For more than a little while, the trade has been to sell US dollars and buy US stocks. On Friday, the story was rather different, as buyers of Dow stocks, in particular, defied the dictum of the carry trade, buying stocks while the US Dollar was rising against other currencies. The questions on everybody's mind were, "Why?". Why now?", and "What about that Fed meeting next week?"
Answers for traders were not forthcoming, as they were bidding up Dow stocks to within 8 cents of its 52-week high at the close. That finish was meaningful, for a variety of reasons, not the least of which had to do with answers to the questions posed above.
Taking them one by one, here's a quick explanation:
Why? The reasons people buy stocks as they approach 52-week highs are as numerous as there are grains of sand on the beach, but in this case, it seemed to be with ulterior motive. Other possibilities include a massive short squeeze on Alcoa (AA), which was up a whopping 1.11, (8.22%). November retail sales came in better than expected (+1.3%) and the University of Michigan Consumer Sentiment reading was higher, at 73.4, following last month's 67.4. Naturally, that good news should have produced a stronger dollar. They did, but, remember the ulterior motive. Read on.
Why now? Stocks were bid up precisely to just below their closing 52-week high just in case technical analysts were peering in on the activities, and they surely were. Today was a planned day for such a rise because it had two significant elements going for it. First, it was Friday, meaning positions would be locked in until Monday, and, second, there is a Fed meeting next week in which it is widely expected that the FOMC will leave rates unchanged, but give more hints as to the exact date of the first, in what no doubt will be a series of, rate hikes. The other kicker is that some of that dubious Dubai debt is supposed to be repaid on Monday, and, if it isn't, chaos in financial markets could ensue.
What about that Fed meeting next week? As answered above, the FOMC will meet to discuss policy on Tuesday and Wednesday, the 15th and 16th, culminating in a policy decision and statement on Wednesday, right around 2:00 pm. That also coincides with options expiration on Friday, and if you think there aren't a boatload of players in that space, betting and hedging on the Fed decision, maybe you should go back to playing euchre with friends for nickels and dimes.
Obviously, there is a good deal of money riding on the events of next week, and the markers were laid down yesterday and today, but especially today, with the apparent end of the dollar carry trade. Don't buy into the argument that positions short the dollar and long stocks don't matter any more. That trade was very prevalent and has yet to be unwound. Today's rise on the Dow was a shot fired across the bows of many hedge funds who are trapped in losing positions. Fireworks should be expected right out of the gate on Monday.
Whoever was in control of today's trade on the Dow was using a great deal of leverage, meaning that today's move was very transient and temporary. Ask yourself if you'd be buying stocks at the end of the year, just as they're reaching new highs - highs, mind you, that have yet to be surpassed in any meaningful way since the end of October. Consider these data points for closes on the Dow, all 52-week highs:
November 17: 10,437.42
November 23: 10,450.95
November 25: 10,464.40
December 1: 10,471.58
Today's close was at 10,471,50 and there was no confirmation by the S&P or, even more importantly, the Dow Transportation Index. Ooops!
As a point of reference to illustrate just how difficult this area of resistance is proving to be, consider these recent closes on the S&P:
November 17: 1110.32
November 18: 1109.80
November 23: 1106.24
November 24: 1105.65
November 25: 1110.63
December 1: 1108.86
December 2: 1109.24
December 4: 1105.98
Today's close of 1106.41 is another meaningless near-top. Clearly, there's a distribution pattern taking place which is preventing stocks from breaking out to new highs.
By all accounts, it's just not going to happen. At least not any time soon. Take heed of the usefulness of the dollar carry or risk trade, and ignore the movements of today as just so much market noise. Buy low, sell high. What do you think the real tradrs are doing here?
And just in case you were wondering, the Dow finished higher for the week, with the NASDAQ and NYSE Composite lower. The S&P actually ended the week with a fractional gain, or, essentially flat.
