Opening Market Commentary For 04-08-2013
Premarkets started out higher (SP500 +5.50) and by the opening melted down. Today appears to be starting off slow and on anemic volume when the markets opened.
The small caps were up and the large caps were in the red and by 10 am most of the major indices were in the red with slightly increasing volume. $RUT closed the gap made on Friday and immediately started to melt down.
Is this the trend for the day, stay tuned for more as I am sure the HFT computer and news from Cyprus will sway the averages.
Leavitt has some wise words this morning, however I am not sure just how good of shape the market really is in. The earnings season kicks off and we will start to get a preview of things to come. AA announces today; JPM and WFC announce Friday.
Overall the market is in good shape, but Warning signs are mounting. Last week the Dow traded flat; the S&P dropped 1%, the Nasdaq 2% and the Russell 3%. This is not how strong markets act. When money rotates from more speculative small cap and tech stocks into larger more established companies, a vote of distrust is cast.
Plus volume has generally been heavier on down days than up days. Many indicators have also diverged from the price action. When the S&P hit a new high last week, the AD line, AD volume line, new highs and others weren’t close to their own cycle highs.
The overall trend is up, but in the intermediate term, aggressively entering new positions has not been wise.
The RRR** has been narrow at the opening bell for the past several months, over a year actually, and was especially narrow 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.
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 second 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: Unchanged at 89% and Secondaries Confirm “Tradable” This might be true, but challenging to deal with. The trading range is so narrow that way too much 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 10:15 is at 14518 down 46 or -0.32%.
The SP500 is at 1551 down 2 or -0.15%.
SPY is at 155.00 down 0.18 or -0.12%.
The $RUT is at 922.23 down 1 or -0.13%.
NASDAQ is at 3196 down 7 or -0.23%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been neutral with a bearish slant and the current bias is down.
WTI oil is trading between 932.70 and 93.73 today. The session bias is bearish and is currently trading down at 92.88.
Brent crude is trading between 105.55 and 104.32 today. The session bias is bearish and is currently trading down at 104.59.
Gold fell from 1582.68 earlier to 1572.50 and is currently trading up at 1576.05.
Dr. Copper is at 3.37 up from 3.34 earlier.
The US dollar is trading between 82.80 and 82.49 and is currently trading down at 82.53, the bias is currently negative.
The week ahead is light on major market moving data releases. From a policy perspective and in light of the recent moves in treasuries, FOMC minutes are likely to be followed by markets. Retail sales in the US are likely to print below consensus both on the headline and on the core metrics.
That said, this needs to be seen against the backdrop of first quarter retail consumer spending data surprising to the upside. Producer prices are also likely to come in on the soft side of market expectations. Finally, do not expect large surprises from the U of Michigan consumer confidence.
** RRR = Risk Reward Ratio
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Written by Gary