Ahead of the open (14-12)

A puzzling early upward bias on what was only incremental news, if not negative (retail #’s lackluster, BBY earnings) had the market rallying.  The pre-market can be explained by a better sentiment overseas (decent auctions, but were only 3mth ones), the gains afterward left one dumbfounded. This was followed by a dramatic fall in the euro in minutes with equities scaling back all gains and more on a report Merkel said no to the ESM being topped up. Really?. Didn’t they just move up date of ESM with no extra firepower talk speculation? Market seems to be getting greedy and jittery at the same time. This ESM top up and Merkel’s repetitive response to it was not an immediate market expectation post- Summit or a surprise.  The upside or downside made no sense as there was no ‘real’ news.

The process of writing daily Journals begins with sticky notes you can say throughout the trading day as the paragraph above written in the morning. It’s not to recap the events for the next day’s journal as it’s never been the intention to recap here, but instead a ‘mentality check’, methodology, a look into what’s on the mind of a trader(s)during the day. The reason behind mentioning this now is the above paragraph can be repeated for the big sell off post- FOMC minutes. Last month, a lead into FOMC and possible MBS whispers came to an abrupt halt and was put away in this view into this FOMC meet up.  How the market or why the market responded the way it did leaves one dumbfounded again as it was not expected. These moves are always telegraphed. The only noise of FED action was a rumor of such floated in the morning.  (Statement was inline, so it was pure QE speculation).  Is the trader becoming naïve too, besides greedy and jittery.  It doesn’t happen this way, if anything was to happen it would have circulated around institutional desks days before and you would have heard about it here. The morning ramp and sell off was repeated in the afternoon on empty speculation. If there was no QE from ECB, why would the FED QE now?

All in, the trading action is signalling a lot of uncertainty and jitters, it all goes to show yesterday’s lead of ominous signals in the market are not be taken for granted …”..but break of 20MA (closed just above) is ominous when paired with Euro and Gold selling off today.( today,Euro slid to Jan lows ~1.30 and heading lower it seems 1.28 to start, Gold liquidating,off 5% on the week)… 20MA held today thanks some late dip buying, (again) but a potential close below it in the days ahead will dampen any hope of a risk on seasonal rally and instead a sell mode effect will prevail. A nearby cross of 20ma/50ma is ominous as well.  Fears are seemingly accumulating now as INTC (BBY today) woke up those not “paying attention”,(SMH hit hardest vs. other important indices)….  The stress of Europe on others is beginning to show it’s hand.

Let’s add the weakness in financials and the seasonal rally of 9% looks to have hit late Nov/early Dec as any idea of a rally now into year-end is cooling off.