Wednesday, February 29, 2012

Keystone's Evening Nightcap 2/29/12

The move thru this turbulent two-day trading period laid out last evening continues.  The bearish move down after the open today did not perform any market damage. The SPX could not hold the sub 1365 level which would have ushered in stronger selling, so the bears did not have the downside juice.  The catalyst today was when Chairman Bernanke did not mention QE3, while at the same time, the markets discovered that LTRO2 was priced into the markets and the ECB did not make any mention of LTRO3.  Yes, LTRO3, the ECB does not have the funds that is why it was not mentioned.  The LTRO2 can still supply market juice moving forward, a few days time will be needed to note the effects on markets.

Chairman Bernanke's words sent the dollar higher with gold and silver markets selling off strongly.  The Nasdaq actually punched thru the 3000 level before falling on its sword.  The month ends today, on the leap day, and the markets experience their best February since 1998. AAPL is the markets and the markets are AAPL. Apple managed to punch out further highs in the 540's but the charts continue to forecast a spank down at the door step, perhaps for Thursday's trade.

The big news minutes ago is the China PMI, coming in at 51.0, better than last months 50.5, and above 50 indicates an expanding economy, albeit by a hair.  On the surface, this will benefit the commodities trade and weaken the dollar but the question is how much, since the number is not exactly anything that requires a big party. More importantly, the HSBC China PMI, which is considered to be more reliable (in other words the China PMI is likely fudged data--they learned that off the U.S. Fed, but at least the HSBC data is likely a little less fudged than the main China PMI number; is not this a sad commentary? It is what it is.).  More simply, the HSBC number should hit in a couple hours so listen up, and pay attention to that number to determine potential effects on the dollar, commodities, gold, silver, copper, and obviously, the broad markets.

We continue thru this Wednesday-Thursday gauntlet area with the HSBC number imminent, and the E.U. Summit begins tomorrow, Euro leaders will be looking for their jelly donuts and orange juice in a few short hours. Here is the schedule into noon tomorrow when the smoke will start to clear and we can see how the broad markets start to line out, exiting the gauntlet;

Thurs; 4:00 AM EST and on; E.U. Summit begins
Thurs; 7:00 AM EST and on; Motor Vehicle Sales
Thurs; 8:00 AM EST; Fed's Pianalto speaks
Thurs; 8:30 AM EST; Jobless Claims and Personal Income and Spending data
Thurs; 10:00 AM EST; Construction Spending and ISM Manufacturing Index
Thurs; 10:30 AM EST; Natty Inventories
Thurs; 12:30 PM EST; Fed's Lockhart speaks

Use volatility, VIX, as a gauge for broad market direction tomorrow. VIX is on top of the 20-day MA at 18.42, thus, above 18.42 and moving higher will cause the bears to rejoice. The VIX, however, will not cause any significant bear damage unless the 23 and higher level is achieved. If 18.42 is lost, then the bulls will be wrestling back control of the broad markets. If the VIX drops back under 18, the bulls are pouring booze back into the punch bowl because the upside party is ramping up again.

Watch CRB 313, now at 321, about 8 points higher.  Remember when we watched this a week or two ago and then it took off to the upside to signal one of the market bull legs higher? It's time to watch it again to see if it drops down into the bear camp again, or not.  The dollar behavior is very important; dollar up = CRB down. As mentioned above, the HSBC China PMI number is important as well and will directly impact the CRB.

For the SPX for Thursday, starting at 1365, the market bears have an easier road to hoe, only needing less than two points lower, to drop the SPX under the 1364 handle, and the market downside selling will accelerate. The SPX 10-day MA at 1362-ish would likely fail quickly as well and then the bears can show what they are made of.  The bulls will not give up easy and need to retrace the Wednesday intraday drop, to touch the 1378 handle, if so, the bulls will regain control of the broad markets.  A move thru 1366-1377 is sideways action.

In a nutshell, HSBC China PMI is imminent and will set the tone for tomorrow's trade, listen for news from the E.U. Summit as well. Jobless Claims, Personal Income and Spending, Construction Spending and the ISM Manufacturing Index are all important data points tomorrow.  The ISM will greatly impact the energy markets. Watch VIX 18.42, SPX 1364, and CRB 313 to determine broad market direction.

Note Added 3/1/12 at 5:47 AM: The HSBC China PMI comes in under 50, signaling manufacturing weakness for about the last five months. This number carries more weight than the China PMI, note how China is keeping the data above 50 while the more pertinent HSBC data continues to print under 50 indicating economic contraction.  Copper is up only two pennies indicating that traders are taking direction off the HSBC number.  Also, the media outlets are not highlighting the HSBC number which tells you that a happier face is trying to be painted by stressing the China PMI number and pushing the HSBC number onto the back pages. The commodity reaction is very subdued, thus, the market bears are keeping their claws dug into the markets. The data on tap this morning is very important and a market pivot point is likely at 10 AM. In additon, traders have ears raised hoping to hear Chairman Bernanke whisper sweet QE3 words. If Bernanke doubles down, and does not mention, or at least down plays, the use of QE3 moving forward, the broad markets should tumble lower.  An exciting morning is on tap, especially the first hour or two of trading.

Keystone's Midday Market Action 2/29/12

Happy leap day.  Lucky folks who have a birthday today only age at one-quarter the rate as the rest of us.  The LTRO2 excitment was a bit of a dud.  Looks like a lot of the news was built into equities.  The SPX moved up and over 1373, so price moved up to test 1377 R.  SPX punched up thru, but then sold off, now coming down to likely test the 1373 level to determine if price has a right to move higher.

Same stuff each day.  Nasdaq moves up and over 3000 so the new records continue. Watch the VIX, now at 17.97.  The bears will need to overtake the 20-day MA at 18.4-ish, if so, they may not look back from there.  But every journey begins with the first step and the market bears got nothing unless they first move above 18.  Speak of the devil, as this is typed, there is a VIX 18.04 print so watch the 20-day MA next, and, of course, see if the 18 level holds.  Chairman Bernanke is speaking now with the feed coming across the business networks.

