Monday, October 15, 2012

Keystone's Midday Market Action 10/15/12

C beat on the top and bottom lines.  Retail Sales numbers are better than expected so it appears that the RTH will receive a reprieve as the new trading week begins.  Retail Sales are up in August and September after the May-July lull. The markets tumbled lower in May and the Europe debt crisis was hot and heavy so folks were not in the spending mood.  The pent-up demand led into the back-to-school sales season and the recent buoyancy.  The major factor in the retail sales increase, however, is energy costs with oil and gasoline prices elevated, so take it all with a grain of salt from a macro perspective. AAPL iPhone5 sales also help pump the data. Empire State Manufacturing data is weak.

If UTIL stays under 478.43, the bears will continue driving the bus. The bulls are mounting a sustainable rally if UTIL moves above 478.43.  Watch RTH 44.40, VIX 16.90 and JJC 46.25. Copper was down overnight, then recovered to the positive side, but has now slipped negative again. GS is lowering longer term forecasts on copper and Deutshe Bank is lowering forward estimates on copper and gold.  If there is any change into the bear camp for RTH, VIX or JJC, it will cause a strong leg down in the markets. The markets may favor a sideways move thru SPX 1424-1441 until the big-time ECB/Euro Summit on Thursday.  For the SPX today, starting at 1429, the bears only need three points lower, to move under 1425.50 and that will accelerate the downside. The bulls need to move up thru 1438.50 to accelerate the upside and begin a sustainable recovery rally. The futures are up about eight so this would place the SPX in the vicinity of about two points short of 1438.50 after the opening bell rings. So watch to see if the bulls got game today, or not, and which way tech (COMPQ) leads the broad markets (SPX).

Note Added 10/15/12 at 9:14 AM:  Spain may request a bailout in November but this news actually drops the futures two or three points since traders want the Spain bailout crack cocaine right away, not a month from now. The news reinforces the idea that Europe may actually be working on a package deal to addresss Greece, Spain and Cyprus bailouts all together.  Interestingly, on the weekend, the Barron's magazine cover says "14,165 Almost There," referencing the Dow Industrials all-time highs, also highlighting a thick green arrow pointing upwards.  Magaine covers are known to be contrary socioeconomic indicators.  Thus, when a magazine cover is very bullish, like now, typically the opposite happens.

Note Added 10/15/12 at 10:15 AM:  The utilities sector is flat so the market bears are happy. RTH is 44.68.  VIX is keeping its head above 16 and looks very encouraging for jumping higher in the days and weeks ahead. JJC is 46.51 approaching the danger level at 46.25-46.35 that will cause another market down leg.  Gold is down 23 to 1737.  Note that tech is now leading a hair to the downside, the Nasdaq is negative, which is bear friendly.  AAPL is now down on the day by a couple bucks. JJC now 46.46. The dropping copper will lead to negative markets. The SPX came up to test the strong 1433 resistance, and collapsed, and is now dipping into the negative side fighting the flat line. The euro is losing steam at 1.2943. JJC is 46.44.

Note Added 10/15/12 at 10:23 AM:  Keystone's algorithm is tracking JJC 46.25-46.30. JJC just dipped into the 46.30's and is now printing 46.43.  If JJC 46.25-46.30 fails, that is all systems go for bears and the broad indexes will take a strong leg lower in very quick order. Bulls must double their efforts and stop this copper failure from occurring at all costs. The drama queen markets are already performing theatrics as the new trading week begins.

Note Added 10/15/12 at 1:52 PM:  JJC tested the danger level but bounced and headed higher to actually turn positive;  price now sits at 46.82 well above the danger zone. This helps the markets recover today.  AAPL weakened after the opening bell falling five bucks which took the markets lower then Apple recovered, so did markets, then Apple back down, ditto, you get the idea.  COMPQ is up 0.36% while the SPX is up 0.61% so tech is not leading higher and places the up move in question. Likewise, the utilities sector is moving higher today with UTIL printing a HOD at 477.50, still a dollar short of the 478.43 the bulls need to seal the deal on an upside rally, so this places the recovery move today into question as well. UTIL 478.43 would be a game changer, however.  The SPX took out the strong 1433 resistance discussed on the weekend, then 1435 resistance, then attacked the 1438.50 level that is needed in today's action to launch an upside acceleration. Price failed this level after two minutes. If the bulls can push thru 1438.50, 1441 would be guaranteed and more likely 1444. The 200 EMA on the 60-minute chart is 1439.28, the HOD thus far is 1438.98. The VIX lost the 16 level but at 15.47 right now, it is maintaining the 50-day MA support at 15.41, watch this closely. High drama.  The 8 MA moved up thru the 34 MA on the 30-minute chart at 1 PM EST indicating bullishness for the hours and days ahead. The bears will need to reverse this cross asap, and that can only be done with a sharp drop by the close today, otherwise, markets should float upwards early this week. The negative divergence smack down in T is beautiful.