Dow 10,471.50, +65.67 (0.63%)
NASDAQ 2,190.31, -0.55 (0.03%)
S&P 500 1,106.41, +4.06 (0.37%)
NYSE Composite 7,125.12, +20.62 (0.29%)
Advancers outnumbered decliners, 4043-2402, though you would have hardly guessed it looking just at the tape. Dow stocks were 21 up with 9 down. The two biggest movers to the upside were Alcoa (AA) and Bank of America (BAC), two dubious leaders, to be sure. New highs beat new lows, 348-60. Besides the days before and after Thanksgiving, NASDAQ volume was the lowest since September 4, a date that also preceded a holiday - Labor Day. NYSE volume was about average.
NYSE Volume 4,408,781,000
NASDAQ Volume 1,762,412,125
More evidence of some deviousness at play came from the commodities pits, where oil sold off for the 8th straight day, losing 89 cents, to $69.65. Meanwhile, major oil company Dow stocks, Chevron (CVX) and ExxonMobil (XOM) both traded higher throughout the session and finished with small gains, though gains nonetheless.
Gold, one of the main catalysts behind dollar strength, traded down again, off $6.60, to $1,119.60. Silver followed suit, losing 10 cents, to $17.09.
One should be well advised going into next week to not read very much into this week's action. Since stocks are at their highs, you've likely missed the move if you were not participating. If you were in, this could be a great time to take a little off the top or close positions should that be your preference. There's been plenty of play in March Index options against the Dow and S&P in particular. Large positions have been placed well out of the money, and while they may be there for protection, the possibility of a sharp correction, which has not yet occurred since the March lows, is growing. Eventually, there is going to be a 10-20% or larger downturn, though the timing of such an event is uncertain.
All good traders, like Boy Scouts, should be prepared.
Friday, December 11, 2009
Thursday, December 10, 2009
Higher Day on Dollar Indifference
Stocks moved higher again on Thursday in tepid action, closing well off the highs made in the first fifteen minutes of trading. Once the Dow moved higher by 100 points at the open on the back of a rather poor unemployment report - up to 474,000 new claimants as opposed to 454,000 the week before - stocks quickly moved lower to test the gap-up open and then proceeded to trade in a 40 point range for the remainder of the session. With the trading volume low and lack of participation seen as a major detriment, stocks traded without conviction, just as they did on Wednesday.
Dow 10,405.83, +68.78 (0.67%)
NASDAQ 2,190.86, +7.13 (0.33%)
S&P 500 1,102.35, +6.40 (0.58%)
NYSE Composite 7,104.50, +36.88 (0.52%)
Advancing issues beat decliners, though by a slim margin again, 3327-3128, with most of the winners residing on the NYSE. There were 327 new highs, to just 55 new lows, with the margin expanding for the first time in five days. Volume was as dull as it has been all week long.
NYSE Volume 4,592,418,500
NASDAQ Volume 1,950,587,875
Oil took another small hit, down 13 cents, to $70.54, the lowest level since mid-October and the sixth straight session in which the price has declined. The slippery stuff traded briefly below $70 a couple of times during the session, though, like stocks, there was little to no influence from the dollar trade, which also traded in a narrow range of just 0.20, finally hitting the key 76.00 level just as the stock markets were closing. Gold finished highre for a change, breaking a string of losses with a gain of $5.50, to $1,126.40. Silver did likewise, up a peevish 3 cents, to $17.21.
The lack of interest in the dollar movement kept every trading vehicle in tight ranges. It's a very dull market, facing end-of-year issues, low participation rates and a slew of unresolved conditions, such as the US employment condition, debt issues from Dubai, to Greece, to Spain, increasing residential foreclosures and a sluggish worldwide recovery.
Tomorrow's end-of-week trading will be aided by guidance before the bell from November retail sales, which are expected to be modestly higher, though those expectations may still be out of line with reality. Even more important will be December retail sales, though those won't be fully known until well after the fact.
Therefore, investors are sailing a ship without much of a rudder and a broken compass. Stocks have been in a holding pattren since the end of earnings season, three weeks ago. Hopes for a "Santa Claus Rally" are fading about as quickly as Tiger Woods marriage vows.
