GDP dissapoints at 2.8%, which is actually an improvement over recent numbers, but traders expected 3% and higher. The news impacting markets is coming in waves. Trying to keep up with it all is fruitless, the weekends are needed simply to play catch-up and process the information. RVBD and JNPR tech earnings were weak so that may impact tech today. Earnings this morning were not that impressive, F, PG, CVX, etc... About 70% of companies are beating earnings but remember, most of these beats are against lowered expectations. Everyone receives a trophy nowadays. In addition, many companies are guiding lower. Another whammy is that many top line revenues are only in line, few are beating and those that do are only beating by a smidge. This speaks volumes about the actual consumer. Holiday spending was performed using credit cards and folks dipping into savings.
CAT earnings were stellar but most positively effected by activity in the States which accounts for about one-third of its business. CAT is an excellent proxy for the global economy, especially emerging markets, and although the overall picture is positive, the areas where the growth is most expected and needed is not where CAT's success occurred. T, the huge divvy play, fell over 2% yesterday, the telecom sector in general weak. Margins are falling as they handle the demand for iPhones. Interesting to see that AAPL had blow-out earnings but many of the support companies, from chips and parts, to the glass, and the telecoms as well, are guiding lower.
The GDP data a few minutes ago weakened the futures. For the SPX today, starting at 1318, the market bears need to push lower about four points, to lose the 1314 handle, and more specifically 1313.60. If so, the broad markets will accelerate lower in short order, the SPX then likely testing 1307-1308. The bulls have a tougher road ahead today since they need to attain 1333 to reignite the upside celebration, 15 points higher, and now the major index futures are all red. A move thru 1315-1331 is sideways action.
The same culprits are in play today. Watch Keystone's SPX:VIX ratio, now at 71.00. If 68 is lost, the broad markets will experience a significant selling event today, the Dow Industrials down triple digits. If the ratio stays above the 68, then any downside move will be limited. The Nasdaq futures are down -0.24% while the S&P futures are down -0.52%, thus, the Nasdaq is not leading the anticipated downside move today so the move lower may be muted. Watch to see if the Nasdaq accelerates and leads lower which would accelerate the bearishness. A Bradley turn date also occurs tomorrow so the market is ripe for a trend change now.
Note Added 1/27/12 at 9:50 AM: The market move down after the open petered out quickly since the Nasdaq is not leading the downside. The SPX came down, however, and bounced directly off of Keystone's target at 1313.62, thus, support held. Look for another test of this 1313.60 level. SPX:VIX is remaining above 68 continuing to favor bulls. Consumer Sentiment data hits any minute and this is a potential market pivot point.
Note Added 1/27/12 at 10:18 AM: Consumer Sentiment was 75.0, a happy reading, highest in about one years time, but the market pivoted on the news and sold off dropping down to test that 1313.60 again. A failure did occur at 1313.60 but only for seconds before the bulls pushed the SPX back upwards. Watch for further tests of 1313.60. If it fails and the failure holds for seven to ten minutes, the bears will accelerate the down move in the broad markets strongly. SPX:VIX is at 70.41, well above the critical 68, dampening the bearish action.
Note Added 1/27/12 at 10:50 AM: SPX failure at 1313.60 at 10:46 AM--and another rebound bounce occurs. The bulls are not giving up easily, they are trying to prevent the 1313.60 failure with all their might. Here's the fifth test coming today...........
Note Added 1/27/12 at 10:59 AM: Remember how important the utilities sector was a couple days ago, before the Fed announcement? The UTIL 439 is a key level this week. The utes are weakening today now printing a 448 handle. For next week, Keystone's algorithm, Keybot the Quant, identifies the 453 level as key. UTIL is now printing 448.15. Thus, watch UTIL extremely closely today. If UTIL closes under 453 at 4 PM today, the broad markets will be in serious trouble when the Monday morning opening bell rings. SPX now popping up towards 1316, the bulls are not giving up today. The tech strength, Nasdaq, is supporting the market bulls today.
Note Added 1/27/12 at 11:35 AM: Portugal is blowing out with the 10-year yield now at 15.22%, up 40 basis points in the last six hours, it appears they are losing control. The Greece talks with bondholders were supposed to deliver the goods today, now it is looking like the can will be kicked into the weekend. The E.U. Summit on Monday is a more firm deadline. Europe needs to provide plans and direction. Even with an acceptable handling of Greece now, Portugal is spinning out of control and may need a second bailout immediately. What a mess.