Note Added 2/29/12 at 11:28 AM:  The VIX is now printing 18.50 maintaining the 20-day MA as support.  Market bears win above here, market bulls win if they push the VIX lower from here. Markets are significantly weakening, gold and silver pulling back, indexes now printing lows of the day.  The Nasdaq was leading the downside for a short while, now the Nasdaq and SPX are moving down at about the same rate.  Watch AAPL, it is the only thing holding the broad markets together. Apple showing a shooting star candle on the daily chart so we shall see if this marks the top.  Moving forward, watch the SPX 10-day MA at 1362, that is important if lost and should lead to further weakness. If AAPL goes negative, still three bucks positive, that will usher in strong market negativity.

Note Added 2/29/12 at 11:37 AM:  The SPX support/resistance is 1386, 1377, 1373, 1370.58, 1370, 1368, 1365, 1363.61, 1363, 1362 (10-day MA), 1361, 1358, 1356, 1352.62 (20-day MA), 1351.  SPX now printing 1367 so operating between 1365 and 1368. Apparently the lack of any mention of further future QE from Bernanke or the ECB (LTRO3) is ushering in the market weakness.  Markets need more crack cocaine and they were told this morning that the supplier is out.

Note Added 2/29/12 at 8:00 PM:  Interesting how the VIX closed at 18.43, one single penny above the 20-day MA at 18.42. How does Keystone know those levels to watch ahead of time? Bears did no serious damage since they could not even break down thru SPX 1365, albeit for a few minutes, and the bears could not hold it below.  The SPX 1364 handle is important for tomorrow, lose that handle and start printing in the 1363's, the SPX, and broad markets, should accelerate lower.  So bears will want to see red futures. China PMI numbers are very important.

LTRO2 Amount is 529.5 Billion Euro's with 800 Banks Participating

The LTRO2 news hit minutes ago.  The amount is 529.5 billion euro's. 800 banks asked for the 3-year loans, about one-third of the banks in the Eurozone. 71 of those banks aked for a one-day bridge loan yesterday.

The market reaction is muted so far. European bond yields and equities and futures markets are all moving sideways.  Traders appear to have a deer-in-the-headlight reaction, frozen in place not knowing which way to move.  Futures dropped a couple S&P's but then regained the loss to sit at 2 or 3 points on the plus side, basically flatish. The reaction to LTRO2 is subdued thus far, not producing a major impact on markets.

The ECB does not make a reference to a third round, LTRO3, yet.

LTRO1; 12/21/12:
489 billion euro's in 3-year loans
523 banks taking loans (one-fourth of the Eurozone banks)

LTRO2; 2/29/12:
529.5 billion euro's in 3-year loans
800 banks taking loans (one-third of the Eurozone banks)

Thus, the 529.5 number is above the 500 billion consensus, so a slightly larger amount than expected, but does not supply the heaping pile of crack cocaine needed to keep the party going. Market reaction remains muted as traders digest the information. U.S. futures remain flat.

Tuesday, February 28, 2012

CPC Put/Call Ratio Signals a Significant Market Top

This chart keeps highlighting a significant market top in place now. The low CPC numbers in the 0.7's verifies the complacency in the markets currently; do not listen to what traders say they are doing, this chart shows that they are fully comfortable staying long without any worry or fear. Note what happened in mid to late July last year when the complacency was at these levels.

The reason that traders are complacent is obvious; the wild orgy of money printing ongoing from the Fed, ECB, BOE, BOJ, China, and even emerging markets, is telling traders to not worry at all, go long and stay long, since the flood of liquidity says markets will grow to the sky. Interestingly, not one pundit has yet asked the question about what happens when every major central bank is easing at the same time? Is it really the major bullish event that traders think, or, is the entire boat simply rising and falling and the net benefit is not what would occur, say, when QE1 and QE2 occurred since this was mainly a solo U.S. liquidity program? The answer is that we do not know what happens when all CB's ease since this is the first time in world history that it is happening.

The 10 MA is above the 21 MA which is market bearish (CPC moving up), watch to see if the market bears can gain further credibilty moving forward if the 17 MA moves above the 25 MA. Note that the last high print was in mid-December which called the bottom in the markets (CPC 1.26). The CPC has not been above 1.1 ever since. The market bottoms are called as the CPC moves above 1.2, currently, we are at the other end, where market tops are called as the 0.7's are printed. Projection remains for a market sell off at any time. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your finanical advisor before making any investment decision.

Keystone's Evening Nightcap 2/28/12

Tomorrow is the leap day for the leap year.  The next two days of trading should prove quite dramatic. The LTRO2 news is the main event and it is only hours away tentatively on tap for 5 AM EST. Here's the playbill to keep track of the drama;

Wed; 5:00 AM EST; LTRO2 announcement
Wed; 7:00 AM EST; Mortgage Applications
Wed; 8:30 AM EST; GDP
Wed; 9:30 AM EST; Fed's Fisher speaks
Wed; 9:45 AM EST; Chicago PMI
Wed; 10:00 AM EST; Chairman Bernanke Testifies
Wed; 10:30 AM EST; Oil Inventories
Wed; 12:00 PM EST; Fed's Plosser speaks
Wed; 2:00 PM EST; Beige Book
Wed; 3:00 PM EST; Farm Prices
Wed; 4:00 PM EST; Monthly charts receive month-end prints
Thurs; (Overnight): China PMI and HSBC China PMI
Thurs; 4:00 AM EST and on; E.U. Summit begins
Thurs; 7:00 AM EST and on; Motor Vehicle Sales
Thurs; 8:00 AM EST; Fed's Pianalto speaks
Thurs; 8:30 AM EST; Jobless Claims and Personal Income and Spending data
Thurs; 10:00 AM EST; Construction Spending and ISM Manufacturing Index
Thurs; 10:30 AM EST; Natty Inventories
Thurs; 12:30 PM EST; Fed's Lockhart speaks

Oy vey!  Good ole Keystone better start taking some Excedrin to get ready, hopefully the ticker holds out. Perhaps the defibrillator should be placed on stand-by. This is a major market inflection point, melt-up versus collapse for markets. By noon Thursday the smoke will be clearing.  Farm Prices will impact the ag trade.  The ISM Mfg Index will greatly impact the energy markets and tickers such as XLE, ERX, ERY. Note the Fed heads out in force; they probably have contingency speeches ready so they can spin the news any way necessary.

The pundits and analysts have avoided making a market call in reference to the LTRO2 news.   Chickens.  Those brave enough are split with the outcomes. The consensus is about 500 billion (Bloomberg reporting 632 B) but it will not be a surprise to see a larger number. Markets probalby have the 500 bilion already priced in, we will know in a few hours.  Some pundits say a higher number will show that the economy is weaker than thought which would worry traders. Keystone says the markets have rallied on crack cocaine, so the more crack that is supplied, the more bull fuel is available, so a higher number should buoy the euro and the markets.  500 billion or lower and the markets should sell the news.

The Dow Industrials closed above 13K which has no meaning technically.  Of more import is that the SPX clsoed above the 2011 intraday high at 1370.58, thus the major indexes have all placed multi-year highs now, XLK, Nasdaq Composite, Nasdaq 100, Dow and now SPX. A big feather in the bull's cap. Keystone was surprised that the SPX highs were achieved, not that they were taken out, but that they were taken out without a substantial pull back first then a ride back up for markets to place the new highs. The move from mid-December is about 175 spoo points, from SPX 1200 to 1370's, 16 points per week for eleven straight weeks.  The power of money printing is truly impressive.  The RUT (Russell 2000 small caps), however, say not so fast bulls.  The small caps have not joined this party so watch RUT 860+ moving forward.

The left margin shows Keybot enjoying the bull run from mid-December, only pausing a couple weeks ago for the stutter step whipsaw fake out move. Keybot remains long and the bears can only breathe easy when the left margin shows the red short signal.  Keystone's top calling for shorter term trading, playing the short side in the indexes and sectors, continues to languish although the chart set-ups remain constructive for the bears. The next two days tell the story.

AAPL is the markets now. In this day and age, 2012, it is interesting to see that one single stock makes up such a vast majority of the markets, and is held by almost every money manager, fund and hedgie out there. The markets have a way of lulling many into a single position like that when one day everyone wakes up and looks around and realizes, typically all at the same time, that the boat is fully loaded to one side as the ship lists. Who would have thought that sophisticated markets could be so fully exposed to one single stock?  The recoil in Apple and the effect on the markets will be very dramatic. Oil was down today so we will see if the SPX follows since oil and the indexes move together, part of the asset relationship; lower dollar (due to global easing by central bank's) = higher euro = higher commodities, gold, silver, copper, oil, equities.

Gold and silver ran higher today as traders are front running the LTRO2 decision, expecting a weaker dollar and more commodity buoyancy. Silver was up over 4%.  The movement in oil, gold and silver is very interesting in reference to potential CME margin hikes.  Remember in 2011 how we would watch for the CME raises that resulted in spank downs of silver and gold?  The April 2011 silver spank down was brought on by the CME raising margin requirements.  Thus, keep the wax out of your ears and listen carefully for any margin requirement news moving forward.

Watch RTH 39 and XLF 14.40 for any signs of bearish strength.  The bulls remain comfortably above these danger levels.  The GS Wells Notice news may effect the financial sector negatively. Make no mistake that traders are complacent currently.  Despite any traders waxing worry and concern lately, the CPC prints 0.78 tonight, the bullish euphoria and lack of fear continues (this is a contrarian indicator). The low volatility where the VIX could not even close above 18 today also reinforces the complacency. The NYHL, although at high numbers, cannot regain the early February highs as yet, which is bearish. Keystone's SPX:VIX Ratio Indicator is 76 well above the danger level at 68 making bulls gleeful.  

For the SPX today, starting at 1372, the market bulls need only one point. If 1373 is pierced and held higher for several minutes, the bulls will launch another upside run.  Bears need a seven point drop to lose the 1365 handle to ignite bearish acceleration lower.  A move thru 1366-1372 is sideways action.

To keep it simple, watch SPX 1373, if taken out, SPX moves upwards to test 1377 R. Bears need to lose the 1365 level. Watch the dollar and euro reaction after the LTRO2 announcement.  Chairman Bernanke is taking a back seat to the LTRO2 news but listen for information on the end to the Operation Twist program in late summer and any blurbs concerning QE3. Enjoy the evening since the two-day battle begins in a few hours. Watch AAPL since as Apple goes, so goes the markets. The AAPL daily chart continues to highlight the 325-335 zone as a nice short entry due to the negative divergence now in place. The LTRO2 decision will be known about four hours before the open so set your alarm clock early to watch the theatrics unfold but guard your Cheerio's since something may be dumped in them before the open.

SPX One Minute Chart Overbot Rising Wedge Negative Divergence

The same theme continues thru the daily and minute charts, note the rising wedge profile, overbot conditions and negative divergence, all are bearish.  She's ripe to roll over but the Energizer Bunny keeps moving upwards.  Look for price to potentially place another high along the top rail of the rising wedge.  If price moves back up to that small pink line and moves above, check the indicators to see if the negative divergence remains.  This is a minute chart so it is only applicable over the next hour. The SPX is supsended in mid air now.  The LTRO news will be dramatic but perhaps today's market action will kick off the show. The important 1372 and 1370.58 levels are highlighted.

Keystone's Midday Market Action 2/28/12

SPX popped at the open and promptly rolled over on its sword after the Consumer Confidence data, which was actually better-than-expected.  Perhaps more and more traders are noticing the froth at these lofty levels.  AAPL continues higher, trees do grow to the sky afterall, but, the negative divergence remains so for the last five bucks Apple remains a nice shorting opportunity now.  There is no doubt that AAPL is holding up the tech sector which keeps the Nasdaq outperforming the SPX and reinforces continued market buoyancy. The markets are AAPL and AAPL is the markets.

VIX is the little engine that could for the market bears.  Since the major sectors remain in the bull camp, the bear hope starts with the VIX regaining the 20-day MA at 18.5-ish. VIX now printing 18.33 trying to muster up strength. The bulls attacked SPX 1370.58 but it only held for a few minutes. The bulls have been unable to attack the 1372 handle which is what they need for a bullish acceleration higher, so keep watching that today. The technical indicators and charts, as presented this morning, show the indexes ripe for a sell off, but, traders cling on to the positive outcome for the LTRO2 news coming in the hours ahead.  The LTRO2 is the main even this week. Today is all sideways action so far. Watch VIX, if bearish, you will be happy seeing 18.5 and higher.  If bullish, you want to stay under 18.5.

Note Added 2/28/12 at 12:07 PM: The bulls keep running with the ball. SPX 1370.58 and 1372 was taken out which opens the door to 1377 R. The bears are having a hard time keeping the VIX at 18 let alone overcome 18.5.  AAPL remains an attractive short now over the last 5 to 7 bucks to 532. Lots of trading remaining today, keep yourself strapped in as we approach the LTRO2 announcement.

Note Added 2/28/12 at 3:31 PM: The SPX is playing around in sideways mode today, the 1370.58 and 1372 S/R are key today.  VIX made a try for 18.5 today but then rolled over and is now trying to maintain 18 into the close, so the bulls are in charge.  Today is all AAPL, which boosts tech and the Nasdaq, and when tech leads the broad markets go up.  Gold and silver jumping today front-running the LTRO2 announcement in the hours ahead.  Dow keeps teasing 13K but this is of no significant importance. Markets are likely idling sideways into the LTRO2 announcement; traders are content to roll the dice and see what happens. Watch VIX and AAPL into the close.

Keystone's Morning Wake Up 2/28/12

The economic data hit minutes ago causing futures to pare gains that were enjoyed all morning long.  The euro is higher, and the Nasdaq futures are above the S&P futures, thus, the bulls have two feathers in their caps still yet. The SPX, starting at 1368 today, is set to challenge the 2011 intraday HOD again at 1370.58.  If the 1372 handle is touched, the bulls will enjoy more upside fun.  The market bears have to drive lower to yesterday's lows at 1355 if they expect to create any negativity.  A move thru 1356-1370 is sideways action today.

Watch the semiconductors, retail, financials and copper moving forward; SOX 412, RTH 39, XLF 14.40 and JJC 48.50.  The bulls enjoy prices above all these levels.  The market bears need at least one of these sectors to fall, otherwise, they got nothing.  Watch volatility, VIX, today since this soap oepra has surfaced again.  Volatilty should spike at any time, which would be in concert with the equities markets selling off. To gauge if this action occurs, watch the VIX 20-day MA at 18.54, the bears win a big fight if VIX moves above the 20-day MA. Market bulls win by keeping the VIX under the 20-day MA.
However, the bears will not be able to perform significant market damage unless VIX 23 and higher is printed.

Looks like the opening bell will provide drama at SPX 1370.58. Watch the 1372 which is the trigger for bullish acceleration higher.  Consumer Confidence at 10 AM is very important and will create a market pivot point.  Thus, the first half hour's action is not that telling but by 10:15 AM, the market tone will be set for today.  AAPL continues to play a key role; the negative divergence should kick it south now and the broad indexes should move lower in sympathy.

The LTRO holds the key to the markets fate this week as mentioned in the Key Events and Market Movers missive on the weekend. The consensus is about 500 billion euro's.  Traders have been talking about LTRO2 for a month now, there is positively some amount of LTRO2 priced into the equities markets already.  To handicap the drama, an LTRO2 of 500 billion or lower should result in a market sell off.  Any words from ECB leaders that try to back off the program will cause heavy market selling.

An LTRO2 of 500 or 600 billioin euro's will likely provide a market bounce, but the euro and the markets will probably be sold on the news resulting with markets leaking lower in the days following.  The big market plus would be shock and awe, making a statement with a 600 billion, 700 or even higher LTRO2. This is enough crack cocaine to explode markets higher in a wild orgy that will, at least, last until the next fix is needed in the near future. The expected 500 billion-ish number looks likely and the broad markets will probably leak lower in response to the news, barring perhaps a quick pop on the news. Traders have had a month to think about LTRO2 and thus buy the market day after day for a month expecting the announcement that occurs within the next 24 hours. Lots of drama ahead over the next day or two.

Note Added 2/28/12 at 9:01 AM: Case-Shiller housing data dissapointed, thus, the S&P's dropped a bit more now showing red. The bulls filttered away their upside move for the open.  The Nasdaq remains elevated above the S&P futures, however, so the bulls still have the strong tech feather in their rally cap's. AAPL behavior is critical today. The Consumer Confidence at 10 AM is extremely important today now that the economic data and Case-Shiller both disappointed.

SPX 30-Minute Chart Potential H&S Overbot Negative Divergence

Keystone's fave chart to monitor the SPX, the 30-minute chart with 8 MA and 34 MA's. Each candle represents 30 mintues of incremental time, so each day is comprised of 13 candles since the trading day is 6 1/2 hours. Yesterday's action shows the big opening sell off, then bounce. Note how the 8 MA was headed lower to stab down thru the 34 MA which is bearish, but before that could happen the markets were goosed higher after the open. Thus, keep watching for the 8 MA and 34 MA cross moving forward. Also watch the RSI 50% level where above is bullish and below is bearish.

The red lines show the negative divergence we watched a couple days ago which resulted in the Friday slap down. The pink lines show that negative divergence remains in place as higher highs occur in price, so nothing has changed, the chart indicates that a move down is in order. The price dropped under the 8 MA which is always a first step for the bears. The ADX shows a stong uptrend in place mid month (over 25) leading to higher highs but look at the paltry 14 number now, indicating that the uptrend has pooped out.

Lastly, watch the blue lines which show potential H&S patterns in play. If the currentl levels serve as the head, say 1370 (or use today's close if the bulls run a bit higher), the neckline at 1354 targets 1338. The thin blue line at 1358 may serve as a neck line as well which would target 1346. SPX 1341-1344 from mid-month is strong support so price will likely test those levels moving forward.

The bulls are the Energizer Bunny moving higher each day but the rally is very long in the tooth as this analysis shows. Projection is a move down for the SPX with an intial move to 1358-1362, the thin blue support line, since this is the price level of the large volume candle from a few days ago. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any financial decision.

