Markets Open Higher Then Fall Off To Yesterday’s Close

Opening Market Commentary For 12-07-2012

The exceptional jobs report this morning pumped up the premarket with green volume that exceeded normal session numbers. It appears a lot of traders wanted to get into the action before the cash crowd had a chance at the opening bell.

The market opened much higher than in past sessions but below the premarket high and on ‘significant’ red volume as the numbers melted down from the highs. It looks like traders are selling as I suspected would happen during this December. Many investors need to get out before the new capital gains tax takes effect and I am sure we will see more of this selling in the next couple of weeks.

By 10 am the excitement has subsided somewhat with premarket highs erased as the seasoned traders took their profits and ran. This is not to say we won’t have a few more days of elevated numbers, but selling is going to be the trend.

I have been hoping for several days of elevated sessions so the expected decent would happen. It seems that Mr. Market isn’t going to make it easy on the traders in this crowd. I almost shorted the market when it opened, but I am still concerned with the persistent low volume allowing the HFT computers to jerk the averages around.

As it turned out that would have been a good ‘guess’ but the 3X short ETF’s have ONLY moved a half point making any trade almost not worth the effort.

@cnn:

The U.S. economy added 146,000 jobs in November, and the unemployment rate fell to its lowest level in four years, the U.S. Labor Department said today.

The number is relatively strong given that some economists were concerned that Superstorm Sandy would weigh on job creation.

The November unemployment rate fell to 7.7% from 7.9% the month earlier.

@zerohedge:

Job Quality Vs Quantity: Number Of Jobs vs Average Hourly Earnings

In light of the composition of today’s NFP pickup, driven by retail, waste, administrative, hospitality and leisure are all low-wage jobs.

Even as Construction jobs posted their first decline in many months on the “housing recovery” and on Hurricane Sandy rebuilding, we refreshed the chart showing that there is a quality not just quantity component to the jobs number.

Sadly, the quality, in the form of Y/Y change of average hourly earnings, continues to be non-existent.

The next big headline is that the university of Michigan Confidence fell to 74.5 vs the 82.0 expected by analyst’s and 82.7 prior. This added increased selling pressure to the markets. As reported at SA, “It’s the BLS vs. the University of Michigan. Incessant chatter about the fiscal cliff looks to have had effect on consumer sentiment, with December’s plunge bringing the number back to August’s levels.”

The RRR** has been narrow at the opening bell for the past several months and surprisingly continued the trend again this morning in light of the pre-market action. The width of most long ETF’ looked exactly like the past lackluster sessions, narrow and unsuitable for profitable trading. This trend of narrow RRR** makes predictions of movements during the session nearly impossible and as you know, trading becomes futile and unproductive.

As long as market volume remains light or the trading range is narrow, one can expect successful trading to remain elusive. The RRR** has been wider on volatile sessions lately and is expected to become more so as the year ends, but a lot of guessing still remains. Correctly ‘guessing’, of course, is the tricky part of the successful trading equation. Any trades today will probably end up on the meager side of profitability if you are lucky as most trades have been less than optimal during this past year.

I also have issues with some pundits writing almost every day that 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. Do not fall into the trap of money burning a hole in your pocket, sit tight better days are coming. Watch for increasing volume to signal improved trading.

Swing trading is also at your own risk for all the reasons mentioned above. Because the market is at a crossroads of sorts, I would prefer to sit on my hands as the markets are currently untradable. Guessing where the market is going to be tomorrow or next week, at this time anyway, can be a foolish and costly endeavor.

The DOW at 10:15 is at 13126 up 52.76 or 0.41%.

The SP500 is at 1416 up 2.61 or 0.18%.

SPY is at 142.29 up 0.34 or 0.24%.

The $RUT is at 823.06 up 1.27 or 0.15%.

NASDAQ is at 2989 down 2,17 or -0.07%.

The longer trend is up, the past months trend is bearish and the current bias is down.

How Oil Really Gets Priced

WTI oil was down then up and again down today and is currently trading down at 86.44 trading between 86.90 and 85.80 and the bias is negative.

Brent crude was up today and is currently trading down at 107.42 trading between 106.82 and 107.88 and the bias is negative.

Gold gaped down this morning and recovered. Currently trading up at 1702.55, trading range is between 1683.16 and 1704.00 with a positive bias.

Dr. Copper is at 3.67 up from 3.65 earlier.

The US dollar rose from 80.21 earlier to 80.68 and is currently trading down at 80.53.

** 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