Thursday, August 16, 2012

Keystone's Midday Market Action 8/16/12

Overnight, China's Wen says the easing inflation allows more room to move with easing measures. More talk. Markets will bite for a while, copper is higher, but as China continues to promise, but delivers nothing, the markets will run out of patience.  European inflation data is flatish which also provides a more freindly backdrop for the ECB to act with stimulus. But, just like China, markets continue to hear talk but see no action.  The retail bellwether WMT reports disappointing earnings, down over 3% pre-market. More retail earnings are to be released today including ARO, BONT, DLTR, GPS, ROST, SHLD and BKE. Retail continues to be a major focus as the back-to-school sales continue along. FB's lock-up period expires today so folks may cash in and abandon the stock.  FB is down over 3% pre-market and should not be considered as a long until 17-18 or lower.  Housing Starts, one of Keystone's key monthly numbers to watch, show well over a 1% drop but futures remain up 2 or 3 S&P's.  A market pivot may occur at 10 AM with the Philly Fed. Natty Inventories are at 10:30 AM.

The CPC put/call signals a major market top right now.  The VIX starts the day with a 14 handle, the recent lows verify the complacency shown by the put/call. Volatility tends to bottom in August, and considering that the VIX has dropped strongly, and we are at mid-month, a move up in the VIX is the likely outcome.  The SPX is moving thru a sideways channel of 1394-1407, and more tightly, 1399-1406, thus, any price move out of these ranges is a significant development.  The tight BB's discussed this morning with the SPX 30-minute chart shows that a violent multi-handle move for the SPX is at our doorstep.  For the SPX for today, starting at 1406, the bulls need to touch 1408 to ignite an upside acceleration that will send price to 1413 in quick order.  The bears need to push under 1402 to ignite a downside move.  A move thru 1403-1407 is sideways action and not likely today considering the tight BB's that forecast a drastic move at any time.

Note Added 8/16/12 at 11:02 AM: SPX punched up thru the upper BB on the 30-minute chart, then failed, moving down to then tap the lower BB, now back up thru the upper BB; wild market action.  The 8 MA came down to kiss the 34 MA but the up move in the markets a short time ago has moved the 8 back above the 34. So the strong move out of the tight BB appears to be to the upside. SPX 1408 should lead to 1413, the SPX now testing 1410 R.  Utilities are weak, UTIL teasing a break thru the 480 level, this action is bearish for markets. Trannies continue to break up thru the sideways triangle highlighted yesterday which would be bullish for markets. The dollar is 82.35 back under the 50-day MA so a weaker dollar boosts copper and commodities, and equities. CRB is printing 302 which favors the bull case. TRIN is 0.70 which is very bullish. VIX printed over 15 today but has since pulled back to 14.91. The COMPQ is up 0.5% and the SPX is up 0.3% so tech is leading the broad markets higher, and this supplies the bullish strength in trading today. The 10-year is 1.81%. The Energizer Bunny market keeps moving higher; the SPX 1410 and 1413 levels are in play as potential tops.

Note Added 8/16/12 at 11:44 AM: SPX wants to try for 1413 since 1410 resistance gave way.  The move above the Bollinger Bands on the SPX 30-minute chart is spectacular this morning, three candles printing up above the upper BB showing that this price action is extremely rare for markets. The tight BB squeezed out an upside move, which was not the higher percentage bet, starting from the 1404 low at the bottom BB, the squeeze move is now nine handles higher. A +1000 TICK clicks off a minute ago with the SPX pushing above 1412. Another +1000 TICK when the SPX tests 1413 R will be interesting to see as time moves along. Hang on to your hat.

Note Added 8/16/12 at 11:57 AM:  SPX moves up to test 1413 resistance. The TICK prints two +1000 TICK's in the last twelve minutes. VIX is printing at the lows at 14.60-ish, watch to see if it recovers or if the market bulls continue to push it lower. Keystone bot ERY opening up a new long position (which is short energy, a dangerous triple X ETF). Holders of Faceplant are dumping the stock, like rats leaving a sinking ship, FB down over 6% today printing new lows.

