Wednesday Vue -- 04/10/2013

Good Morning World,

Opening Vue:

• News is really discounted as shown by yesterday's news and the DOW reaching new record heights. Alcoa kicked off earnings season -- news? - not so good.  The S&P500 had alternated between gains and losses 14 days in a row.  Yesterday ended that. I told you that several of the investment funds were expecting a "good" earnings season.  The stock market prices reflect expectations for the future: Not the reality of today.  Again, that is worth the price you pay for reading this blog.
• For example, the Wholesale Trade report was good as it showed inventories were being reduced.  The DOW was up with very small corrections after that report.  It is all about the future...  
• DOW continues to gain ground.  It has not had a 3 day losing season in 2013.  That is unusual enough, but the global economy has observed several very rough spots (including the USA).  And yet, price is what it is. -- Still my advice holds.  Take out insurance on any longs in the stock market you have.  Except for very long term investments, it is still a good idea to reduce the risk as much as possible -- take profits. 
• Yesterday's NYSE was paced by financial, consumer discretionary, consumer staples, transports and utilities.  This was actually a mixed reaction as everything participated - cyclicals and counter-cyclicals. 
• VOLUME WAS EXTREMELY LIGHT!!!  BEWARE!!!!  The gods must be crazy, and the winds could shift at any moment to the downside.  If you are a retail trader: Remember, it is you that the BIG SHARKS make their living off.  
• VIX (index $VIX) closed at 12.84 yesterday.  $VIX won't open until 9:30 AM EDT, but VXX - ETF from iPath -- is down.  If you don't know, VXX and $VIX move in lockstep for the most part, and both move opposite to the S&P 500. Often $VIX will lead the S&P by a very short time period - or in other words, if $VIX starts up, the stock market will start down immediately, or follow with in 1-2 minutes.  However, as usual with any relationships in the markets, anything is possible.  Basically, $VIX is indicating there is not much fear of any downward movement in the stock market.  
• There is one number that is calculated by the S&P floor traders that is useful if you are trying to determine what the probability of the stock market being up or down today.  This is the PIVOT number.  http://stockcharts.com/school/doku.php?st=pivot&id=chart_school:technical_indicators:pivot_points The main one is the Pivot point.  The Pivot Point is an average of the high-low-close from yesterday.  If the market is trading above this number after trading overnight, look for the market to pause if it pulls back to this point. When overnight trading is above this number, there is a way better than 50% chance the market will close up for the day.  This of course drives academics who study these things crazy, unless they apply behavioral economic theory to their studies.  Why?  Because according to the random walk theory, this kind of support (or resistance if the market is below the Pivot) should be no more than 50% chance of forecasting where the market will be.
• Stay tuned, and I will give you an update on Trader Commitment across the equities as I have time this morning.  
• At the moment, it looks like the DOW will open up, and Level II information is saying the same for NASDAQ.  Not so definitive on S&P 500.