Markets Open Up With Some Profit Taking

Opening Market Commentary For 10-16-2012

Premarkets were up to 1444, 4 points above yesterday’s SP500 close, and then moved sideways until the opening. There was relatively heavy red volume (still low by years past) at the opening bell but the ‘dippers’ finally won the tug of war pushing the averages further higher.

By 10 am the green volume was 4 to 1 over the red volume but the gains were not all that impressive indicating there was still major profit taking underway. As the volume fell off the gains leveled off and the morning action seems to have come to an end.

The RRR** was very narrow at the opening bell, just as it has been for the past month. Any trades today will probably end up on the unprofitable side as long as this market remains flat or continues to have low volume.

I have issues with some traders in that they are saying there are setups for day trading. This is true enough, but the trading range is so narrow that way too money has to be put on the table just to get back meager gains.

Swing trading is also 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. Guessing where the market is going to be tomorrow or next week, at this time anyway, is a foolish endeavor.

The DOW at 10:15 is at 13525 up 103 or 0.77%.

The 500 is at 14650 up 10.50 or 0.73%.

The $RUT is at 833.99 up 5.75 or 0.69%.

SPY is at 145.18 up 1.10 or 0.75%.

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

Oil Slips As Chinese Data Fails To Lift Recovery Hopes

WTI oil has been up and down today and is at 91.94 trading between 91.30 and 92.30 and the bias is neutral.

Brent crude was down today and is at 115.14 trading between 116.15 and 114.75 and the bias is negative.

Gold is up this morning. Currently trading down at 1746.35, trading range is between 1734.48 and 1748.48 with a positive bias.

Dr. Copper is at 3.71 up from 3.69 earlier.

The US dollar fell from 79.90 earlier to 79.36 and is currently trading at 79.42.

Lots of talk of tops and the market dropping lately. I have be saying the tops formed at an earlier date are withing sticking distance for the averages now. Seeing the market make a bull run for these ‘tops’ and then declining is not at all that farfetched as the resistances posed by the top zones are significant and will be difficult to penetrate.

It is also possible that we will see the markets flounder for the remainder of the year and then descend as the current tops have ALREADY been marked as the highs for the year. It is NOT necessary for the markets to rise to previous highs before descending although a normal event in past years to match previous highs. As we have all been hearing, “this time it is different”.

Michael Belkin Predicts 40% Stock Market Drop

Hedge Fund Consultant Michael Belkin spoke at The Big Picture conference, predicting a 40% stock market drop in the coming 12-15 months. Belkin joins Sam Mamudi to discuss his case for a market drop.

“Nothing like being cautious. But Ritholtz investing rule number 2 says
“Avoid predictions and forecasts: Humans are very bad at guessing what the future will bring. The academic literature overwhelmingly proves this.”

“Don’t forget Ritholtz rule number 2.

If Michael Belkin is right the market will tell us. For those. . . followers of the Dow Theory, we will see a bear market signal. Since [the] Dow Theory tends to be more responsive than moving averages, sell signals are flashed at . . . 10% from the top . . . it allows the investor to participate in the trend until exhausted.

Thus, the Dow Theory also complies with Ritholtz rule number 1: Cut your losses short, let your profits run.

Under [the] Dow Theory, we always know how much we stand to lose whereas the profits are open ended.

However, it is always good to hear what learned people have to say. It helps us determine whether we are in the last phase of a bull market or in the beginning and whether fundamentals provide head or tailwind. By factoring those “fundamental” factors in, we can better allocate funds between assents, thereby complying with Ritholtz rule number 5.”

@leavitt:

VIDEO: Warnings of a Top

** RRR = Risk Reward Ratio

To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

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Written by Gary