Note Added 10/15/12 at 2:28 PM:  UTIL is printing the highs for the day at 477.52.

Note Added 10/15/12 at 4:15 PM:  Quite a dramatic start to the week.  This morning the markets were stumbling lower ready to roll down the steps with copper collapsing, then, JJC bounced off the 46.25-46.30 to lead the recovery today.  In the final minutes, UTIL punches thru 478.43 only to pull back and close at 478.36.  How does Keystone know these numbers to watch ahead of time?  A very interesting finish since the bulls fell 7 cents shy of the 478.43 they need to seal the deal for the extended rally. The SPX closed at the top rail of the sideways 1424-1441 channel we discussed this weekend.  So what does all this mean?  It means you have to wait until tomorrow to see who shows up to play in the morning, the bulls or the bears. The SPX was parked where it could easily collapse from the 1440-1441 resistance, or, easily punch up thru and run higher. Ditto UTIL 478.43. The utilities will immediately tell you the story after tomorrow's opening bell.  The VIX closed at 15.26 well under the 16.90 the bears need to see.  The 50-day MA is 15.40 and 20-day MA is 15.21 so price is sandwiched between these two critical moving averages. The market bears will be happy if the VIX moves above 15.40 and bulls will be happy if VIX drops under 15.21 and heads lower so check this after tomorrow's bell. The bears are favored with UTIL under 478.43.  The bulls are favored with RTH, VIX and JJC remaining bullish as judged by the numbers listed above. Also the 8 MA is above the 34 MA on the 60-minute chart which is bullish for the hours and days ahead.  And another bull win today is the SPX moving above the 200 EMA on the 60-minute chart which is 1439.25 which signals bullishness ahead. The markets shifted towards the bull side today but fell short of sealing the deal.  If the SPX stays above 1439.25, and, most importantly, UTIL moves above 478.43, the bulls will run the SPX to 1444, then 1446, perhaps higherIf UTIL makes a stand and the utilities drop after the opening bell, and UTIL remains under 478.43, the bears will continue to run the show. If the bulls come to play tomorrow, watch the SPX 20-day MA at 1447.77 which is also a strong resistance area, price may want to back test this resistance before releasing itself to head lower.

28 comments:

  1. Keystone's call on a break of 1425.50 to quickly hit 1419 played out very nicely on ES last night.

    Since price has rebounded stronger than I expected, I have to prefer more upside to print the second wave before a big move down. I expect primarily a slide throughout the day for today to correct the overnight advance, but ultimately more upside with the highest probability targets at 1445 and 1450 (ES) which I consider equally probable for now. I am not particularly keen on a long position except maybe for a day trade though as the count has a few tricks it could pull to fail to hit either of those targets and I still think the highs are in for the long run. Bears and Bulls should just be equally careful for the short term.

    ReplyDelete
  2. Apple is only up just over a buck premarket, even though electronics helped drive the retail sales beat. The Euro is now negative too. Once again I'd be careful about adding too many longs. We'll see what the utes do on opening. Thanks for the weekend reports, KS.

    ReplyDelete
  3. Yep the low in the S&P futures overnight definitely hint that lower numbers will likely need explored for the broad indexes. Perhaps a sideways vibe may occur into the Euro Summit. Traders will be expecting clarity, be it positive or negative, with Greece, Spain, Portugal, and also receive a progress report on the banking union that is under development. That is a tall order to fill. News hit that Spain may request a bailout in November. That is not positive for markets near term, the long traders wanted that Spain baiout crack cocaine right away to pump the markets. Perhaps that is why the futures dipped from plus 8 to now plus 5 or 6. The S&P's are up 0.4% while the Nasdaq is up 0.5%, thus, tech is leading the markets higher by a single hair, so this favors the bulls as the day begins, albeit by a smidge.

    ReplyDelete
  4. Thx Keystone for your blog. Very helpful.

    ReplyDelete
  5. $UTIL lower BB and 200MA both around 467-68. KS, is the trap door still at the 50-week of 464.44?

    ReplyDelete
  6. Yep Weaver, you are correct.

    Watch copper, JJC, it is testing now and this action will probably determine the day ahead. JJC 46.25-46.30 is the line in the sand. JJC is now printing 46.35, holy schmokes, keep an eye on it. If the 46.25-46.30 fails in the minutes or hour ahead, the SPX will be thru 1424 and likely at 1419 in a heartbeat. If the level holds, the bulls will manage to keep markets sideways today.

    ReplyDelete
  7. Another fugly day, feels like we'll go nowhere, frustrating everybody, maybe some sort of "good news" will trigger a 3-day rally tomorrow to settle scores for OEX.

    ReplyDelete
  8. The slide I posted about above happened faster than I thought, but price and form are in line with expectations. It looks like the lows are in for the day and we are now moving in the next wave towards the targets posted above. I guess bullish OpEx week strikes again.