Note Added 8/16/12 at 12:17 PM:  The bulls keep pushing higher, SPX up above 1413 now. Note that the spike high in May this year occurred at 1415.32 on 5/1/12. SPX S/R is 1403, 1406, 1410, 1413, 1415.32, 1417, 1419.04 (closing high this year 4/2/12), 1422.38 (intraday high this year 4/2/12) and 1424. The SPX 30-minute chart is now printing four candles above the upper BB, a move above the standard deviations that you do not see everyday. The excitement, and tension, in the markets is palpable, requiring vigilence, cutting into Keystone's hammock time.

Note Added 8/16/12 at 1:36 PM:  The bulls keep pushing, the SPX HOD is 1414.79, only 53 pennies away from the 5/1/12 high. The 30-minute candles finally moved back inside the BB's after spending the first half of the day on the upper side; a move back to the middle BB, at a minimum would be expected, this number is 1407.97, call is 1408. Trannies remain at elevated levels but no where near confirming the Dow Industrials as per Dow Theory.  Small caps continue to lag.  The utilities are negative. Tech is leading the broad market higher so this provides the bullish buoyancy all day long. The RSI on the SPX daily chart squeezes out a slightly higher high compared to a few days ago so price will want to revisit the current levels after a pull back occurs (reference the SPX daily chart a few posts back).

Note Added 8/16/12 at 2:12 PM:  The SPX is now testing the 1415.32 May high. The move out of the tight BB is eleven handles. You can use the tight BB's for any of your ongoing trades and in any time frame, minute charts, daily, weekly, etc... Whenever you see the BB's coming in tight, a sharp violent move occurs, today the tight BB's on the SPX 30-minute chart resolved as a sharp up move.

Note Added 8/16/12 at 2:39 PM:  The SPX takes a large spike higher, wild frenzied buying, SPX punches thru the 1415.32 resistance, now sets its sights on 1417, which is not printing as this message is typed. SPX 1419.04 is the closing high for this year. The TICK is printing +800 on this thrust higher. TRIN is very low at 0.65 which confirms the uber bullishness. SPX is testing 1417 as support. The Energizer Bunny keeps thrusting higher.  Note that over the last half hour, the SPX printed the higher high but the VIX did not print a lower low.

Note Added 8/16/12 at 3:41 PM:  The resistance at SPX 1417 is holding, for now, 1419.04 remains in play.

Note Added 8/16/12 at 3:51 PM:  The SPX is fighting to hold the May high as support at 1415.32.

Note Added 8/16/12 at 4:07 PM:  SPX falls back thru the 1415.32, but recovers in the final minute to close at 1415.51, above the May high. At these levels with a high over 1417, the closing and high-of-day highs for this year at 1419 and 1422, respectively, are only a handful of points away, setting up an interesting day of trading for tomorrow. WTIC oil is over 95. The 10-year yield is at 1.84% and as high as 1.86% today. UTIL closes with a 479 handle which is a bearish signal in the midst of this bullish euphoria. The light volume action continues. The VIX closed at the lows for the day.  Markets continue to trade oddly. Perhaps a catalyst will occur overnight tonight.

30 comments:

  1. KS, you've done a brilliant job this week preparing us for what might develop over the next couple of days. Many thanks.

    ReplyDelete
  2. yes much thanks I have seen some big sellers in the ES pit's today 4000 plus contract sold at once on the open look we are at critical support now... damn missed it while blogging LOL

    ReplyDelete
  3. Wake me at 1434 in a couple weeks.

    ReplyDelete
    Replies
    1. Ok not really, they have to flush this mkt a bit to get the next leg up. I could see going short for a bit at 1415ish...it will all be kind of slow motion anyway. On vacay but watching.

