Markets Open Lower Then challenge Yesterday’s Highs

Opening Market Commentary For 01-30-2013

The premarkets were down a ‘tad’ mostly because they are tired after advancing continuously since the 10^th of January. But the 8:30 economic numbers looked like the markets were weakened even further as they slipped a bit.

After the markets opened down, as expected, they jumped back up slightly as the ‘dippers’ jumped in. Reverse ETF’s fell severely in response to the changing averages and were were off to a another mixed, flat and choppy start.

The markets, while flat, were back into the middle ranges of yesterday’s numbers evidently trying to test yesterday’s highs. While any further advancement is going to be met with fierce resistance it is not an impossible task. We have noted here several times that the ‘tops’ made several years ago have not been challenged and today’s markets could still advance further.

I feel that dipping your toes in now is probably not a good idea.

Several big surprises for the morning that will be played out during this session. One is the economy dropping and the other is the inconsistent and inaccurate BLS reporting of the employment numbers.

@zerohedge:

Noisy ADP, aka “BLS For Dummies”, Beats, Last Month Revised Much Lower

ADP may have changed its methodology, wiping out a few hundred thousand 2012 jobs in the process, but its predictive track record remains the same: lousy.

In December, the private payroll counter “reported” some 215,000 private job gains, well above expectations and about 50,000 more than the BLS reported two days later.

Today, ADP was expected to print far lower, or at 165,000, and once again we got a major beat, this time January data apparently soaring to 192K, yet at the same time the utterly meaningless December data was revised far lower, from 215K to 185K just to be inline with the BLS.

Expect this number, too, to be revised lower as it usually tends to be, following a weaker than implied BLS payroll number.

Of note: seven consecutive drops in manufacturing jobs: so much for that Obama promise to double manufacturing jobs in 5 years or whatever it was. Judging by the market’s non response to today’s latest ADP number, we are not the only ones who see Mark Zandi’s pet seasonal-adjustment project as nothing more than a monthly joke.

@cnn:

The U.S. economy contracted at a 0.1% annual rate in the fourth quarter of 2012, the first decline in gross domestic product since the second quarter of 2009.

The drop was a big surprise, as analysts were expecting the economy to grow 1% last quarter.

The government says the data in the first reading are, as always, incomplete, with a revision scheduled for release on February 28.

Unlike Leavitt, where he states, “I like the long side, but in most cases it’s too late to chase stocks higher”. I believe lighting of longs is in order if you have not done so already.

@leavitt:

Today is Fed Day. I’m not going to repeat my mini rant from two days ago. If things really are improving, the Fed should remove the punch bowl sooner rather than later or else we run the risk of another bubble forming.

I won’t know how to interpret the Fed needing to keep rates low while the economy and market are improving.

Something has to give. It would be a shock if the Fed raised rates right now, but some language in their statement hinting at when rates will be raised will be looked for.

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. Buying shorts or longs at this point is probably not wise from a RRR** standpoint.

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 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 several years.

I also have continuing issues with some pundits, writing almost every day, that there are setups for day trading. Best Stock Market Indicator Ever: Unchanged at 79% and Secondaries Confirm “Tradable” 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. I keep hoping for increasing volumes to signal improved trading.

Swing trading is also at your own risk for all the reasons mentioned above although guessing overnight trades would have been most profitable. Again, 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 10:00 is at 13937 down 18 or -0.13%.

The SP500 is at 1506 down 1 or -0.06%.

SPY is at 150.60 down 0.05 or -0.04%.

The $RUT is at 903.36 down 4 or -0.44%.

NASDAQ is at 3159 up 5 or 0.17%.

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

How Oil Really Gets Priced

WTI oil was rose this morning and is currently trading down at 97.75 trading between 95.50 and 98.25 and the bias is negative.

Gold was up this morning. Currently trading down at 1677.55, trading range is between 1651.65 and 1680.30 with a positive bias.

Dr. Copper is at 3.74 up from 3.65 earlier.

The US dollar fell from 79.75 earlier to 79.38 and is currently trading up at 79.44.

** RRR = Risk Reward Ratio

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Written by Gary