Opening Market Commentary For 01-02-2012
SP500 Futures gaped up from 1423.41 to 1440.00 earlier and that WILL be filled sometime in the near future indicating a declining market. Adding to this, the USD gaped down from 79.86 to 79.65 leaving a quiet a hole to fill and the FX markets are quicker in filling up the gaps.
The DOW opened up 230 points but under relatively light green volume with flashes of red being thrown in. Considering the gaps in many of the averages I have my red-flag waving machine at full throttle as I watch somebody or something move the markets up unrealistically. If the charts mean anything in today’s world of reading the tea leaves, there is a tiny bit of room for the averages to advance further. Not much, but some as the small caps are butting up against the next resistance providing enough evidence that we could see very soon a ‘correction’ or the continuing ‘Secular bear’ run.
The article below accurately describes the scaled-down ‘Fiscal Cliff’ aftermath in the US Senate from SocGen. The article goes on to say, “For those still confused, nothing has changed on the US long-term sustainability picture. In fact, as the CBO announced yesterday, deficits will rise by $4 trillion.”
“The scaled-down deal passed in the Senate addressed the fiscal cliff but did nothing to address longer term fiscal health of the nation. This puts the US rating at risk for a downgrade.
However, credit rating agencies may decide to wait and see what emerges from the subsequent talks. There is an implicit new cliff at the end of February related to the sequester and to the expected exhaustion of extraordinary measures related to the debt ceiling. This date is expected to be used by Republicans as leverage for spending cuts.
President Obama has already signaled that a new round of spending cuts – those related to the sequester as well as entitlement spending – will have to be matched by additional revenue increases. Therefore entitlement and tax reform are likely to be at the center of discussions over the next two months.”
The RRR** was wider than normal this morning and provided a narrow window of opportunity for a quick scalp. 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 10:15 is at 13358 up 258 or 1.97%.
The SP500 is at 1455 up 30 or 2.04%.
SPY is at 145.36 up 3 or 2.06%.
The $RUT is at 870.08 up 20 or 2.44%.
NASDAQ is at 3096 up 79 or 2.61%.
The longer trend is up, the past months trend is bullish and the current bias is up.
WTI oil was up this morning and is currently trading down at 93.52 trading between 93.87 and 91.60 and the bias is positive.
Brent crude was up earlier and is currently trading up at 112.53 trading between 111.18 and 112.90 and the bias is positive.
Gold was up this morning. Currently trading up at 1694.51, trading range is between 1670.70 and 1694.60 with a positive bias.
Dr. Copper is at 3.75 rising from 3.66 earlier.
The US dollar gaped down from 79.86 earlier to 79.65 and is currently trading down at 79.57.
** RRR = Risk Reward Ratio
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary