Friday, June 8, 2012

Keystone's Midday Market Action 6/8/12

MCD lays an egg this morning with an earnings warning moving forward. The stock is down 3% and will contribute about 20 negative Dow Industrials points at the open (multiply the projected 2.5 point loss for MCD by a factor of 8 to provide an estimate; you can use this formula for any of the 30 Dow stocks). The divvy bubble is stretched, perhaps this is a sign of the popping of the dividend stock bubble? Markets continue to wildly react to the news wires, one minute Europe says things are dire, markets drop, the next hour they say a Spain bailout is on tap this weekend so markets turn happy.  There is talk that the China economic data this weekend must be very weak since China reacted with a rate cut mid-week rather than waiting for the weekend as is typically the case.  Keystone says balderdash, do not read too much into the move which was more likely the starting point of a coordinated global QE plan coming. Perhaps step two occurs during the pizza meetings all weekend long where a Spain bailout deal is finalized. The Spain bank audits are due on Monday so the timing of a Spain bailouot would be ideal reminiscent of the U.S. in March 2009 with the bank stress tests and QE1 announcement. So keep the Internet handy during the weekend fun and frolic to see how the Euro leaders proceed with Spain.

Sticking to the technicals, the NYA 40-week MA at 7644 is the goal the bulls must achieve to take markets higher. The SPX 12-month MA at 1292-ish is the goal the bears must achieve to take the markets lower.  For a direct gauge on the markets today, watch RTH 41, starting at 41.20.  If RTH loses 41 after the opening bell, the bears got game, if not, the bears got nothing.  For the SPX starting at 1315, the bears only need two points lower, to push under 1313, and the downside will accelerate, the SPX likely testing the strong 1307 support.  The bulls will simply try to prevent any significant downside from occurring by keeping the RTH above 41. If RTH fails, the SPX 1292-ish as described above becomes very important. A move thru SPX 1314-1328 is sideways action today.

Keybot the Quant, Keystone's proprietary trading algorithm, flipped long on Wednesday at 11 AM. The first hour and one-half of trading today is very important and will likely determine the remainder of the day.  If the RTH loses the 41 level, and the SPX drops under 1312, Keybot will likely flip back to the short side. Thus, a hectic busy first couple hours of trading may be on tap.

On the esoteric side, we are now in a major Bradley turn window that runs thru Tuesday, 6/19/12, moving into the Fed meeting. The actual Bradley turn date is Tuesday, 6/12/12 and the market turns typically occur closer in towards the actual date, give or take a couple-three days, so there is a strong chance of a major market turn occurring anytime now thru next Friday.  Stay alert.  Interestingly, a new moon occurs on Tuesday, 6/19/12, so markets would be expected to be weak next Friday into the Fed meeting.

To keep things simple for today, focus on RTH 41 at the bell. Also watch SPX 1312-1313 to see if the bears got game, or not. Traders must position themselves for the Spain bailout on the weekend which should result in a large market up day for Monday. Best to take things hour to hour, however, and see what transpires today first. The opening bell is only minutes away.

Note Added 6/8/12 at 9:34 AM:  RTH is 41.16 holding above the critical 41 level, so far. Keystone bot SSO opening up a new long trade.

Note Added 6/8/12 at 9:43 AM:  RTH is 41.15 so the bulls are hanging tough despite the broad market weakness.  SPX S/R for today is 1318, 1316, 1315, 1314, 1312, 1310, 1308, 1307, 1305, 1300, 1298, 1296, 1295, 1292.66 and 1292 (also the 12-month MA area). SPX now testing 1308 support. RTH now printing 41.18.

Note Added 6/8/12 at 10:02 AM:  The SPX failed the 1313 at the open so an acceleration to the 1307 support occurred. SPX 1305-1310 is a strong S/R cluster from Wednesday's action so watch the price action thru this range. RTH is printing 41.27 well above danger, thus, following today's road map, the bears got nothing. Lots of trading is ahead for today, however. Nasdaq now turns green, obviously leading the broad markets upwards currently.

Note Added 6/8/12 at 10:14 AM:  RTH is at 41.27 allowing the bulls to keep a choke-hold on bears all day long--as long as the RTH stays above 41. The President speaks in a few moments to comment on the economy; his track record is not that good with the markets that typically sell off as he talks, but, perhaps he has some happy news.  Always lots of drama ongoing.

Note Added 6/8/12 at 10:51 AM:  RTH 41.46. SPX heading up to test the strong resistance areas at 1316 and 1318. Keystone took profits on TNA closing out the trade. Also bot more ANR. Also bot more BBG.

Note Added 6/8/12 at 10:58 AM:  Keystone took profits on the SSO day trade today, will look to reenter, but went the other way, bot TZA (short small caps) opening up a new long position. SPX 1318 is strong overhead resistance. Time to let things simmer a bit and poke around the garden.

Note Added 6/8/12 at 11:13 AM:  Keystone took profits on the TZA, fifteen minute trade. It is always better to be lucky than good. Will look to reenter.

Note Added 6/8/12 at 11:17 AM:  Keystone bot TZA opening up a new long position.