SPX Daily Chart Upward-Sloping Channel Overbot Rising Wedge Negative Divergence

Price continues to respect the tight purple channel, for now. The overbot conditions, rising wedge and negative divergence forecast that a spank down should easily rupture the lower rail at 1360-ish. The blue line shows the volume participation by bulls is continuing to trail off as the index rises. This is a market negative. In strong bull markets, the volume should steadily rise as prices rise. The coming days should offer up plenty of market excitement.

The projection is down, with an initial test of the 1355-1360 area, a confluence of horizontal support and the 10-day MA. Then the big test of support with the 20-day MA, now at 1346.87. The behavior at the 20-day MA, as it always is for any index or individual ticker, is extremely important and will determine if bulls or bears win. The table is set. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any financial decision.

SPX Daily Chart Overbot Rising Wedge Negative Divergence

The market bulls continue the party but this chart is not happy. Note the green lines for the RSI and money flow indicators that were long and strong and wanted to see another higher high in price--they received that higher high now and it occurs as the red lines for the indicators show negative divergence across the board. This divergence, along with the overbot conditions, and textbook rising blue wedge, show that a spank down is on the doorstep, it is simply a matter of how much of a pull back is received.

Note the volume candles continue to show lower participation as the markets move up. Probably the same traders and hedgies selling stock to each other to float things up, but one of them will end up as the last fool, that always holds the bag. Note the 150-day MA, the light green moving average line, the slight upward slope shows that the bulls are in control. Should markets start to sell off, bears will do no real damage, on a longer term secular basis, unless the slope of the 150-day MA flattens then slopes negatively.

Yesterday's candle has a small tail sticking up above the body so it is not a true hanging man candle, that typically forecasts a trend change, but we will say its a cowlick a la Alfalfa from the old-time television show Our Gang sticking up from the head, and watch today for follow thru of this candle which signals that a trend change is on tap. Projection is a spank down for the SPX at any time, it is simply a matter of how far down she will want to sell off before the dip-buyers come in. The Consumer Confidence at 10 AM plays a key role this morning and of course the LTRO news will be the main driver over the next 48 hours. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

European Bond Yields 2/28/12

Italy 10-year yield dropped since yesterday now at 5.35%.  Spain dropped under the 5% level briefly, now at 5.00%.  France popped up over 3% briefly, now at 2.95%. The two main concerns are Portugal and Hungary.  Portugal moved up another ten basis points yesterday, now at 12.79% approaching 13%. Hungary jumps 20 basis points since yesterday to 8.86%, now only 14 bips from 9%, but the media ignores Hungary, for now. Money continues to seek safety in Germany with the 10-year yield now at 1.84%.

Monday, February 27, 2012

Keystone's Midday Market Action 2/27/12

The week begins with the bears growling but they are not producing any damage to the broad indexes. The SPX was either going to touch 1369 for bulls to win today, or 1363.61 for bears to win, so bears won, for now.  Keystone's SPX:VIX Ratio Indicator is at 73, five points above the 68 danger level so bulls do not appear worried.  AAPL is a couple bucks off the top but remaining somewhat buoyant. The slight Apple weakness is helping the Nasdaq lead the broad markets downwards, which provides bearish street cred for today.

The retail sector, RTH, remains above 39 so the bulls are not concerned overall, the LOD is 39.36 so the bears need to push 36 cents under today's low before the bulls start to panic. TRIN at 1.22 favors sellers although this is orderly steady-eddy stye selling without panic.  The NYAD printed a low at -1700 so not yet near the -2000 and lower that is more in tune with signaling a temporary washout so this favors the steady-eddy selling type vibe today sa well.

The SPX support and resistance indicates that the 1363.46-1363.61 zone is now a resistance ceiling and bulls can only develop positivity if they punch back up thru this zone and remain above.  Support below includes 1361 (where the SPX is battling now), 1358, 1357.49 (10-day MA), 1356, 1355 (important support the last few days--and today), 1351, 1347, 1346.54 (20-day MA), 1345 and 1344. The battle for 1361 S/R continues.....

Note Added 2/27/12 at 10:45 AM: Here is the test of the 1363.46-1363.61 zone, bulls punched up thru, see if it holds for seven to ten minutes, or not.  This fight will likely determine today's action.  Bulls must keep price elevated moving forward.  Bears need to push back under this zone, if so, they can push lower to retest the 1355 support from this morning.  Current print is 1363.58, smack dab in the middle of the zone, here we go, who will win today, bulls or bears? The bears appear to have the upper hand today, but this spike higher in the SPX shows that the bulls are trying to stop the down slide. The next few minutes are critical.

Note Added 2/27/12 at 3:15 PM: Bulls took the ball and ran with it from 11 AM on. The 1369 level was targeted and that gave way about a half hour ago.  The table is now set for the fight for the intraday HOD from 2011 at 1370.58, so there will be drama around this level into the close today.  Interestingly, tech is not leading the upside, so you would expect the bullish move to peter out; tech is somewhat coincidental with the broad markets, however.  AAPL punching out a new high is helping the broad indexes explore these upper levels.  The negative divergence remains for Apple so it is only putting off the inevitable downside spanking for a few hours, or a day or so.  Would not be surprising to see Apple sell off into the close today. TRIN is 0.84, bullish.  Lots of drama ahead for the last 45 minutes. Would not be surprising to see markets move lower again.  Watch SPX 1370.58.

Note Added 2/27/12 at 3:30 PM: Watch to see if volatilty, VIX, can punch up thru the 18 level.  There it is, VIX 18.01.  Remember last week we watched the struggle for the 20-day MA at 18.53. This fight may be front and center again as the markets move to the close today and in tomorrow's session.  Bears need to move above VIX 18.50 if they want to get something started, otherwise, they got nothing.  The VIX has jumped form 17.62 to 18.00 in the last 20 minutes which has ushered in some minor market negativity. VIX now printing 17.97, if this moves up, the broad indexes move down, or visa versa for the bulls that want to stay under 18.

