Opening Market Commentary For 03-21-2013
Premarkets were off 0.05% at 8 am and stayed that way until the opening. The Cyprus situation is still in play but not as intense as traders look at other issues as they sit back and observe.
The markets opened down where the DOW fell 77 points to mark the morning low point. The ‘dippers’ marched in on moderate green volume to at least push the averages back to almost flat status.
By 10 am the averages were headed, er melting, back down when existing home sales printed in negative. The financial numbers this morning are mixed and I suspect the market is going to ignore some and rally on others.
We are going to have to wait and see what Mr. Market has in store at this point. Several of the small cap indices made gaps opening down and that usually means the markets will proceed back up to fill them – stay tuned.
Meanwhile, the market has made interesting new highs based on ‘hopium’ in my opinion. I have been leery of any additional movements higher and have taken a wait and see position. Business’s in reality haven’t been doing all that well.
S&P500 Profit Margins Tumble To Q1 2010 Levels
The S&P 500 gained 12% in 2012 and has almost reached that level of return in 2013 YTD , delayed only by the apparent non-event in Cyprus, led, if one is to believe the talking heads and asset gatherers, not by a Fed-driven liquidity flush but by the mother’s milk of stocks – earnings.
A major driver of these earnings has been corporations ability to squeeze more blood out of their stones (read – layoff and automate as much as possible) and margin expansion is often cited as the catalyst for the next leg higher in stocks.
The trouble with that ‘anecdotal’ meme, trotted out again and again, is it appears to have hit its unemployment/consumerism-driven limiting point.
As JPMorgan notes, in light of the robust cost cutting experienced during the recovery, additional margin expansion remains unlikely going forward, leaving future earnings growth dependent on stronger revenues – recoupling expectations to GDP growth and we know what that means.
Critically, in reality, S&P 500 profit margins have dropped rather notably in the last two quarters – now at their lowest since Q1 2010 – not exactly the ‘expansion’ the advisers told us would happen.
The RRR** has been narrow at the opening bell for the past several months, over a year actually, and has continued the trend again today. 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.
The DOW at 10:15 is at 14440 down 71 or -0.49%.
The SP500 is at 1551 down 7.60 or -0.49%.
SPY is at 154.85 down 0.84 or -0.54%.
The $RUT is at 947.81 down 4 or -0.44%.
NASDAQ is at 3227 down 27 or -0.84%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been neutral and the current bias is down.
WTI oil is trading between 93.80 and 92.68 today. The session bias is beaish and is currently trading down at 92.81.
More Widening For The Brent/WTI Spread Ahead?
Brent crude is trading between 108.22 and 107.51 today. The session bias is bearish and is currently trading down at 107.65.
Gold rose from 1604.50 earlier to 1616.58 and is currently trading up at 1614.83.
Dr. Copper is at 3.44 down from 3.49 earlier.
The US dollar is trading between 82.74 and 83.19 and is currently trading up at 83.06, the bias is currently bullish.
** RRR = Risk Reward Ratio
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Written by Gary