Note Added 6/8/12 at 12:32 PM:  Keystone's SPX:VIX Ratio Indicator is coming back into the picture again with the bull push higher.  Watch the 68 level for the ratio, now at 64.78, only three points away, since that ignites strong bullishness if taken out to the upside. Overhead resistance for SPX is 1318, 1319, 1321, 1326, 1329, 1331, 1332, 1333, 1336 and 1337. Large spike occurs thru 1319 so price will try to move thru 1321, if so, the strong and critical 1326 level would be on tap next. RTH is 41.53, very bullish and keeping the broad indexes elevated today.

Note Added 6/8/12 at 1:42 PM:  SPX punched up thru 1321 resistance at 1:10 PM to HOD at 1323.35 so far, now coming back down to back test the 1321 support.  See if it holds, or not. The 8 MA was a hair away form crossing down thru the 34 MA on the SPX 30-minute chart which would have placed the bears back in the drivers seat, but the bulls continue driving the bus for now.  Starting to look like a sideways drift into the weekend. RTH is 41.62 which created the market positivity today but the bulls are unable to push above the NYA 40-week MA at 7644 to enable any additional oomph and 1326 is strong R.

Note Added 6/8/12 at 3:54 PM:  It took all day but the SPX came up to take a look at the strong 1326 R.

Note Added 6/8/12 at 4:01 PM:  SPX parks itself at 1326 for the weekend, all ears will listen for the Spain bailout, or not. Germany and Spain must dance the waltz this weekend.Tech led the broad market higher today.  The strength in RTH told the story from the start. High volatilty will continue creating these large market point swings up and down.

11 comments:

  1. Pretty lack luster day going ride it out till Monday thanks for BBG and ANR

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  2. Hello MCAP, too early for a danke on those tickers, next week folks will be searching for good ole Keystone with pitchforks and torches. The Spain stuff over the weekend will provide drama.

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  3. Keystone,
    I have a question about the major Bradley turn. Could you little bit explain what could happen in such turn? a major upward move trend etc? what do I expect?
    Thanks!

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  4. http://www.amanita.at/FAQ/FragenzumBradley-Siderograph/Bradley-Siderograph/

    Hello Serenay, the link above is a starting point but you can google for more information. The Bradley turn dates identify where a market trend change may occur. The Bradley turn date does not forecast direction, it simply identifies a heightened area of intensity where markets are prone to reverse if rallying or rally if they are tending to the down side. Sometimes, the date will resolve as a melt-up move for the existing trend. So you have to stay on your toes. The major turns are the most important dates of the year and this is where typically major market inflection points occur such as a top that lasts a few weeks or months, or a bottom that lasts a few weeks or months. Thus, simply keep an eye out and be aware of the current trend, which is now a rally trend for five days in a row. The market turn moves typically occur within +/- 2 or 3 days of the date, thus, from today thru next Friday, be aware.

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  5. Hi Keystone,
    Thank you. How do you view the direction change of 9 MA turning upwards just before going through 34MA in 30 minutes chart? Is it something artificial (manipulated)?

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    1. The moving averages are simply calculations using the price, thus, if that would be manipulated it more directly would say that price itself is manipulated. A 9 MA is simply the price average over the last nine days, the 34 MA simply the price average over the last 34 days. Thus, markets are simply doing what they do, the MA's are simply tools in the toolbox that help a technician gauge the market direction moving forward. A curl of the 8 or 9 MA will provide an early hint but it is best to rely on the actual cross of the 8 and 34 MA's on the 30-minute chart for SPX to project bullishness or bearishness for the hours and couple days ahead.

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  6. hmmm, not sure if i should have taken profits today or not, considering the weekend. oh well, Monday is a new day.

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    1. Tricky markets currently Arnie. There is an old adage in trading, 'when in doubt stay out'. There are always many options available, you can cut back on positions or hedge positions with options or adding an ETF that works the opposite way will provide a hedge.

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  7. Ks, I sure as hell hope you got out of TZA. I was thinking the same thing and made 2 smalls trades of it for a nice 10 cent twice profit and then out. Now is not a time to hold it. It had no legs and no one was buying. TNA shows the strength. good luck and thanks for the RTH handle, worked out today.

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    1. Hello Anon, always try to look the one or two steps ahead not at the current step. Like playing billiards, the pro players are not worried about the current shot, they are planning where the cue ball ends up and sets up the next shot and shot after that. That said, the news flow is dictating market action, so, flip a coin. Markets should provide a nice trading range next week, flat overall but lots of spikes up and down, trading heaven.

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  8. Hello all, it is best to always stay hedged so you have a finger in the bear and bull pies all the time. Typically, when the boat is loaded to one side with traders all going one way, the markets juke the other way, always striving to hurt the maximum amount of traders at all times.

    Monday will be determined by the China data this weekend and the developments on the Spanish bailout. It is all a crap shoot since markets are simply reacting to news headlines now. Lack of a Spain bailout should result in a market selloff. A small Spain bailout will not supply a lot of upside oomph to markets but rather help markets line out flat all week ahead of the Greece elections. A large Spanish bazooka bailout will catapult equity markets higher.

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