Midday Market Commentary For 01-02-2012
By 1 pm the averages were trading in a narrow range and on anemic volume. This interesting because the ma and pop cash crowd left the market 2 years ago basically leaving the large institutions and major investors. So it appears that everyone who is left went all in today using their cash reserves. These isn’t any new investors today so what is going to happen over the next week or so? The markets may just continue to sail along sideways like we have seen recently or watch a waterfall when the first bad piece of news comes along.
Personally, I do not see the cash crowd jumping into this market as we wait for the climax of the US being downgraded.
As read in Zerohedge, “The ‘deal’ didn’t surprise CNBC’s Rick Santelli as he notes the administration did the “easy thing” once again. However, he does think the coming battle in 6-8 weeks regarding the debt ceiling will be surprising to many and believes “there has to be an endgame to insanity.”
Rick’s rightly cynical perspective on the euphoric opening gap today in stocks and bonds (and questioning the veracity of manipulated ‘market’ prices) appears as frustrating to him as “watching politicians all slap each other on the back while the country slips into a Grecian like formula.”
The RRR** was wider than normal this morning and provided a narrow window of opportunity for a quick scalp. As of 10 am the market stopped advancing and any purchases will 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 1:15 is at 13332 up 228 or 1.74%.
The SP500 is at 1415 up 25 or 1.75%.
SPY is at 144.91 up 2.49 or 1.75%.
The $RUT is at 869.17 up 19 or 2.34%.
NASDAQ is at 0389 up 70 or 2.33%.
The longer trend is up, the past months trend is bullish and the current bias is sideways.
WTI oil was up this morning and is currently trading down at 92.96 trading between 93.87 and 91.60 and the bias is negative.
Brent crude was up earlier and is currently trading up at 112.25 trading between 111.18 and 112.90 and the bias is negative.
Gold was up this morning. Currently trading down at 1688.75, trading range is between 1670.70 and 1694.60 with a negative bias.
Dr. Copper is at 3.74 rising from 3.66 earlier.
The US dollar gaped down from 79.86 earlier to 79.65 and is currently trading down at 79.99 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.
Expect the markets to follow this trend down.
** RRR = Risk Reward Ratio
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Written by Gary