The Labor Day holiday is over, unwanted rubbery hotdogs lay on a barely smoldering grill, red solo cups strewn about the ground. The party is over but the new trading week begins. More talk of ECB bond-buying keeps markets elevated. Copper is strong since Friday on a weaker Chinese economy; Pavlovian traders expect stimulus which means weaker dollar, stronger commodities, copper, gold and equities. Watch the 8 and 34 MA cross on the SPX 30-minute chart, now bullish but the 8 MA should stab down thru to favor bears after the open. Copper will likely stay bullish, watch JJC 43.70. Utilities are extremely important this week, especially the early prints today. Watch UTIL 467.35 and this number will remain the same all week long. If UTIL loses 467.35 after the open, "Houston, we have a problem."
For the SPX watch the 20-day MA at 1407.40 as a key bull-bear indicator going forward. Also, the move out of the 1399-1413 channel will select the winner moving forward, bulls obviously win above 1413 which takes them to 1419 in quick order, while bears win if the SPX falls under 1399 which takes price down to the low 1390's. No matter what the opening shows, stay tuned thru 10 AM EST since a market pivot will occur on release of the ISM Manufacturing Index. Energy markets are in play today. JJC 43.70 and UTIL 467.35 are mucho importante today.
Note Added 9/4/12 at 11:01 AM: Keystone's proprietary algorithm, Keybot the Quant, flipped bearish at 10:34 AM at SPX 1399. As always, stay alert for a whipsaw. Details to follow. VIX is over 18.35. UTIL is under 467.35 but has recovered. SOX is under 391. SPX 1399 failed. Lots of drama is ahead.
Note Added 9/4/12 at 11:39 AM: The excitement continues. Copper and utilties were the most impotant parameters to watch to begin the day but volatility and semiconductors stole the show. The VIX leaped over 18.35 to usher in the early market negativity today. Then UTIL 467.35 failed. Then semiconductors failed with the SOX dropping under 391. The SPX used the 20-day MA as overhead resistance and would not move up thru, so the SPX started downwards losing the 1399. Price is hanging on at 1399, a sharp and strong move to the low 1390's would be anticipated but the bulls are trying to make a come back by keeping UTIL above 467.35. If UTIL loses 467.35, strong selling will occur in the markets, the SPX will be on its way lower, and the bears will lock in further downside. Bulls can make a come back if they keep UTIL above 467.35 while moving SOX back above 391 and VIX back below 18.35. Keystone's SPX:VIX Ratio Indicator is at 75 printing a LOD under 74 nearing the danger level at 68. The 8 MA stabbed down thru the 34 MA on the SPX 30-minute chart which says markets will sell off in the hours and days ahead, as long as the 8 stays under the 34. Gold hit 1700 today.
Note Added 9/4/12 at 12:27 PM: The SPX continues to play around at 1399. VIX and SOX remain bearish influencing the markets negatively. Tech is leading the broad markets lower today which is a feather in the bear's cap. UTIL is at 467.78, if it loses 43 cents more, it will flush the markets. Look at copper losing its luster, JJC is printing 43.85 nearing the 43.70 danger line. The bulls have their hands full currently. If the market bears can push a bit harder, the broad markets will roll over strongly to the downside. An interesting afternoon is on tap, it's all on a silver platter for the bear's, how bad do they want it?
Note Added 9/4/12 at 3:18 PM: The bear's did not want it at all, they took that silver platter and proceeded to trip over their own bear rug falling flat on their face. They were not even allowed to keep the silver platter. Note how the parameters all reversed today. It started with tech no longer leading the broad market lower a couple hours ago. That is why you have to watch and compare the daily move in COMPQ (use as a tech proxy), and SPX (use as the broad market proxy). Tech started to lead higher and that brought the SPX above 1400. SOX flipped back above 391. Then VIX fell back below 18.40 (use this number now instead of 18.35), so it all went back the bull way. The 8 MA remains under the 34 MA on the SPX 30-minute chart which is bearish so watch that into the close. VIX 18.40, UTIL 467.35, SOX 391 and JJC 43.70 all remain in play. All are bullish contributing to the market upside so any change to any of the four will result in market weakness. If they stay bullish, the markets continue floating upwards. Keystone's algo, Keybot the Quant flipped back to the long side at SPX 1402. Today was a round trip, all the bearish signals that triggered this morning have reversed back to the bull side as the day went along except, the 8 and 34 MA cross--keep an eye on this. Haha, you have to love trading. The SPX is now printing 1407.99 and the 20-day MA is 1408.09, so price did want to explore that important moving average again afterall.
Note Added 9/4/12 at 3:56 PM: The 8 MA did not cross above the 34 MA as per above, yet, so the bears have a feather in their cap. The bulls have all the other feathers. TRIN is 1.36 which typically reflects steady-eddy selling. The TRIN had printed those uber low numbers if you remember that from Friday so that was one reason the markets sold off this morning, to release some of that off-the-charts uber bullishness.
