Opening Market Commentary For 11-07-2012
Around 10:30 the DOW tested the 200 day MA (13,000) along with the $RUT (807.46) and halted while the ‘BTFD dippers’ moved in for what may or may not be bargains. All of the averages went below their respected supports this morning and it remains to be seen if that trend will continue.
By noon the DOW had dropped 300 points in the most significant sell-off since the middle of June, 2012. I am not sure where all of this is going to take the markets. Tomorrow may see this as a bottom and take off, but the likelihood of that happening is in serious doubt. The $RUT is still within its channel downward and could very well recover somewhat tomorrow after such a decline. What happens after today is currently unknown.
I would not have guessed the market would drop over 2% in a single day, 2.5% maybe, but it doesn’t look good for the rest of the week.
It seems like only last night everyone was celebrating more hope, if not much change. Now comes the hangover.
The Dow Jones intraday drop is now 2.23% (and rising), greater than the biggest drop so far in 2012 record on June 1.
The last time the market plunged as much: literally one year ago, or November 9, 2011. Sadly, it appears that one can’t have their Dow Jones Industrial Average and redistribute it too.
The RRR** was very narrow at the opening bell, just as it has been for the past month but expanded somewhat into the midday mark. However,any trades today could end up on the unprofitable side as long as this market remains flat or continues to have low volume. Watch out for quick reversals. Today would have been a good setup for some shorts, but to have gotten in you would have to ‘guess’ yesterday what was going to happen today. I suspected we would have a somewhat down day if Obama was reelected, but wasn’t willing to gamble.
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. The real gains are guessing at the overnight holds.
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 as the markets are currently untradable. Guessing where the market is going to be tomorrow or next week, at this time anyway, is a foolish endeavor.
The DOW at 12:15 is at 12938 down 306 or -2.31%.
The 500 is at 1396 down 32 or -2.26%.
The $RUT is at 805.44 down 20.37 or -2.47%.
SPY is at 139.86 down 3.08 or -2.16%.
The longer trend is up, the past week’s trend is bearish and the current bias is down.
WTI oil was down today and is at 85.11 trading between 88.80 and 84.80 and the bias is negative.
Brent crude was down today and is at 107.50 trading between 111.60 and 107.52 and the bias is negative.
Gold was up this morning and then took a turn for the worse. Currently trading up at 1715.15, trading range is between 1703.00 and 1730.00 with a neutral to bearish bias.
Dr. Copper is at 3.45 down from 3.54 earlier. (Ouch!)
The US dollar rose from 80.37 earlier to 81.02 and is currently trading at 80.91.
It is too bad the political advocates promoted class warfare over the last 4 years. The have-not’s will still remain poor and the rich will remain rich. The feudal class of the under privileged has been sold a bill of goods and unknowingly they will be depressed even further as time marches on. This may very well be the end of the great experiment of Democracy in the US.
The election outcome is a deeply divided political landscape where poor and undereducated will never understand the financial realities of Socialism they have wished upon themselves. Getting ‘Free Stuff” is great, but someone has to pay for it and our unselfish society that helps so many is now strained to the breaking point. Socialism has never worked and hoping for a different outcome this time around is futile and well, kind of stupid.
Do not expect any changes to the trends of polarization and party non-conformists is the message from JPMorgan’s CIO Michael Cembalest.
As he explains moderates like Blue Dog Democrats and Rockefeller Republicans are now artifacts in the Natural History Museum, having given way to their more ideological offspring (through retirement or after having been beaten in primaries).
If anything, Cembalest believes the House may become even more partisan after apparent losses by moderates in both parties. After a better than expected night for Democrats given Senate results, the fiscal cliff looms; With the status quo maintained, a divided government goes back to work to solve the Mutually Assured Fiscal Destruction problem.
However, electoral results suggest the country is in no mood to address entitlement issues right now, will defer them to another day, and continue to shift towards a high-Federal debt economic model that bears some resemblance to Europe and Japan. In the 1950’s, the solution to 80% Federal debt was not taxation, austerity or inflation, but growth.
** RRR = Risk Reward Ratio
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Written by Gary