Closing Market Commentary For 03-07-2013
Interesting market today with several serious false starts or ‘traps’. One right after the markets opened took the markets skyward and then dropping to the monings session’s low point. The next one came around noon when the averages witnessed a bull trap that skyrocketed to new highs and that too soon fell. The last bear trap happened at 2 pm looking like the indices were going to hell in a hand basket as the averages made a new low point, but by 2:30 those losses were reversed.
Markets closed up into the green on low volume having backed off the highs for the day. It won’t take much to push this wagon off the road as much weakness prevails around the World.
There be problems out their Capt’n!
Low volume, check. VWAP-reversion-algo, check. Equities higher, check. Dow Theory confirmation that was so convincing when Dow Transports were rising? Umm, no. Trannies lost 0.6% today, underperforming the Industrials by 50bps in March now.
Breadth was not confirming the gains either. Financials were the best performers – remember we warned yesterday what happened ahead of last year’s CCAR.
Treasuries had a poor day with yields popping 5bps but 10Y holding below 2.00% into the close. Silver and Oil recoupled on the week now both +1% as EUR strength was enough to offset JPY weakness and pull the USD lower and supportive of risk.
VIX remains dislocated from stocks but fell 0.5 vols today ending the day just above 13%.
Unfortunately, all of the gyrations that happened today were in a relatively tight and narrow band of trading on low volume. This all points to the HFT algo computers pushing the numbers around. I just hope this isn’t going to become the new ‘normal’ as it makes any financial decision making a joke.
The RRR** has been narrow at the opening bell for the past several months, over a year actually, and has continued the trend into the closing session. This continuing trend makes predictions of session movements nearly impossible making trading futile and unprofitable. As of right now, it is too late to jump in to catch the highs and still may be too early to start shorting.
As long as market volume remains light or the trading range is narrow, one can expect successful, or at least profitable, trading to remain elusive. The RRR** has been wider on some volatile sessions lately and is expected to become more so as 2013 enters the first quarter, but unfortunately 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: Rises to 86% and Secondaries Confirm “Tradable” This might be true (for last week anyway), but difficult to deal with. 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 over the past year. 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 4:00 is at 14329 up 33 or 0.23%.
The SP500 is at 1544 up 2.80 or 0.15%.
SPY is at 154.76 up 0.26 or 0.21%.
The $RUT is at 934.57 up 4.61 or 0.50%.
NASDAQ is at 3232 up 9.72 or 0.30%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been bullish and the current bias is down.
WTI oil is trading between 89.58 and 91.70 today. The session bias is positive and is currently trading up at 91.55.
Brent crude is trading between 110.04 and 108.80 this morning. The session bias is neutral with a bullish flavor and is currently trading down at 109.32.
Gold rose from 1567.00 earlier to 1585.50 and is currently trading up at 1578.11.
Dr. Copper is at 3.52 up from 3.49 earlier.
The US dollar is trading between 82.65 and 81.99 and is currently trading up at 82.12, the bias is currently neutral with a bearish slant.
The 500 at the close.
The DOW at the close.
** RRR = Risk Reward Ratio
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary