Markets Gap Up On Moderate Low Volume

Opening Market Commentary For 12-11-2012

Premarket were elevated this morning indicating a gap up for the cash market. Yesterday I mentioned that we were due for a breakout to the up side for technical reasons more than sound economic reasonableness. That said, be on the alert for a pull back as I expect any move to the upside will be short lived and turn out to be nothing more than a bull trap.

The markets opened up on relatively low green volume and the buying continued past the 10 am mark. I expect the markets to continue trading upwards for the morning session and then see some investors give in to cold feet and sell. I do not expect any selling to adversely effect this mini bull run.

Lately the news has been market movers and it remains to be seen if anything can continue to move the markets up.

@SA:

FOMC seen ramping up the money printing. “The FOMC is due to hold its latest two-day policy meeting today, with economists predicting that the Fed will announce a new $45B monthly Treasury acquisition program. The purchases would replace those from Operation Twist, which expires this month. The Twist was notable in that its bond-buying was offset with sales of shorter-term debt. A new scheme without those sales would be far more expansionary.”

For the past several sessions the averages have melted above the 50 DMA, but the 50 DMA is not as important as it may first seem. Any market that is ‘artificially’ propped up, as they have been for several years, will never reflect the true nature of the averages in which I believe we are above true pricing.

In charting, a line in the sand was a given before the QE’s and Twists were shoved down our financial throats. Now, the lines of supports and resistance’s are more like looking at zones of ‘possible’ scenarios that may or may not happen. This is because the markets are propped up like a house of cards awaiting for the glue that will fix them permanently into place and that ‘glue’ has not been forthcoming.

@dshort:

S&P 500 Snapshot: Bouncing on the 50-Day Moving Average

The Dow was up 0.11%, the Nasdaq up 0.30%, but my preferred benchmark, the S&P 500, finished the day just above the flat line with a gain of 0.03%. We had no economic news to stir the market. Nor did we get any “cliff” banter from the politicians.

So CNBC stepped in with a “Special Report” (apparently from the Associated Press) to stir some juices: ‘Cliff’ Talk Failure Could Trigger a Sell-Off is the headline. As I type this, the S&P 500 Monday volume isn’t yet available, but trading on the SPY ETF was 31% below its 50-day moving average.
More…

The RRR** has been narrow at the opening bell for the past several months and continued the trend again this morning. This continuing trend makes predictions of session movements nearly impossible making trading futile and unprofitable.

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 13262 up 93 or 0.71%.

The SP500 is at 1430 up 11 or 0.81%.

SPY is at 143.68 up 1.21 or 0.85%.

The $RUT is at 832.92 up 6.69 or 0.81%.

NASDAQ is at 3022 up 35 or 1.18%.

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

How Oil Really Gets Priced

WTI oil was up earlier but turned sour and is currently trading down at 85.79 trading between 85.35 and 86.38 and the bias is negative.

Brent crude was up today then turned down. Currently trading down at 107.88 trading between 107.10 and 108.31 and the bias is negative.

Gold was up this morning and then turned south in a big way. Currently trading up at 1709.72, trading range is between 1706.39 and 1714.40 with a negative bias.

Dr. Copper is at 3.69 down from 3.72 earlier.

The US dollar fell from 80.50 earlier to 80.19 and is currently trading up at 80.20.

** RRR = Risk Reward Ratio

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Written by Gary