Note Added 2/27/12 at 4:20 PM: SPX did not close above the 1350.78, so that is a feather in the bears cap.  VIX closed at  18.18, so we will call that in the bulls camp for now, and tomorrow we see if the VIX can move above the 18.50 level which will provide a feather in the bears cap if it occurs.  The sectors remain bullish overall.  RTH is at 39.75 well above the 39 danger level. The semiconductors require watching. The SOX is at 424, watch to see if the 412 fails which would signal market danger, today the SOX ventured as low as 418. Bulls need to be given their due, they are keeping the rally alive this year and are trying to burn off the overbot conditions and negative divergence by moving sideways. Any Europe or LTRO news leading to the Wednesday announcement is very importantConsumer Confidence is at 10 AM tomorrow and this data will serve as a market pivot point.

ZSL UltraShort Silver ETF Daily Chart Oversold Falling Wedge Positive Divergence

The inverse silver ETF continues to bottom. Keystone has liked this one from 10 and under, so he must love it at 9.18. The positive divergence remains (blue lines), as well as postive divegence on the weekly chart, and the falling blue wedges, as well as oversold stochastics and RSI, all point to price launching at any time, which would be in concert with the silver price falling.

The red lines show a potential inverted H&S that may be in progress now, using these current low prints at 9.18 as the head. A right shoulder will be needed moving forward so the chart can be monitored as the days and weeks play out. ZSL is an extremely dangerous ETF, and generally, you do not want to hold these for a long time.

Projection is a price bounce to occur at any time, inital target would be the gap fill at 9.7-ish, then a gap fill at 10.3-ish, then over time, an assessment of the potential 10.8-11.0 neckline can be made. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

WTIC West Texas Crude Oil Daily Chart Diamond Continuation Pattern

Oil is the big story nowadays. The yellow lines show a diamond pattern after the first leg up in price. Typically, bull flags or pennants will form in this area, the diamond patterns do not occur as often. The diamond signals either a drop off and collapse in price coming, or a second leg launch higher. Typically when diamond patterns occur after long moves up that will be in concert with a pull back, and visa versa, diamonds may signal bottoms after a long move down.

On this oil chart, the diamond occurrs after a first leg move from 77 to 102. When price broke above 102 it was obvious that the bulls were starting to run with the ball and the diamond resolution will be higher. When the breakout move up out of the diamond pattern occurred, that was the tell that a second leg up is likely on tap. Since the first leg moved 25 ticks, and the second leg begins at 97, thus, 97 + 25 = 122 price target.

This would sync with Keystone's 80/20 rule when a price breaks the 80 level it seeks the 20 level, thus when price was closing above 80, this always left the door open to 120. Also, 118 leads to 122. This strong spike higher needs to take a rest but looking at the green lines for the indicators, all show long and strong profiles and signify that price will want to see another new high after a pull back occurs. Thus, the 120-ish, to satisfy the diamond pattern, is very much in play for the days or weeks ahead. The 20 MA above the 50 MA is bullish. The Middle East turmoil obviously providing the premium in oil price.

Projection would be a move down to 102-103 only to bounce upwards again to target 120-122. At that time the chart can be referenced to see if negative divergence forms. Continued buoyancy in oil price means the M.E. turmoil should linger on. China PMI will also add drama this week since it will help gauge how much of the oil price is due to global growth projections.  Chances are, the high oil prices are mainly due to the ever-increasing dangers in the M.E. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

USDJPY Dollar/Yen Daily Chart Inverted H&S

The orange lines show an inverted head and shoulders (H&S) pattern with head at 76-ish. The thicker line shows the neckline at 78-ish, which was broken, so a target of 80 is in forecasted, and already achieved. Another inverted H&S can be forecasted with the same head but using the thinner neck line at 79-ish, thus, that target would be 82. Price is currently receiving a pull back from the 81 area. With the momo in place now, 82 should be tagged, then price can pull back and likely move sideways thru the 78-82 channel going forward.  Note that the necklines are ruptured without any back kiss yet taking place, thus, price should come back down to 78-79 for a test and bounce to show that it truly wants to head higher. If looking at the FXY chart, simply use the inverse analysis and project a H&S breakdown for that chart, the reverse of this analysis.

The weaker yen causes the dollar/yen to move higher, a higher dollar causes the dollar/yen to move higher. The white lines, and yellow lines, show the positive divergence that launched price, the chart easily told you at these junctures that you do not want to be playing the downside. Speculators buy at the white and yellow arrows to call bottoms. From March to the bottom in early November, note the falling wedge that gave a bounce projection more street cred as well.  Projection is a move to tag 82, then back down to 78-79, then sideways thru 78-82. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

AAPL Apple Daily Chart Overbot Rising Wedge Negative Divergence

The AAPL chart has been setting up with negative divergence over the last 3 or 4 days. We were looking for a 520's print to top it off, it's there. Note the textbook blue rising wedge forecasting a spank down. The blue lines show the negative divegence and along with overbot RSI and stochastics, all want to see a smack down.

Looking at the indicators thru January into February, note the green lines all showing a long and strong profile for price; this behavior demanded to see another higher high in price--and we now have that higher high in price. Of interest is the MACD line which punches out a tiny higher high, thus, after price receives this spank down, price will come back up for some buoyancy due to the MACD line, then likely roll over.

The neon green circles show all the juicy gaps left open as price made its parabolic move recently. These gaps will likely be filled at some point in the future. The 444 level represents the bottom level of the island that formed above. Thus, price may come down and collapse thru the gap to create an island reversal, that will be fun to watch as the days and next couple weeks or more tick by. For this near term, the projection is a spank down for price now, intial targets are provided by the open and closing prices of that high volume candle at 514-ish and 498-ish. As AAPL goes, so goes the markets. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

European Bond Yields 2/27/12

Greece 10-year yield continues higher, now at a ridiculous 34.42%. Here are the current yields as a new trading week begins.
10-Year Yields:
Greece 34.42%
Portugal 12.69%
Hungary 8.65%
Italy 5.46%
Spain 5.05%
Belgium 3.67%
France 2.95%
Netherlands 2.36%
U.K. 2.05%
U.S. 1.95%
Germany 1.89%

Portugal up a few basis points since Friday, so the focus and concern will increase each passing day. Hungary pulled back down since Friday by almost 20 basis points, but, as we have watched over the last month, it is a beach ball under water and sure to explode higher again.  For now, there is no talk of Hungary as a concern, perhaps 9% will signal trouble. Portugal and Hungary are the two major concerns right now. The other yields are moving sideways.  Germany and the U.S. are back under 2%.