Note Added 1/27/12 at 11:46 AM: SPX failure at 1313.60 at 11:40 AM. This may be for real this time. A bearish acceleration lower would be expected if the bears hold it under 1313.60. A back kiss would be needed. The SPX:VIX ratio is 69.94 so this continues to place a dampener on any downside move. The bears need to see 68 for the ratio. Tech buoyancy continues to help the bulls. UTIL now printing a 447 handle.
Note Added 1/27/12 at 1:02 PM: SPX failure at 1313.60 at 12:58 PM. If price finally decides to stay under 1313.60 the broad markets should accelerate lower. The buoyancy in tech and the SPX:VIX above 68 continues to support the bulls today preventing any significant downside. UTIL venturing down to the low 447's. Every step lower makes it more likely to print under 453 at the close today three hours away.
Note Added 1/27/12 at 1:04 PM: Fitch rating agency downgrades Belgium, Cypress, Italy, Slovenia and Spain.
Note Added 1/27/12 at 1:25 PM: UTIL printing a 446 handle. The fight along SPX 1313.60 support/resistance continues.
Note Added 1/27/12 at 3:33 PM: The bulls are pumping the indexes into the close with the SPX now testing 1319. Price continues to fight thru the support/resistance gauntlet at 1314-1319. The Nasdaq bullishness today and SPX:VIX ratio now over 72 would not permit the broad indexes to move lower today. UTIL is 449.26 appearing to want to close under the critical 453 level.
Note Added 1/28/12 at 8:00 AM: The markets trailed lower during the last half hour of trading. The bears did not perform any negative damage since the Nasdaq, technology, continues to relentlessly lead the upward momo. Of interest, for Monday's open, the utes, UTIL, will automatically begin in a market bear-friendly position. As long as UTIL stays under 453, market bears will begin to be favored moving forward. If UTIL moves up at Monday's open and regains 453, that is an immediate tell that the market bulls will continue to push much higher. After such an impressive bullish market move in December-January, the down side is hard to envision, the markets have a way of lulling you into this mindset. But if UTIL remains under 453, the markets are in serious trouble. The UTIL 50-week moving average (MA) must be closely monitored as well. If the broad markets do weaken moving forward, a failure of UTIL at the 50-week MA, now at 432.07 and moving up, represents a trap door for the broad markets where bearish carnage runs wild. Thus, the utilties are key come 9:30 AM Monday. There is lots to look at and post as the weekend moves along. The Greece bond holder talks are front and center leading into Monday's E.U. Summit.
Again.... Thank you for sharing your vast knowledge.....it's invaluable!!! What is it about the utilities that is so important to the entire market moving forward. Chuck
ReplyDeleteHello Chuck. The utilities are used by the old-timers to forecast coming broad market weakness. A great reference is an old book, it has a red cover, Stock Market Logic, by Norman G. Fosback, which describes how to use the utilities sector for market forecasting.
ReplyDeleteThe basic idea is that as long as the utilities are moving in a weekly upward trend, the broad markets are rockin' to the upside. Should the utilties uptrend reverse into a weekly downtrend, typically at the same time or within a month or two time the broad markets typically roll over and die.
The way you determine if a weekly uptrend exists, or not, is to count backwards 15 weeks from this weeks close. That is the comparison number. This is why Keystone monitored UTIL 439 last week and why 453 is so important for the week ahead. UTIL closed at 448, thus, the utes remain in a weekly uptrend and the bulls are drinking champagne. But, at the opening bell Monday, the world changes. UTIL will be under the 453, at least in the first few seconds, thus signaling a move to a weekly downtrend for utes and forecasting broad market trouble.
That is only Part One of the deal. UTIL moving into a weekly downtrend creates broad market weakness. Part Two is when the utes lose their 50-week MA, which can be thought of as a trap door opening on the broad markets.
In the summer of 2010, the broad markets were lost. The indexes were going over the falls, the utes had collapsed under the 50-week MA, that is why Chairman Bernanke had to step in with QE2, to save the markets. But all that did is put off the inevitable to some future day when it will be far worse than it should have been. So watch the utes, UTIL, closely moving forward, the 453 and 432 numbers playing a key role as UTIL starts the week at 448.
Thanks. ... And I have that book. Again... Thanks for all your help. Chuck
ReplyDelete