Keystone's Midday Market Action 7/18/12

Housing Starts are a key economic indicator each month and minutes ago show a better number than expected.  Permits were down, however.  The data remains mixed. Futures are unaffected. Chairman Bernanke gets a do-over today at 10 AM so traders will once again listen for hints of easing. Geithner is about to speak shortly. Bernanke has managed to walk a tight rope thus far, perhaps today he will provide clarity. Traders firmly believe in QE3 coming and also believe measures will be taken at the Fed meeting in a couple weeks, at a minimum perhaps a statement that low rates will continue thru 2015 instead of 2014, and then a mention that QE3 is in the works over the next month or so. Traders are complacent and have no doubts that Bernanke will provide the crack cocaine as evidenced by the low CPC and low VIX. Therefore, the big shock to markets would occur on the downside, not the upside. Traders are expecting the markets to move sideways to sideways up and do not fear the downside. The stock market is a gambling casino where bets are simply based on whether or not the Bernanke sugar is provided. Fundamentals, schmudamentals. Earnings, schmernings. All traders care about is the crack cocaine. These are not your grandfather's markets.

Sticking to the technicals, so this macro economic mess can be properly calibrated, watch NYA 7749, JJC 44.20 and CRB 293.80. The dollar is up this morning which will create JJC and CRB negativity. A market pivot point should occur at 2 PM today upon release of the Beige Book. The SPX 1363.61 level is very important since this is the 2011 closing high.  Likewise, the 100-day MA at 1359.70 and 20-week MA at 1359.26.  Since price overcame these two important moving averages yesterday, it is important for bulls to maintain the SPX above 1360, and conversely, it is important for bears to stab back down thru these MA's. For the SPX today, bulls only need to punch a couple points higher. If the strong 1366 resistance fails, the 1370's will come quickly. Bears will try to prevent SPX 1366 with all their might while at the same time try to push the NYA under 7749 and CRB under 293.80 to start a sustainable down move.

Pay attention to the percentage gain of the SPX versus the Nasdaq. Tech did not lead the upside yesterday which places the rally into question.  Looking at the futures right now, tech and the broad market are down 0.2% and 0.3%, respectively, thus, tech is not leading the downside so the bears do not have much momo despite the weak futures.  If the COMPQ starts to lead the SPX lower, a market sell off would have legs.  Otherwise, markets will continue to stumble sideways.

Note Added 7/18/12 at 9:46 AM:  Perhaps sideways action into the 2 PM Beige Book.  The strong SPX 1366 resistance will lead to the 1370's so expect a big fight here.  SPX now printing at 1363.61 wrestling with the 2011 closing high. Bernanke will provide some drama shortly.

Note Added 7/18/12 at 1:08 PM: The bulls are running again today.  The 1366 R gave way at 10 AM so the party to the 1370's was on tap. The leap higher is impressive since it poked up thru the high for 2011 at SPX 1370.58; watch for more drama around this number. SPX resistance above is 1374, where price is at now, then 1378, the HOD thus far is 1375.26, then 1385, 1389, then very strong resistance at 1391. Tech is leading the broad markets higher adding bullish strength.  Note, however, that copper remains under the level of interest at JJC 44.20, which will serve to cap this market move. The dividend bubble continues to be pumped larger. The Beige Book in one hour may create a market pivot point.  Keystone opened a new position shorting RTH again. The chart is making a price high again with very attractive negative divergence on the daily and weekly charts. With copper, speak of the devil, look at JJC popping, now printing 44.10.  Ten more cents and another leg higher will occur for markets. If JJC stays under 44.20, the market upside should stall.

Note Added 7/18/12 at 2:06 PM: The Beige Book is uneventful, markets move sideways. SPX is between the 1372 support and 1374 resistance. Support below is 1372, 1370.58, 1370, 1366 and 1363.61. Keystone shorted more RTH. VIX tagged a 15 handle today.  Long volatility is a very attractive play; daily VIX chart is positively diverged (up VIX is coming which means down markets). Bulls need to see JJC 44.20 to take the next leg higher, without that (JJC now printing 44.03), the markets will drift sideways into the close.

Note Added 7/18/12 at 2:44 PM:  Keystone opened up a new position shorting XLU which is shorting the uitilities sector. Keystone is also holding the thinly-traded SDP which is an inverse ETF which is a short position against the utes. The XLU daily chart shows an attractive rising wedge, overbot stochastics and RSI, and negative divergence which should create a spank down at any time.

Note Added 7/18/12 at 2:58 PM:  SPX is now testing 1370 support, if it is lost, price will move back to 1366, the breakout point from this morning.

Note Added 7/18/12 at 3:53 PM: Keystone added to the SPXS position.

Note Added 7/18/12 at 4:05 PM:  The bulls flexed their muscles today.  SPX went out sideways since copper, JJC, could not regain 44.20. But look at how the bulls ran at the end, the JJC closing only a hair away at 44.14.  Thus, at tomorrow's opening bell, JJC 44.20 will immediately tell you market direction. It will be interesting to see if the utes now do a swan dive off the cliff. NYSE volume was at a regular days pace. Watch the dollar since stronger dollar is weaker copper and bear friendly while weaker dollar (as QE rumors persist in the market and traders expect QE) is stronger copper and bull friendly. QCOM is light on earnings with lowered guidance so this pokes a hole in the tech euphoria balloon. IBM is light on revenue but beats on the bottom line and guidance is raised. Note how many companies are missing on the top line. This tells you that overall sales are weak; this is not a sign of a robust recovery. Guidance also drifts lower over time. But, alas, the markets move higher. Stay on your toes, stay hedged, have a finger in a few different pies.  Speaking of which, it is time for Keystone to sample a slice of blueberry pie on the side porch. The final CPC print will be interesting tonight.