down)
The 500 is at 1453 down 2.00 or -0.14%.
The $RUT is at 838.41 down 0.00 or -0.00%. (flat)
SPY is at 145.42 down 0.22 or -0.15%.
The longer trend is up, the past week’s trend is neutral to bearish and the current bias is down.
WTI oil is up today and is at 90.47 trading between 89.36 and 90.75 and the bias is positive.
Brent crude is up today and is at 113.24 trading between 112.00 and 113.46 and the bias is positive.
Gold was down then back up this morning. Currently trading at 1774.40, trading range is between 1769.00 and 1779.83 with a neutral bias.
Dr. Copper is at 3.73 down from 3.75 earlier.
The US dollar rose from 79.57 earlier to 79.96 and is currently trading at 79.91.
UNEASE: China’s biggest technology companies, eager to expand in the U.S., face an America anxious about threats to jobs and national security. LATEST EVIDENCE: A U.S. report that says telecom equipment makers Huawei Technologies Inc. and ZTE Corp. are potential security threats that Americans should avoid doing business with.
CONFLICTS: For the U.S., China is both an important trading partner and a potential strategic rival. U.S. companies see China as both a crucial growth market and a source of competition and industrial spying.
** RRR = Risk Reward Ratio
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Written by Gary