Dow 10,405.83, +68.78 (0.67%)
NASDAQ 2,190.86, +7.13 (0.33%)
S&P 500 1,102.35, +6.40 (0.58%)
NYSE Composite 7,104.50, +36.88 (0.52%)
Advancing issues beat decliners, though by a slim margin again, 3327-3128, with most of the winners residing on the NYSE. There were 327 new highs, to just 55 new lows, with the margin expanding for the first time in five days. Volume was as dull as it has been all week long.
NYSE Volume 4,592,418,500
NASDAQ Volume 1,950,587,875
Oil took another small hit, down 13 cents, to $70.54, the lowest level since mid-October and the sixth straight session in which the price has declined. The slippery stuff traded briefly below $70 a couple of times during the session, though, like stocks, there was little to no influence from the dollar trade, which also traded in a narrow range of just 0.20, finally hitting the key 76.00 level just as the stock markets were closing. Gold finished highre for a change, breaking a string of losses with a gain of $5.50, to $1,126.40. Silver did likewise, up a peevish 3 cents, to $17.21.
The lack of interest in the dollar movement kept every trading vehicle in tight ranges. It's a very dull market, facing end-of-year issues, low participation rates and a slew of unresolved conditions, such as the US employment condition, debt issues from Dubai, to Greece, to Spain, increasing residential foreclosures and a sluggish worldwide recovery.
Tomorrow's end-of-week trading will be aided by guidance before the bell from November retail sales, which are expected to be modestly higher, though those expectations may still be out of line with reality. Even more important will be December retail sales, though those won't be fully known until well after the fact.
Therefore, investors are sailing a ship without much of a rudder and a broken compass. Stocks have been in a holding pattren since the end of earnings season, three weeks ago. Hopes for a "Santa Claus Rally" are fading about as quickly as Tiger Woods marriage vows.
Wednesday, December 9, 2009
Stocks Higher, Though without Much Conviction
The Dollar risk trade continued to move US markets at midweek, as the major averaged struggled to gains in collusion with a weaker dollar. By far the biggest move of major stocks was by Apple (AAPL), which gained 7.93 (4.18%) on rumors of an early unveiling of its tablet computer, seen as a competitor to Amazon's Kindle and other so-called electronic book readers. Elsewhere, the mobil internet sector moved mostly higher in concert with Apple's big upswing.
Overall, however, the session was dull, with stocks falling early and only tacking on gains in the final hour. The S&P and NASDAQ spent almost the entire day in the red, while the Dow held a positive position for much of the day. In the final analysis, however, stocks moved higher only when the dollar index began to deteriorate after 2:00 pm, breaking off the general trend of the week.
Dow 10,337.05, +51.08 (0.50%)
NASDAQ 2,183.73, +10.74 (0.49%)
S&P 500 1,095.94, +4.00 (0.37%)
NYSE Composite 7,067.62, +11.36 (0.16%)
Advancing issues beat decliners, but by a very slight margin, 3374-3045. New highs retained their edge over new lows, 185-58, but the margin continued to exhibit weakness, declining for a fifth straight day. Volume was down again to the level seen on Monday, one of the lowest in months, adding some fuel to the bearish argument. The general movement of the markets has been sluggish since the triple tops made last week. Since then, indices have traded in a "no-man's land" with a slightly negative bias, all signs of a tired market that has made tops and should continued to vacillate lower. There needs to be a catalyst to move stocks forward, though none seems to exist. With the backdrop of a possible unwinding of the dollar carry trade, it's doubtful that any significant move higher will be made before the year's end. Stocks are fairly valued - some say overvalued - at the present. A 4-8% decline on fundamentals and profit-taking might actually be helpful heading into the new year.