Sunday, February 26, 2012

Keystone's Key Events and Market Movers Week of 2/27/12

© 2012 The Keystone Speculator™. All Rights Reserved. No part of this document may be copied although links to this site are encouraged.

Keystone presents the following underlying market currents, sometimes subtle, sometimes turbulent, that move global markets in real time.  The key dates and times below typically correspond to market pivot points.

Summary for the New Trading Week Ahead:

The low volatility confirms the complacency (along with the low CPC and other indicators) in place as the majority of traders do not anticipate any pull back in markets. For the traders that do expect a pull back, they only reference a minor rest for markets of 3 to 5%.  The Barron’s cover advertises Dow 15K a week ago.  Jeremy Siegel, Professor at the Wharton School, toured the cable business outlets to tell everyone Dow 15K and higher is coming.  There is no denying the positive market impact of the LTRO program provided by the ECB, as well as the Fed announcing low rates thru 2014. This crack cocaine has supplied the bull fuel, and this week, we find out how much more crack cocaine is on tap.

The estimates and projected outcomes from the imminent LTRO decision are all over the map.  To perhaps keep a simple approach with the announcement, since simple is always better, if 500 billion euro’s or lower are announced, equities markets will likely be disappointed, even though the consensus is in this area.  If the amount is from 500 billion to 600 billion that will likely please traders and provide an initial pop but the steam will probably come out of markets thereafter.  We will find out how much of the LTRO announcement is already priced into the markets.  If the LTRO program is a shock and awe event, with an 800 billion bazooka or higher, the equities markets will take off like a rocket, since that crack fix will be plenty to keep the addicted markets happy. The LTRO announcement is the main event this week and will have the greatest impact on markets.

The broad indexes continue to print new multi-year highs. The Dow Industrials keeps testing 13K and the SPX closed above the 2011 high at 1364. Markets always strive to hurt the maximum amount of traders. Right now, the bulls are back-slapping and telling each other how smart they are for riding the bull rally the last two months.  Bulls have no fear of the markets going down, many say that even if the markets do pull back, there will be plenty of time to cash out and take profits, or the pull back will be so minimal that there is no need for concern. The bears are frustrated from shorting the market beast, having to cover the shorts as markets rose, only to provide short-covering bull fuel to keep pushing the indexes higher.  Many short players are sitting out now, they would rather wait and see markets drop first so then they can be more sure of a committed down move.

Therefore, considering the bulls are complacent with their feet up on the desk, and bears do not want to sell the market, the best outcome to hurt the maximum amount of traders is for an overnight event to occur that causes the equities markets to open down large, perhaps even lock limit down. That way, bulls that enjoyed the upside will immediately cry foul since a huge drop would erase much of the profits and long players that jumped in over the last two or three weeks would be under water. At the same time, the short sellers that were waiting for the move down, got it, but the magnitude and speed of the move down leaves many short sellers in the dust, not holding short positions, now having to decide to chase the downside or simply accept the missed move.  Stay on guard, as this example illustrates, markets are very unstable currently.

Earnings continue along in force with many second tier companies reporting.  The AZO earnings on Tuesday and Vehicle Sales data on Thursday will provide automobile data to help gauge the health of the U.S. and global economy. ODP and SPLS will provide information on small business activity.  Early in the week, the LOW earnings and the Case-Shiller data will affect the housing market.  Lots of energy earnings are on tap, including the popular MLP’s, and the ISM data hits on the first, Thursday, as it does each month. The XLE, oil and gas stocks will respond strongly to the ISM data.

The high gasoline cost is becoming a serious issue and now that the general public is taking notice, the effects on the retail sector are probably not far behind. Gasoline prices are already at or near $4 working towards $5 per gallon in the U.S. in the area where demand destruction occurred a few years ago. When cars are parked in the driveway, people are not shopping, and, not earning money to go shopping.

Aside from the LTRO main event this week, Chairman Bernanke’s testimony in front of Congress this week is important.  The Consumer Confidence data at 10 AM Tuesday should provide a market pivot point.  The Beige Book provides another market pivot point at 2 PM Wednesday.  Note how the economic data is centered in the mid-week time frame Tuesday thru Thursday.  Friday is set up as a slow day but perhaps the excitement this week will have all traders crying for a slow day by then. The Mexico City communiqué is the direct news that traders are focused on tonight, Sunday night, into the start of the week.  The LTRO talk takes precedence over anything else occurring this week. China and HSBC PMI numbers on Thursday are very important since the copper and commodities markets, and in turn, the equities markets, will react on the news.

Continue watching AAPL since as AAPL goes, so goes the markets.  As Keystone pointed out with an Apple chart last week, and the chart can be updated and reposted over the next day or so, the AAPL daily chart is set up with negative divergence setting up a nice short trade since a spank down is on tap. In fact, the traders that went in to short AAPL on Friday may look smart come Monday. As AAPL moves lower, so will the broad markets. 

Watch the Nasdaq versus S&P 500 percentage moves in real-time. If the Nasdaq 100 and Nasdaq Composite start to lag the broad market, the SPX, that will show tech running out of gas and thus affect the broad markets negatively. This occurred Friday, 2/17/12 thru Wednesday 2/22/12 for the first time this year. Traders enjoying the technology rally will likely take profits moving forward.  February is typically a month where tech traders take profits since the strong Q4 seasonality has now passed and this week we will be moving into March already.

Market bulls have made serious gains in the broad markets over the last month, overtaking the moving average lines as well as other key levels indicating a return to secular bull markets.  The bulls are in good shape as long as they stay above SPX 1284 and NYA 7650. The dollar and euro dictate the markets, up dollar = down euro = down commodities = down markets and down dollar = up euro = up commodities = up markets. Chairman Bernanke crushed the dollar with extending the low rate Fed policy into late 2014. Thus, Bernanke’s testimony this week will impact the dollar, and markets, again.  The euro moves opposite the dollar and in the same direction as equities. Thus, the LTRO decision this week will impact the euro, and, in turn, one of the relationships highlighted will play out.