      Delete
  4. lots of good scalps today but it tough way to earn a buck sideways - sideways and sideways for every big buyer the is a big seller 1146 ES bought 1186 ES sold huge 5000 contract + orders have been selling over the week

    ReplyDelete
  5. All I know Zig is that number 1434 is possible but the last time I got long up here at 1407.25 I had to sell size at 1401 for a big loss that I'm 2 days of trading as of yet hasn't paid for but as I type someone one bought 1972 contract so higher it goes... For now!

    ReplyDelete
  6. Great comments all. The drama continues to play out. The Bollnger Band squeeze is now from 1404 to 1413. A test of 1413 resistance in concert with a +1000 TICK may mark the inflection. SPX now printing above 1413 so this will be interesting.

    ReplyDelete
  7. Ok sold longs at 1411.25 ES I know we are going higher but we need to regroup somewhere...

    ReplyDelete
  8. Ah, finally a break out of this super tight range. I think I see it now from an EWT perspective: the move up on last Friday was likely wave 1. Then the minting move down on Monday was wave 2, with wave 3 starting mid day same day. Tuesday and yesterday were wave 4, which makes sense since wave IV of 3 touched ~1403 and wave 4 did the same (wave 4s often retrace to IV of 3 levels). Now wave 5 the final wave is under way. Many well-respected EWTers have 5 top in the 1415-1420 area with possible overshoot to 1440-1450.

    Given all bullish sentiment a CPC at 0.7s, ATR down to almost 10 (that indicator has also marked tops very well over the past yrs), VIX in complacency territory,SPX:VIX in the mid-90s, etc it's time to start buying shorts IMHO!

    ReplyDelete
    Replies
    1. I watch the ATR(7) of the stock market and VIX. If you ignore the low ATR levels during low-volume, seasonally positive December, the other times consistently identified significant tops during the last few years.

      On the other hand, I have doubts that this is "the" (primary wave 2) top that Elliott Wave International and others are always forecasting, since they have been wrong for years. No one cares about fraud and insolvency any more and they just print money to "stop" deflation. Maybe they will stop printing money when the US Treasury market starts to collapse and interest rates go way up in order to attract buyers.

      Delete
    2. This comment has been removed by the author.

      Delete
    3. This could be a bearish rising wedge (Z wave of WXYXZ?) terminating within a couple of weeks. It would be apropos for it to end right after the Fed's big meeting. Then, everyone can say that the market is "disappointed" by no more money printing (yet).

      Delete
    4. Paul, all those grand super cycle predictions are just what they are: predictions. I think EWT is a very useful tool, but better on a shorter timeframe of say intra-day to a few weeks ahead than yrs or decades.

      EWI is Prechter's child and he's been married to calling this top. Other lesser known EWT-era (pretzel, Dan Eric, etc) are actually much better since they are more neutral (though still biased towards the bear camp)

      The final arbiter is price and right now all it does (today) is go up. I dunno what the volume is doing but if you look at the BBs now compared to say those of August 3, 4 on a 30min chart (per KS), then you see that the upside move now is much less explosive compared to then. This often indicates a 5th wave.

      Delete
  9. Mr Keystone,

    Check out the NYA:

    http://www.screencast.com/users/strikefirst/folders/Default/media/d4a2f5a6-ef08-4fc9-9aed-1a89211851dc

    ReplyDelete
  10. Utes are flat, and in fact were down earlier. What will the $CPC print be tonight? I'm with Arnie. I added to my shorts at SPX 1410-13.

    ReplyDelete
  11. Weaver,

    Picking tops and bottoms is very dangerous...

    ReplyDelete
    Replies
    1. Of course it is, but isn't that the whole idea of trading? That's why traders use many tools to identify them. None of those tools is perfect though, which one has to keep in mind. However, I am sure you can agree that most of the tools mentioned here and by KS indicated we are much closer to a top then a bottom.

      Delete
  12. Yah Weaver I've started a little earlier on TZA at 16.90 - 16.86 I'll buy toward the end of the day but I'm selling Aug 24th 17 calls against that position and collecting .37 so either way I'm artificially lowering my buying cost or I'll be called away at profit.