NYSE Volume 4,684,984,500
NASDAQ Volume 1,837,168,375
Despite weakness in the dollar, commodities continued their downtrend, with crude oil down another $1.95, to $70.67. Oil fell for the fifth day in succession. Gold dropped as well, losing $22.40, to $1,121.00, off nearly $100 since last week. Silver dropped 63 cents, to $17.18, in a full retracement of its upsurge since October.
New unemployment claims will be in focus prior to the opening bell on Thursday, with expectations that fewer than 450,000 Americans signed on for unemployment benefits in the most recent week. If the recent trend holds true, it could make for a difficult day for stocks, as any good news seems to push the US dollar higher, and stocks lower.
One bit of economic news on the day that was slightly overlooked, yet helped stocks out of the red early, was wholesale inventories climbing 0.3% in November, breaking a string of declines, though that news could be discounted by the advent of the holiday season, which usually encourages higher inventories. Though the move was slight, investors viewed it as modestly positive.
There are significant crosswinds making trading difficult, a condition which has existed for more than a month. With so much uncertainty and conflicting signals, traders have become quite nimble, entering and exiting positions with grand alacrity.
Overall, however, the session was dull, with stocks falling early and only tacking on gains in the final hour. The S&P and NASDAQ spent almost the entire day in the red, while the Dow held a positive position for much of the day. In the final analysis, however, stocks moved higher only when the dollar index began to deteriorate after 2:00 pm, breaking off the general trend of the week.
Dow 10,337.05, +51.08 (0.50%)
NASDAQ 2,183.73, +10.74 (0.49%)
S&P 500 1,095.94, +4.00 (0.37%)
NYSE Composite 7,067.62, +11.36 (0.16%)
Advancing issues beat decliners, but by a very slight margin, 3374-3045. New highs retained their edge over new lows, 185-58, but the margin continued to exhibit weakness, declining for a fifth straight day. Volume was down again to the level seen on Monday, one of the lowest in months, adding some fuel to the bearish argument. The general movement of the markets has been sluggish since the triple tops made last week. Since then, indices have traded in a "no-man's land" with a slightly negative bias, all signs of a tired market that has made tops and should continued to vacillate lower. There needs to be a catalyst to move stocks forward, though none seems to exist. With the backdrop of a possible unwinding of the dollar carry trade, it's doubtful that any significant move higher will be made before the year's end. Stocks are fairly valued - some say overvalued - at the present. A 4-8% decline on fundamentals and profit-taking might actually be helpful heading into the new year.
NYSE Volume 4,684,984,500
NASDAQ Volume 1,837,168,375
Despite weakness in the dollar, commodities continued their downtrend, with crude oil down another $1.95, to $70.67. Oil fell for the fifth day in succession. Gold dropped as well, losing $22.40, to $1,121.00, off nearly $100 since last week. Silver dropped 63 cents, to $17.18, in a full retracement of its upsurge since October.
New unemployment claims will be in focus prior to the opening bell on Thursday, with expectations that fewer than 450,000 Americans signed on for unemployment benefits in the most recent week. If the recent trend holds true, it could make for a difficult day for stocks, as any good news seems to push the US dollar higher, and stocks lower.
One bit of economic news on the day that was slightly overlooked, yet helped stocks out of the red early, was wholesale inventories climbing 0.3% in November, breaking a string of declines, though that news could be discounted by the advent of the holiday season, which usually encourages higher inventories. Though the move was slight, investors viewed it as modestly positive.
There are significant crosswinds making trading difficult, a condition which has existed for more than a month. With so much uncertainty and conflicting signals, traders have become quite nimble, entering and exiting positions with grand alacrity.
Tuesday, December 8, 2009
Strong Dollar Whacks Stocks, Metals
The continuing saga that is the unwinding of the risk-carry trade on the back of the weaker US Dollar continued today in earnest as the greenback strengthened against a basket of world currencies, most notably, the Euro and British Pound. As strength in the dollar causes speculators who used the currency as free cash as it was falling to sell stocks and cover, US markets took a decidedly negative turn on Tuesday. Also adversely affected were the precious metals, which continued their quite precipitous decline.
