Markets Open Down Then Melt Up On bad News

Written by Gary

Opening Market Commentary For 09-04-2013

Premarket was light and directionless indicating a down opening for the cash crowd. Oil and copper are down as is gold. The dollar is also down but rising off its lows.

Markets opened down as expected, but almost immediately started to rise on ‘moderate’ volume. US Trade Balance reported in down and the markets evidently thought that was O.K.

By 10 am the bulls were in charge as the averages were melting upwards, but had not reached yesterday’s sessions highs.

Someday, financial news will trump Dr. Ben’s free ice cream.

Worse Than Expected US Trade Deficit Spikes In July, Trade Gaps With China, EU Rise To Record

When last week the revised Q2 GDP print was announced, which beat expectations solidly driven entirely by a surge in net exports, we said that “with China on the rocks and tightening, the Emerging Markets in free fall, and Europe still a net exporter (so not benefiting the US), anyone hoping this trade led-recovery will be sustainable, will be disappointed.”

Sure enough, the first trade data update for the third quarter as of July, confirmed just this, as the trade deficit widened from a revised $34.5 billion deficit, to a substantially larger monthly deficit, amounting to $39.1 billion.

This was $500MM more than consensus expected, or $38.6 billion, and it means that as we predicted, the downward revisions to Q3 tracking estimates are about to start rolling in, trimming ~0.1%-0.2% from US GDP for this current quarter.

Specifically, imports for the month rose from $225.1 billion to $228.6 billion while exports fell from $190.5 billion to $189.5 billion.

But perhaps most notable is that in July, the US trade deficit with China and the EU rose to a record of $30.1 billion (from $26.6bn last month) and $13.9 billion (from $7.1bn) respectively.

The RRR** was again narrow at the opening bell today. Any trend of low volume and narrow trading sessions makes any predictions of session movements nearly impossible, thus making trading futile and mostly unprofitable.

As of right now, it is too late to jump in to catch the market highs, if there are going to be any, safely anyway. Traders need to be especially cautious how close you set your stops as we have seen lately several corrections that unnecessarily wiped out a lot of investment profits. As for shorting, it still may be too early to start picking out your best candidates, but I feel you will not have to wait much longer.

Correctly ‘guessing’, of course, is the tricky part of the successful trading equation.

The Best Stock Market Indicator Ever: Confirm Market Is “Untradeable”. Remember there is a wedge between perception and reality that has been going on for some time now where the reality doesn’t match the continued bull run. Maybe we have seen the top – but don’t count it!

Indicators for the long haul are 50-50 and not reliable. The short haul is a different story with sell indicators averaging 80% sell.

The problem with the trading range is that it has been 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 14877 up 43 or 0.29%.

The SP500 is at 1647 up 8 or 0.48%.

SPY is at 165.18 up 0.78 or 0.47%.

The $RUT is at 1021 up 5 or 0.49%.

NASDAQ is at 3635 up 23 or 0.63%.

NASDAQ 100 is at 3114 up 22 or 0.72%.

The longer trend is up, the past months trend is bullish, the past 5 sessions have been sideways and the current bias is positive.

How Oil Really Gets Priced

WTI oil is trading between 108.60 and 107.02 today. The session bias is negative and is currently trading up at 107.30.

Brent Crude is trading between 116.02 and 114.44 today. The session bias is negative and is currently trading up at 114.75.

Gold fell from 1414.99 earlier to 1386.17 and is currently trading down at 1388.30.

Here’s why copper has lost its indicator role

Dr. Copper is at 3.4 falling from 3.314 earlier.

The US dollar is trading between 82.46 and 82.26 and is currently trading up at 82.35, the bias is currently bearish.

** RRR = Risk Reward Ratio

To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

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Written by Gary