For the SPX, starting at 1366, the market bulls need to touch 1369, if so, the intraday HOD from 2011 at 1370.58 is tested next, which leads to 1377. The market bears need to push the SPX back under the 1363.61 (2011 closing high), if so, the broad market selling will accelerate. A move thru 1365-1367 is sideways action. Since the projected range is very tight for Monday’s trade, the markets will likely commit to one side or the other, thus, watch 1369.00 and 1363.61. Keep an eye on retail this week as well, the RTH 39 may play a key role. We also find out if March comes in like a lion or a lamb.

Key Dates and Times for the Week and Month Ahead:

·         Monday, 2/27/12: Traders are awaiting the communiqué from the Mexico City meeting which will help assess the struggle between LaGarde and Germany.  Listen for news concerning the second LTRO program over the coming days. Watch the European 10-year bond yields, especially Portugal and Hungary.  Congress will return from a one week holiday recess which is a market negative. Listen for any China news, especially growth projections, which affect copper and commodities markets, and in turn, equities markets. PMI is important on Thursday. Markets remain in a Bradley turn window thru Wednesday so watch for a potential market trend change to occur early in the week, if it occurs. Pending Home Sales 10 AM. Dallas Fed Mfg Survey 10:30 AM. Earnings: AONE, ACHN, AEGN, AMRS, ATLS, CCC, CECO, DPM, DNDN, EGLE, EP, GXP, HGSI, HOGS, JAZZ, LOW, MRX, MELA, OXGN, PBT, PCLN, KWR, KWK, SOL, SJT, SWN, SVNT, SINA, JOE, TIE, UHS, URS, VTUS, VISN, VVUS, ZAGG, ZIOP.
·         Tuesday, 2/28/12: Durable Goods 8:30 AM. Case-Shiller 9 AM. Consumer Confidence 10 AM.   Richmond Fed Mfg Index 10 AM. Fed’s Pianalto speaks 7:15 PM. Earnings: AMED, ANGN, AZO, CERS, CRZO, DPZ, DSX, DWA, FSLR, FE, GTLS, HFC, MWE, NKTR, NRG, ODP, STEC, PANL, VRSK, VPHM, WNR, WTR.
·         Wednesday, 2/29/12: Leap Day for Leap Year. EOM. The announcement of the second LTRO program is the major market mover for the week. Mortgage Purchase Applications 7 AM. GDP 8:30 AM.  Fed’s Fisher speaks 9:30 AM.  Chicago PMI 9:45 AM. Chairman Bernanke speaks 10 AM. Oil Inventories 10:30 AM. Fed’s Plosser speaks at noon time. Beige Book 2 PM. Farm Prices 3 PM. Earnings: BID, COST, EIX, EVEP, FNSR, ISIS, JOY, LIZ, MDR, NOG, PETM, SIGM, SODA, SPLS, YGE.
·         Thursday, 3/1/12: E.U. Summit begins. China PMI and HSBC PMI data. Motor vehicle Sales data. Pianalto speaks 8 AM.  Jobless Claims and Personal Income and Outlays 8:30 AM.  Construction Spending and ISM Mfg Index 10 AM (watch the energy markets).  Natty Inventories 10:30 AM.  Fed’s Lockhart speaks 12:30 PM. Fed Balance Sheet and Money Supply 4:30 PM. Fed’s Williams speaks 10 PM.  Earnings: GMO, JRCC, KR, FL, FLOW, LORL, MITL, SATC, SPPI.
·         Friday, 3/2/12:  Fed’s Bullard speaks 8 PM. Earnings: ALTI, BIG.
·         Thursday, 3/8/12: ECB Rate Decision and Press Conference.
·         Friday, 3/9/12: Monthly Jobs Report 8:30 AM.
·         Monday, 3/12/12: Eurogroup meeting of euro zone finance ministers in Brussels.
·         Tuesday, 3/13/12: Ecofin meeting of European Union finance ministers in Brussels.
·         Tuesday, 3/20/12: Greece deadline for financing.
·         Friday, 3/30/12:  Informal meeting of EU finance ministers in Copenhagen.
·         Thursday, 6/28/12: EU Summit for heads of state in Brussels.

Saturday, February 25, 2012

SPX S/R Week of 2/27/12

The SPX closed above the 2011 closing high at 1363.61 which is a feather in the bulls cap. The tech strength this year started the trend in the indexes making new multi-year highs.  The XLK, COMP, and then the Dow Industrials last week took out the multi-year highs.  The single lonely number target remaining above now is the SPX 1370.58 intraday HOD from 2011.

For the SPX, starting at 1366 on Monday morning, the bulls need to touch 1369, if so, the move to test 1370.58 will occur quickly. Note that a break up thru the 1371 resistance will lead to a move to test 1377, so the 1370.58 is an important line in the sand.  The G-20 meeting ongoing as this is written will affect the euro, and thus the dollar inversely, for Monday's trade. Euro up = up markets. Euro down = down markets.

The market bears need to push lower to regain their composure and this is very difficult with the dollar losing steam.  Thus, bears need to see a stronger dollar = lower euro = lower equities.  If the bears can push back under the 1363.61 number, the downside will accelerate lower. Watch the 10-day MA since this moving average has served as strong support for this bullish rally since mid-December. Any rupture of the 10-day MA to the downside is bear-friendly.  A move thru 1365-1367 is sideways action. Note the tight range projection for Monday, thus, it is highly likely that price will commit to one side or the other; watch SPX 1369 to see if the bulls win, or, 1363.61 to see if the bears win.

·         1399
·         1391
·         1389
·         1386
·         1377
·         1371 (5/2/11 Intraday HOD 1370.58)
·         1370
·         Friday HOD 1368.92
·         1368
·         Friday Close 1365.74
·         1365
·         1364 (4/29/11 Closing High 1363.61)
·         Friday LOD 1363.46
·         1363
·         1361
·         1358
·         1356
·         10-day MA 1355.65
·         1351
·         1347
·         1345
·         20-day MA 1344.30
·         1344
·         1341
·         1339
·         1338
·         1337
·         1336
·         1333
·         1332
·         1331
·         1330
·         1329
·         1327
·         1326
·         1323