Besides the US Dollar story, there was little else to move markets, although a report of declining same-store sales from McDonald's (MCD) and an earnings warning from 3M (MMM) helped push the Dow lower.
Dow 10,285.97, -104.14 (1.00%)
NASDAQ 2,172.99, -16.62 (0.76%)
S&P 500 1,091.93, -11.32 (1.03%)
NYSE Composite 7,056.26, -99.47 (1.39%)
Declining issues overwhelmed advancers, 4488-1987, a measure of more than 2:1, while new highs beat new lows, 217-51, with the margin now having declined for the fourth straight session from a high of 341 to today's 166, or, by more than half. Should the high-low indicator continue to weaken and eventually turn negative, the chances of a severe downturn would increase proportionately. As it is presently, the indicator is flashing only a slightly negative sign, though taken together with other indications, the market may be already past a turning point to the downside.
Volume remained consistently low, as traders seem to have already headed out of town for the holidays. Speaking of which, there are only 16 shopping days left until Christmas, and thus far, retailers have not offered any encouragement. The American consumer is spending with rarely-seen frugality this season, and the numbers may not even be good enough to surpass last year's dismal sales figures.
One caveat remains in place concerning holiday retail sales. Even though last year's figures were horrid, they may have been better than they should have been, given that the stinginess demonstrated by the banks was just beginning to take hold. More consumers were negatively affected in terms of credit during 2009 than prior to the shopping season of 2008. The financial collapse was only then a month or two old, so there was still a good deal of uncertainty and skepticism concerning the true depth of the crisis. It was only in January and February that the real impact of the financial crisis became real for many people. Bear in mind that stocks didn't bottom until March of this year, and the clanging impact of that bottoming is still resonant.
NYSE Volume 5,421,175,500
NASDAQ Volume 1,916,778,500
Commodities fell victim again to the stronger dollar, which, in the long term, is positive. Oil was lower by $1.31, closing at $72.62. Talk of testing the $70 level has been bantered about, but that is nothing but a number. The real test for oil will not occur until it approaches $65, and a stronger US Dollar should provide sufficient impetus to push it through that level down to more reasonable valuations. Yesterday, Saudi oil minister Ali al-Naimi proclaimed that the price of oil was "perfect" at $74/barrel. Today, he is likely a little less sanguine.
Gold dropped $20.60, to $1,143.40, though it has traded lower - down another $15 - after the official print at 1:30 pm. Silver was hit likewise, dropping 58 cents, to $17.79. Nearly every commodity price was lower on the day, with just corn and natural gas bucking the trend.
With just 16 trading days left in the year, the two key dates are next Friday, the 18th, which is a quadruple-witching day for options expiration, and the 31st, the final day of trading for the year. With Christmas and New Year's Day falling on Fridays, the year will end with two short weeks. The 24th will be a morning session only, with the trading floor closing at 1:00 pm. New Year's Eve, the 31st, will be a full trading session.
Besides the US Dollar story, there was little else to move markets, although a report of declining same-store sales from McDonald's (MCD) and an earnings warning from 3M (MMM) helped push the Dow lower.
Dow 10,285.97, -104.14 (1.00%)
NASDAQ 2,172.99, -16.62 (0.76%)
S&P 500 1,091.93, -11.32 (1.03%)
NYSE Composite 7,056.26, -99.47 (1.39%)
Declining issues overwhelmed advancers, 4488-1987, a measure of more than 2:1, while new highs beat new lows, 217-51, with the margin now having declined for the fourth straight session from a high of 341 to today's 166, or, by more than half. Should the high-low indicator continue to weaken and eventually turn negative, the chances of a severe downturn would increase proportionately. As it is presently, the indicator is flashing only a slightly negative sign, though taken together with other indications, the market may be already past a turning point to the downside.
Volume remained consistently low, as traders seem to have already headed out of town for the holidays. Speaking of which, there are only 16 shopping days left until Christmas, and thus far, retailers have not offered any encouragement. The American consumer is spending with rarely-seen frugality this season, and the numbers may not even be good enough to surpass last year's dismal sales figures.
