Averages Keep Gains, Volume Anemic

Closing Market Commentary For 01-02-2012

The markets closed up after a massive gap up this morning – that is the good news. The bad news is that this US financial mess is far from over and once the ‘Hopium’ has worn off we should start to see some moderation in the markets. A decline is almost a certainty in the near future as several major averages have hit or about to hit a triple top and will most likely react negatively. The gaps produced today will also pressure the averages to close them by declining. A lot of indecision is going on right now keeping a lot of traders on the sidelines. More so now than several weeks ago.

During the last few minutes it appears that the HFT and BTFD dippers jumped onto the markets band wagon and moved the numbers higher setting up a nice decline for tomorrow morning.

The RRR** was wider than normal this morning as you may have noticed. As of 10 am the market stopped advancing and any trades made today will now have to become a swing trade as you go into tomorrow.

However, the continuing trend of narrow trading ranges makes predictions of session movements nearly impossible making trading futile and unprofitable. I would continue to be cautious.

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 2012 ends and 2013 begins, but a lot of guessing 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 the past year.

I also have continuing 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 4 pm is at 13412 up 308 or 2.35%.

The SP500 is at 1462 up 36 or 2.54%.

SPY is at 146.02 up 3.64 or 2.56%.

The $RUT is at 873.43 up 24 or 2.84%.

NASDAQ is at 3012 up 92 or 3.07%. (A correction down is almost certain to happen.)

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

How Oil Really Gets Priced

WTI oil was up this morning and is currently trading down at 92.93 trading between 93.87 and 91.60 and the bias is negative.

Brent crude was up earlier and is currently trading down at 112.34 trading between 111.18 and 112.90 and the bias is neutral.

Gold was up this morning. Currently trading down at 1685.28, trading range is between 1670.70 and 1694.60 with a negative bias.

Dr. Copper is at 3.73 rising from 3.66 earlier.

The US dollar gaped down from 79.86 earlier to 79.65 and is currently trading down at 79.90 after climbing like a skyrocket up and through the gap left from this morning opening creating a new high for the day at 80.03.

The 500 at the close.

The DOW at the close.

The SPY at the close. Notice the VERY LARGE gap? That has to be closed meaning the markets WILL fall to do so. As mentioned earlier, there is room for a further advance over the next day or so, but it is all downhill from there. (Click on chart for larger view.)

(Click on chart for larger view)

** RRR = Risk Reward Ratio

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Written by Gary