Note Added 9/4/12 at 6:05 PM: The FDX warning after the bell is a serious market negative. Keystone's UPS 20 and 50 Week MA Cross Indicator (on the Cyclical page) must now be watched closely moving forward. If shipping is in the dumper, so is the global economy. FDX's news means that products, parts and paperwork, signs of a strong economy, are not being shipped, and the FDX and UPS guys are sitting in the beer parlor all day instead of delivering packages, a very ominous signal for markets moving forward.
VIX seemed to jump more than would be expected from the minor down on the open. Interesting to see which will abide.
ReplyDelete$SPX:$VIX is at 75.
ReplyDeleteKS, great call on the mid-morning exit out of 1399 (or 1413). Arnie, you too - great call on a 120-point Dow decline. Have to say we're all well-prepared again.
ReplyDeletethanks weaver!! I had to double check my DOW chart with the symmetrical triangle and I had 12955 project for the DOW, whereas it went to 12977 (so far). Not bad. Not bad at all. This weekend I was thinking: "if it ain't gonna go to what I charted with the text book triangle, then I give up, that be so weird." But it did, and it feels good!
DeleteEverybody, keep up the good work. KS' insights, charting, info, and back grounds are invaluable. What we can add to it only seals the deal!
Good mornign all, lots of activity today. Watch UTIL 467.35, if lost, the bear side is locked in and significant downside is occurring. Bulls are trying to hang on by the skin of their teeth by keeping UTIL's head above water at 467.35. VIX and SOX are the two that are creating the bulk of the market negativity today. SPX is clinging onto 1399, its a big deal if/when it fails.
ReplyDeleteGiven the indicators you have alerted us to, it looks like there is a possibility that we may get a triple bottom in the SPX IF it holds around 1399. This is the 3rd punch-thru 1400 in the past week, if it holds, then we might get a short-covering rally. A lot of traders have bet on a Sept. downturn, judging by the options skew in favor of puts.
ReplyDeletePerhaps Charlie, but the parameters VIX 18.35, SOX 391, UTIL 467.35 and JJC 43.70 are running the show. VIX and SOX are bearish now so markets stay at these levels or lower if this remains the case. UTIL and JJC are bullish still yet but looking very shaky. If either one fails, the market selling will increase, if both fail, the markets are headed far lower, SPX 1385 would be starters. The market bulls need to push the VIX back below 18.35 or the SOX back above 391, if so, the SPX returns inside the safety of the 1399-1413 channel.
ReplyDeleteKS thanks to you, we all have a handle on the market direction/trend. If all 4 indicators turn up or down, then we have a trend we can trade.
ReplyDeleteVoila, VIX under 18.35 and SOX over 392. I think we might get a monster short-covering rally as everyone who bet on a weak Sept. covers. Sept. might close weak, but maybe we get a rally first....
ReplyDeleteI think the keybot better turn back long here don't you think?
ReplyDeleteKS,
ReplyDeleteany opinion going long gold and silver?
thanks.
Charlie, you had the right idea, the parameters reversed. It all looks like continued sideways stuff, there is only one day more until we know Draghi's decision so the markets must be content on staying within the 1399-1402 channel until then.
ReplyDeleteKeep watching VIX 18.40 (this increased slightly), UTIL 467.35, SOX 391 and JJC 43.70. All are bullish but if you see any one lose the level shown, then the markets go into sell mode again.
Anon, yep, Keybot flipped back to the long side. That was a rarity the way it happened as well, three sectors reversed in short order which is something that does not occur often (to generate a whipsaw). SPX probably floats thru 1399-1413 until Draghi.
Anon, gold and silver are tricky trades. Gold appears to have broken out but it probably needs a few days to show its true hand. The PM's hang in the balance, like the markets, due to the Draghi decision coming in one day. So, it is probably best to stay away from them until the ECB decision occurs. Since gold punched up thru 1680, the 80/20 rule says it should go to 1720. Keystone owns PAAS and is simply lettingthat simmer on a back burner, ohter than that, simply staying away for now.
Amazing day! Somebody really likes the 1409.31, .32 number. It's been hit 3 times now exactly the past 2 trading days. Note how the SPX is making lower highs and about similar lows... Do we see a descending triangle forming of the 1426 high. With 1397ish as the floor. That would mean a trip to 1370s from here if it materializes. KS, what do you see? Maybe you could chart it?
ReplyDeleteThat is the start to a descending triangle, we can show it on a chart.
DeleteAs for the VIX, it closed the gap it created at the open this morning, closed within its upper BB and stayed within its trend channel. With the BB's expanding it has now more room to grow IMHO.
ReplyDeleteFor Bollinger Bands, the touches at the outside bands, and middle band is important. The middle BB is also the 20-day MA. When the one side is tagged, price will move back to the middle BB at a minimum and more likely the opposite BB. Early August, price touched the low side at sub 14, then today spikes up thru violently violating the upper BB, so a move back to the middle and lower BB may be in order, which helps the market bulls. Look at early April and the same type of fractal may play out, a sideways to sideways down consolidation, then up and away. The 20 MA crossing above the 50 MA will verify the upside. FDX warning after the bell is a very serious development. Remember Keystone talking about his cyclical indicator with UPS?, keep an eye on that moving forward. Weak FDX and UPS are going to create strong market negativity.
Delete