One caveat remains in place concerning holiday retail sales. Even though last year's figures were horrid, they may have been better than they should have been, given that the stinginess demonstrated by the banks was just beginning to take hold. More consumers were negatively affected in terms of credit during 2009 than prior to the shopping season of 2008. The financial collapse was only then a month or two old, so there was still a good deal of uncertainty and skepticism concerning the true depth of the crisis. It was only in January and February that the real impact of the financial crisis became real for many people. Bear in mind that stocks didn't bottom until March of this year, and the clanging impact of that bottoming is still resonant.
NYSE Volume 5,421,175,500
NASDAQ Volume 1,916,778,500
Commodities fell victim again to the stronger dollar, which, in the long term, is positive. Oil was lower by $1.31, closing at $72.62. Talk of testing the $70 level has been bantered about, but that is nothing but a number. The real test for oil will not occur until it approaches $65, and a stronger US Dollar should provide sufficient impetus to push it through that level down to more reasonable valuations. Yesterday, Saudi oil minister Ali al-Naimi proclaimed that the price of oil was "perfect" at $74/barrel. Today, he is likely a little less sanguine.
Gold dropped $20.60, to $1,143.40, though it has traded lower - down another $15 - after the official print at 1:30 pm. Silver was hit likewise, dropping 58 cents, to $17.79. Nearly every commodity price was lower on the day, with just corn and natural gas bucking the trend.
With just 16 trading days left in the year, the two key dates are next Friday, the 18th, which is a quadruple-witching day for options expiration, and the 31st, the final day of trading for the year. With Christmas and New Year's Day falling on Fridays, the year will end with two short weeks. The 24th will be a morning session only, with the trading floor closing at 1:00 pm. New Year's Eve, the 31st, will be a full trading session.
Monday, December 7, 2009
Bernanke's Remarks Quite Revealing of Future Fed Policy
Federal Reserve Chairman Ben Bernanke reiterated previous comments and provided even more clues to future policy for the nation's central bank. Throughout his prepared remarks to the Economic Club of Washington, Bernanke hinted at a tightening of policy in the future, though he was resolute in never using qualifies such as "near" or "short", keeping any anticipated federal funds rate hike at arm's length, at least. He also mentioned, at various times, that the Fed had other means for reigning in inflation, not limited to rate adjustments, such as repurchasing agreements and liquidation of some assets on the Fed balance sheet.
-- Federal Reserve Chairman Ben Bernanke addressing the Economic Club of Washington
The mopping up of excess liquidity has likely already begun, sufficiently demonstrated by recent moves in currency and commodity markets. On the first day of trading for the week, gold was hard hit early in the day while stocks held onto fractional gains all morning. Following Bernanke's remarks, the markets began to unwind, falling off their highs (up more than 50 on the Dow) to register in the negative as the day ensued.
Gold and silver managed to pare losses, and while the US Dollar was lower against most currencies, it was not by very much as the Euro continued a strong run against the greenback. Stocks continued to struggle along, as they have over the past three sessions. The indices put in hard triple tops on December 2, 3 and 4, and those intra-day high levels have been, and will continue to be, difficult levels to overcome.
Contributing to the weakness is a fairly obvious short-term overbought condition of stocks and the coming end of the calendar year. Many professionals have already locked in substantial gains prior to the month (indeed, many fund managers were through at the end of October) and trading volumes have been thin. Profit taking seems more the order of the day than actual search for value or the staking out of new positions.
Dow 10,390.11, +1.21 (0.01%)
NASDAQ 2,189.61, -4.74 (0.22%)
S&P 500 1,103.25, -2.73 (0.25%)
NYSE Composite 7,155.73, -26.98 (0.38%)
Simple indicators were slightly skewed to a positive bias, with advancing issues outperforming decliners, 3380-3103. New highs finished ahead of new lows, 352-49. Volume was at the low end of the recent range, and, in fact, among the lowest trading volume of the past two months, another sign that overall market participation is on the wane. Similar conditions are being reported on options exchanges.