    ReplyDelete
  13. Today provides more twists and turns. Keystone will have to study the ATR. On the NYA, yes, that weekly chart is moving thru a sideways symmetrical triangle (draw another pink line as a lower trend line sloping up), and NYA price isnow at the top rail of the triangle. This action very similar to the TRAN chart.

    The utility weakness is very ominous so watch to see if that continues.

    Anon, you are correct, picking tops and bottoms is the most dangerous style of trading, that is why it is speculative. Fortunately, divergences can help steer the way.

    Scaling in to any position is always smart, develop the position over time to take some of the choppiness out of the equation. Whoa, there is the 1415.32, big time resistance test right here.............

    ReplyDelete
    Replies
    1. As I mentioned, I have studied charts of ATR(7) for the stock market and VIX, and found a consistent pattern of extremely low ATR's at major stock market tops. The ATR is not always so low at tops, but when it is at such an extreme, a major top should be coming very soon.

      ATR is an interesting concept for the VIX, since it's measuring the volatility of volatility. By the way, someone calculated that the VIX correlates well with the actual mathematical volatility of the stock market, not just fear.

      Anyway, I found that you can put a horizontal line at roughly the lowest ATR achieved at preceding major tops and then extrapolate that we should be very close to a top now, since we are finally approaching the same level. You'll probably notice that the ATR can stay low for quite a while, but I have noticed that, once the ATR shoots back above the horizontal "signal" line, the top should be in. You have to "tune" the ATR signal line by moving it slightly up or down to match it to previous tops. It's pretty subtle where the line should be.

      In Elliott Wave parlance, extremely low ATR's seem to indicate the end of major wave 3's and 5's. I think that's pretty interesting, since it could help to validate wave counts.

      Delete
    2. Intersting stuff, the ATR on the SPX daily is now exactly between the March and May market tops, and the current price is between those tops as well.

      Delete
    3. Make sure to set the ATR to a shorter interval than the default of 14 days to see what I am talking about. I like to use about 7 or 10 days instead. That's why I called it ATR(7)...

      Delete
  14. Weekly R2 on SPX at 1417.45.

    /ES already above its weekly R2.

    ReplyDelete
  15. FWIW,
    New Moon @ 15:55 UTC on August 17th which coincides with option expiration

    ReplyDelete
    Replies
    1. Which is 10:55 AM EST. That is interesting, markets are typically weak into the new moon but that certainly did not hold true today. The open tomorrow should be interesting from the OpEx and the new moon perspectives. Perhaps the gremlins will appear at 11 AM.

      Delete
  16. SPX put in a classic M top!? Either this is wave 4 (looking for support in the wave IV of 3 area (1414), with one more thrust higher to come (v of 5) or this is wave 1 down... EWT is beautiful but also a bi&$h since it is so hard to know what "level" the count is... Anyway, classic M-top remains a fact

    ReplyDelete
    Replies
    1. It could very well be the case. The RUT is not following the M top vibe like the other major indexes in the last few months, the RUT M top may be more the action over the last 1 1/2 year.

      Delete
  17. I barrowed this idea from another site ( I’m no EW expert) and I put it out for discussion.
    The idea is that the S&P is (from the Mar 09 bottom) either in a 5th wave up or it has already begun a correction and we are waiting for a C wave down to start. If the S&P is still in a 5th wave up then that wave can not move above 1435. If it were to exceed 1435 that would make wave 3 the shortest up wave which breaks basic EW rules. I’m posting a link to a chart I made. Hope links work here. Thanks. Willy

    http://stockcharts.com/h-sc/ui?s=$SPX&p=W&b=6&g=0&id=p06975260027&a=271493468

    ReplyDelete
    Replies
    1. Nice Elliot wave chart.

      Delete
    2. The a-b-c makes sense. But, if so, she is going to have to turn down now, tomorrow or at the latest on Monday.

      Delete

Note: Only a member of this blog may post a comment.