Opening Market Commentary For 11-20-2012
Premarket remained elevated from yesterday’s bull run on ‘Hopium’ and was flat this morning in light of decent financial reports. I have mentioned several times that I thought there was still some fight left in the markets. Yesterday was a good example of sudden upturn within a downturn. However, watch your back if you decide to dip your toes in. SPY was off 0.14 so I expected the market to open down. The trend for the day is uncertain however.
Markets opened down on light volume and by 10 am the market recovered slightly and remained lackluster and flat.
We could see a Santa Claus rally, so do not sit on your laurels expecting things to be static. Also remember that SPY and $RUT gaped up yesterday and that gap has to be filled. Meaning the markets need to descend once again. Overall the news coming out of the Middle East is not good, Spain is still very much in the picture as well as Greece being a real sore point in the EU.
The ‘hopium’ being dished out yesterday by the US politicians was bull$hit and the ‘fiscal cliff’ is still looming and not a darn thing has been done to avoid it – yet. To put the financial mess into perspective you need to read: Crash Alert: A Toxic Mix Of Events Heading Into 2013 it will be worth your while.
The market put in a big follow through day yesterday. The price gains were the biggest registered in several months (not a surprise, we know the biggest up days occur within downtrends) . . . But the first move off a depressed level is the easy move. There’s pent up buying interest, and shorts are eager to take profits. Then, after several days, the real test comes.
That’s when real buying, institutional buying, needs to take place to offer evidence the bounce is the beginning of a rally, not just a bounce within a downtrend. We’re not there yet; we’re still in “short covering” mode, but soon the market will be tested.
Unfortunately we have a holiday coming up which will throw things off. Right when the market will be tested, volume will dry up.
U.S. housing starts rose 3.6% in October to an 894,000-unit rate, well above estimates of an 840,000-unit rate and marking the highest pace since July 2008. Housing permits fell 2.7% to an 866,000-unit rate, slightly ahead of estimates of an 865,000-unit rate.
Best Buy posted a fiscal third-quarter profit of three cents a share, far below estimates of 12 cents. The technology retailer’s sales of $10.75 billion came in slightly above expectations of $10.73 billion. Shares dropped nearly 3% in pre-market trading.
Hewlett-Packard revealed an adjusted fiscal fourth-quarter profit of $1.16 a share, topping estimates by two cents. Revenues of $30 billion came in shy of Wall Street’s forecast of $30.43 billion. The blue-chip technology company said it expects to earn between 68 cents and 71 cents a share for the fiscal first quarter on an adjusted basis, compared to estimates of 85 cents. H-P shares dropped sharply in pre-market trading.
The RRR** was narrow at the opening bell and may remained tight into the closing session as volume is expected to dry up. It is getting wider lately, but a lot of guessing still remains and of course that is the tricky part of the successful trading equation. 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 still have issues with some traders in that they are saying there are setups for day trading. This may be 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 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 10:00 is at 12758 down 38 or -0.30%.
The SP500 is at 1384 down 2.25 or -0.18%.
The $RUT is at 791.30 down 1.76 or -0.22%.
SPY is at 138.81 down 0.30 or -0.21%.
The longer trend is up, the past months trend is bearish and the current bias is down.
How Oil Really Gets Priced (I have left this article in because it should be read – really interesting.)
WTI oil is down today and is trading down at 88.43 trading between 89.28 and 88.29 and the bias is negative.
Brent crude is choppy today and is currently down at 111.24 trading between 111.80 and 110.75 and the bias is negative.
Gold was up then down this morning jumping around a 6 point range. Currently trading even at 1732.10, trading range is between 1735.50 and 1728.80 with a negative bias.
Dr. Copper is at 3.52 down from 3.53 earlier.
The US dollar fell from 81.04 earlier to 80.84 then went back up to 81.06 and is currently trading down at 80.89.
This will be my last post for a week as I catch a plane to WDW in Orlando Florida to visit Donald and some relatives living in the area. I hope everyone has a great turkey day and I will see everyone in December. If I get a chance I’ll sneak in a memo or 2 when the missus isn’t looking.
** RRR = Risk Reward Ratio
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Written by Gary