NYSE Volume 4,780,842,500
NASDAQ Volume 1,894,192,500
Commodities continue to slide, with oil down to 2 1/2 month lows, down $1.54, to $73.93. Gold, which was down as much as $29 during the day, fell $5.50, to $1,164.00. Silver was down 14 cents to $18.38, though, like gold, losses were far greater earlier in the session.
Most of the indications currently in play are calling for nothing greater than sideways trade, which, by itself, puts pressure on the downside. With the general consensus that the markets are tired and trading slow, the potential for some spillage is evident. If the current short-term climb in the dollar continues, spurred along either by better US economic news or a flight to currency safety, the bet for stocks is presently neutral to lower. Chasing performance at these elevated levels goes against the most fundamental tenet of investing: buy low, sell high.
It's obvious that the professional traders are, or already have been, selling.
The improvement in financial conditions this year and the resumption of growth over the summer offer the hope and expectation of continued recovery in the new year. However, significant headwinds remain, including tight credit conditions and a weak job market. The Federal Reserve has been aggressive in its efforts to stabilize our financial system and to support economic activity. At some point, however, we will need to unwind our accommodative policies in order to avoid higher inflation in the future. I am confident we have both the tools and the commitment to make that adjustment when it is needed and in a manner consistent with our mandate to foster employment and price stability.
-- Federal Reserve Chairman Ben Bernanke addressing the Economic Club of Washington
The mopping up of excess liquidity has likely already begun, sufficiently demonstrated by recent moves in currency and commodity markets. On the first day of trading for the week, gold was hard hit early in the day while stocks held onto fractional gains all morning. Following Bernanke's remarks, the markets began to unwind, falling off their highs (up more than 50 on the Dow) to register in the negative as the day ensued.
Gold and silver managed to pare losses, and while the US Dollar was lower against most currencies, it was not by very much as the Euro continued a strong run against the greenback. Stocks continued to struggle along, as they have over the past three sessions. The indices put in hard triple tops on December 2, 3 and 4, and those intra-day high levels have been, and will continue to be, difficult levels to overcome.
Contributing to the weakness is a fairly obvious short-term overbought condition of stocks and the coming end of the calendar year. Many professionals have already locked in substantial gains prior to the month (indeed, many fund managers were through at the end of October) and trading volumes have been thin. Profit taking seems more the order of the day than actual search for value or the staking out of new positions.
Dow 10,390.11, +1.21 (0.01%)
NASDAQ 2,189.61, -4.74 (0.22%)
S&P 500 1,103.25, -2.73 (0.25%)
NYSE Composite 7,155.73, -26.98 (0.38%)
Simple indicators were slightly skewed to a positive bias, with advancing issues outperforming decliners, 3380-3103. New highs finished ahead of new lows, 352-49. Volume was at the low end of the recent range, and, in fact, among the lowest trading volume of the past two months, another sign that overall market participation is on the wane. Similar conditions are being reported on options exchanges.
NYSE Volume 4,780,842,500
NASDAQ Volume 1,894,192,500
Commodities continue to slide, with oil down to 2 1/2 month lows, down $1.54, to $73.93. Gold, which was down as much as $29 during the day, fell $5.50, to $1,164.00. Silver was down 14 cents to $18.38, though, like gold, losses were far greater earlier in the session.
Most of the indications currently in play are calling for nothing greater than sideways trade, which, by itself, puts pressure on the downside. With the general consensus that the markets are tired and trading slow, the potential for some spillage is evident. If the current short-term climb in the dollar continues, spurred along either by better US economic news or a flight to currency safety, the bet for stocks is presently neutral to lower. Chasing performance at these elevated levels goes against the most fundamental tenet of investing: buy low, sell high.
It's obvious that the professional traders are, or already have been, selling.
Subscribe to:
Posts (Atom)
Posts
