Written by Gary
Opening Market Commentary For 12-06-2013
Premarket action was up +0.25% prior to the jobs and unemployment reports anticipating a poor reporting, but that was not the case. More than 203K jobs were added in November and the unemployment rate fell 0.3 percentage point to 7%, the lowest level since November 2008, while economists expected the rate to fall less to 7.2%. By 9 am the futures climbed +0.97% with unusual volume volatility to match.
The volatility swings were dramatic as the us dollar swung 57 cents, the WTI oil almost a dollar and gold $30 dollars. The end result is that the indexes moved close to where they were at yesterday’s close.
Markets opened higher (+0.80 / +0.90%) with opening gaps in every major average which is bearish. The $VIX dropped from 15.36 to 13.87 within seconds of the opening, small caps started melting off its highs and the large caps were trading sideways on low to moderate volume.
The University of Michigan survey came in higher at 82.5 beating the expected 76.0 which drove the indexes back up to the opening levels, but then started melting off those highs to trade sideways. Another sign to view this session cautiously.
With all this ‘good’ news investors might think the markets might start to sink, but this morning proved otherwise. There will inevitably be doubts surrounding the outlook, but is there enough evidence to justify a tapering of bond purchases this month remains the question. With the American economy adding 203,000 jobs in November, the labor force participation rate, which gauges the proportion of the population employed or seeking employment, rose to 63% from 62.8% in October. Again, is this enough to start tapering this month and if so, how much will it effect the markets?
Last month, the expected NFP print was 120K, instead we got 204K. Today, the expectations was 185K, while the print, was almost an identical 203K, even as last month’s was revised modestly lower to 200K.
The unemployment rate dropped from 7.3%, which was also below the 7.2% expected, to only 7.0%.
The unemployment rate was derived from a drop in the number of unemployed from 11.3K to 10.9K, while the labor force rose from 153.8K to 155.3K, which also led to a modest bounce in the labor force participation rate which rose from a 35 year low of 62.8% to 63.0%.
For the traders, short term indicators are leaning towards the hold side at today’s opening, but I would advise caution in taking any position because of the Fed’s cryptic utterances in hinting when the taper will begin and by how much. I would also take chart and other technical indicators with a grain of salt for the time being and watch what the Fed does WHEN it actually does something.
The longer 6 month outlook remains 40-60 sell until we can see what the Fed is actually going to do, simple as that. If we get some Fed tapering in December (17th. -18th. meeting) the markets will certainly react in a negative fashion, how much of course depends on much bond buying takes place. If the tapering begins in March 2014, like many believe it will, the markets are going to price that in by declining sooner. I am expecting weak to negative markets for the foreseeable future.
Members of the FOMC believe the US economy has shown signs of improvement, but they have assured short-term interest rates would remain low for quite some time to come. Alpari Market Analyst, Craig Erlam, said: “Many members of the Fed now appear eager to start winding down its asset purchases and are looking for ways to do it that will create the least disruption in the financial markets, such as setting simple thresholds for reductions, or even more simply, providing a timetable for tapering that is not data dependent.”
ADVFN reported, “The rally in question has been built on the back of the Fed’s promise of a stimulatory environment. If any catalyst points to the Fed giving up its accommodative stance, there is a danger of a pullback and near term support for the index lies around the 15,965, 15,890 and 15,804 levels.”
Personally, I think it could go a lot lower.
The DOW at 10:15 is at 15950 up 129 or 0.83%.
The SP500 is at 1800 up 15 or 0.85%.
SPY is at 180.54 up 1.60 or 0.89%.
The $RUT is at 1131 up 9 or 0.78%.
NASDAQ is at 4054 up 21 or 0.52%.
NASDAQ 100 is at 3496 up 18 or 0.53%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been negative and the current bias is up but sideways.
WTI oil is trading between 97.15 and 97.47 today (excluding the big swings prior to the opening). The session bias is neutral and is currently trading up at 97.41.
Brent Crude is trading between 110.95 and 111.68 today (excluding the big swings prior to the opening). The session bias is neutral and is currently trading up at 111.34.
Gold rose from 1224.72 earlier to 1233.46 and is currently trading down at 1232.50. (excluding the big swings prior to the opening)
Dr. Copper is at 3.250 rising from 3.217 earlier.
The US dollar is trading between 80.40 and 80.28 (excluding the big swings prior to the opening) and is currently trading down at 80.34, the bias is currently neutral.
To contact me with questions, comments or constructive criticism is always encouraged and appreciated:
Written by Gary