daytrades april 13 pre-market

Morning traders.

Market wrap: Shares will open under pressure for a second day following sharp falls in commodity prices and US and European equities overnight.

The June SPI futures contract ended the night session 26 points or 0.53% weaker at 4891 as risk aversion swept world markets. Oil plunged more than 3% for a second night, copper suffered its heaviest fall in five weeks and precious metals continued to retreat.

The S&P 500 fell for a fourth night as weak US economic data compounded concerns over Japan's nuclear crisis and Alcoa's disappointing earnings report. The benchmark index dropped 0.78% but closed above its 50-day moving average. The Dow lost 118 points or 0.95% and the Nasdaq gave up 0.96%.

"Investors are taking some risk off the table," a manager at Huntington Asset Advisors in the US told Bloomberg. "Every time you mention the word radiation, you end up scaring people. I don't think there were any illusions that Japan was not one of the most serious nuclear accidents we've seen."

Commodity prices tumbled as Japan upgraded its assessment of the crisis at the Fukushima nuclear plant to the same level as the Chernobyl disaster in 1986. Tokyo Electric Power said yesterday the plant may leak more radiation than Chernobyl. A global commodities measure dropped almost 2%, its steepest one-day fall in a month.

Also weighing on sentiment in the US was a downturn in trade that prompted some economists to lower their growth projections. Imports fell 1.7% in February and exports declined 1.4%, suggesting weakening first-quarter activity. A separate report showed confidence among small businessmen declined to a five-month low last month as energy prices rose.

The weak US data added to pressures on oil, which has now lost more than 7% in two days. Light sweet crude for May delivery was recently down $3.89 or 3.55% at $106.03 a barrel. Traders ignored news that rebels in Libya have rejected a cease-fire proposal and OPEC has hiked its demand outlook for oil.

Resource stocks fell heavily in US trade, with Alcoa dumped 6% after releasing a Q1 earnings report marred by higher energy and raw-material costs. BHP lost 2.4% in US trade, Rio Tinto 2.3% and Alumina a whopping 6.8%.

Industrial metals continued to pull back sharply from Monday's peaks. In London, copper fell 2.2%, aluminium 1.2%, lead 4.1%, nickel 3.8%, tin 2.2% and zinc 3.3%. US copper was recently off 1.7%.

"All of these markets - aluminum, oil, copper - all had big, big runs over the past few weeks. So what we are seeing is just a sharp pullback," the chief executive of
Sarhan Capital told Reuters. "They all took the stairs up, but are now taking the elevator down. The question is how far down will this elevator ride go?"

Precious metals retreated as the big slide in oil and raw materials temporarily eased inflationary worries. Gold for June delivery was recently down $13.80 or 0.9% at $1,454 an ounce. May silver fell 50 cents or 1.2% to $40.13 an ounce.

The major European markets lost ground after Alcoa got the US earnings season off to a limp start, with mining stocks hit hardest. Britain's FTSE slumped 1.47%, Germany's DAX 1.42% and France's CAC 1.54%.

TRADING THEMES TODAY

RISK AVERSION, VOLATILITY ON THE RISE: Wall Street's fear gauge, the VIX, rallied more than 3% overnight as traders hedged against the threat of a significant pullback in shares. However, it's important to remember that earnings season is always volatile in the US, as hope and fear ebb and flow with the latest reports, and Alcoa's result will be quickly forgotten if it proves a one-off. It's far too early to call this earnings season a disappointment. More concerning for Australian traders is the on-going slump in resource prices. So far this appears to be little more than an overdue pullback - again it's too early to draw long-term conclusions. Our market took some of its medicine yesterday and may stage a recovery at some time today.

BOUNCE SCALPING: Volatility brings opportunities to make quick money by trading shares that become oversold on an intraday basis. These are quick opportunities generally occurring in the first hour or two of trade before the market settles down. When fear grips the market, buying support can crumple very quickly, sending shares sharply lower. I look for shares hitting obvious support levels hard and then holding. I then look to sell into recoveries as value buyers and bargain hunters take over. This is purely an intraday strategy and works best with the more liquid small and medium caps. It comes with obvious risks - if I take four trades I expect to lose money on at least one. The key is to manage the trades well enough that the profits outweigh any loss.

ECONOMIC NEWS: Consumer sentiment figures are due at 10.30 am. Tonight's schedule in the US is topped by retail sales and also includes crude oil inventories, business inventories and the Fed's beige book.

Good luck to all.