    ReplyDelete
  9. If you did not get long late Friday/Sunday as I suggested (I know, hard to get long Sunday if you are not trading futures) then the next shot would be at the bottom of wave 2. We have touched off the channel line for the ES, just not quite for the S&P.

    ReplyDelete
    Replies
    1. Even the old warhorse, the daily stochastics, has turned upwards. Last time this happened we were at 1280. I'm just sayin...

      Delete
    2. i agree (half-ish ;-) )I went long (SDS) twice last week, averaging down to a 60.38 position. Not adding more for now, as this market is so fractured. NOT TRADING ADVICE. The positive divergence KS mentioned, and which was on pretty much all relevant time scales, from 30min to 120min kicked in today IMHO. Either this is a two up, followed by serious 3 down or the start of final wave V up... time will tell.

      Delete
  10. Top looks in for the day, should be pretty lethargic with a down bias for the rest of the day if my interpretation is correct.

    The track so far is looking good to hit the first target, pull back a bit, then hit the second. Note that if action does play out like this it is actually quite bearish because this would be a good indication the expanded flat 2nd wave interpretation is correct which means a 3rd wave down is to follow which would target something like <1390 SPX at a minimum, but I would expect much lower. Obviously will have to see how things play out as it gets closer.

    ReplyDelete
    Replies
    1. Tiny chance this is B of an expanded flat, but looking more like a nest up now, so my call about the (orthodox) top in for the day is likely wrong.

      Delete
  11. KS, you are usually wrong lately, very much so. Pie business looks good.

    ReplyDelete
  12. Watch UTIL 478.43 and the 200 EMA on the SPX 60-minute chart now at 1439.26. Bears are fine unless UTIL moves above 478.43 which will signal a more extended rally move. TRIN is 0.94 which is neutral favoring the bulls by a smidge today. VIX is under 16 but note how it is fighting and maintaining the 50-day MA, watch that as a guide as well.

    ReplyDelete
  13. KS, is it a good thing for bears that VIX held the 20 MA at 15.21?

    ReplyDelete
    Replies
    1. Yes, but it is better if it would have held the 50-day as well. Price is sandwiched between these two so whichever side price exits that will provide hints on market direction, bears want to see up VIX, bulls want to see down VIX.

      Delete
    2. the 50 day not holding is key, bears have nothing but blanks left in the gun.

      Delete
  14. You got to hand it to them, they did a marvelous job of ramping the utes into the close. Beers all around in the clubs of NYC, I bet. And Keybot... how does it know these numbers?

    ReplyDelete
  15. SPX closed above 200EMA on the 60min chart,
    SPX also closed above the 34SMA on the daily chart
    The 8sma crossed 34sma on the 30min chart and never looked back.
    UTIL closed only a meager 7 pennies under 478.43.
    VIX closed at 15.26 and below it's 50d sma...
    SPX and INDU kinda "launched" off their 50d SMA on daily scale.
    JJC at 46.87; well above the danger zone.
    Candle stick patterns on SPX and INDU appear to show a bullish reversal pattern (e.g. kinda like a ladder bottom (DOW), or break away pattern (SPX) )

    All in all, seems like the bears got smacked around on all fronts today.

    ReplyDelete
  16. Great summary Arnie. The bears can hold on to the fact that UTIL could not close above 478.43 today, so that will tell the story in the morning. It would be worthwhile to see if any of the utilities such as DUK, D, EXC, etc... are trading pre-market since that will tell you which way UTIL will want to go. Bears did get beat up today but it is still a coin flip for tomorrow. A very important number to watch if the bulls come to play is the SPX 20-day MA at 1447.77 which is also strong resistance, it almost seems like destiny where price has to back kiss the 1447 before releasing itself to head lower.

    ReplyDelete
    Replies
    1. yep, I so agree. One day doesn't win a war. So tomorrow is a next day. Could be a 4th wave of a larger C down or a 2 of a 1 down; either are projected to end ~1448ish project... which is exactly where the 20d MA lies... wonderful :-)

      If it's a C, then higher highs are to be expected after the 5th down (to probably 1410ish +/- 10 points). That be a great level to add longs. If it's a 1 down, then 1470s is all she wrote for a loooong time. But the 2 up from those low 1400s to say 1450ish would still make for a great long!

      Delete
    2. The components of $UTIL include: AEP, AES, CNP, D, DUK, ED, EIX, EXC, FE, NEE, NI, PCG, PEG, SO, and WMB. It looks like most trade pre-market, and a number of them slipped after closing yesterday. Won't be a cakewalk for them this morning?

      Delete
  17. "One day doesn't win a war". A war fro what the "Smack down" the huge bearish selloff?? LOL. Anyone who is bearish going into this election is a fool. That was the selloff. Maybe another head fake below 1430, but that's it, if you are looking for market "Smack down" and basing your trades on TA and divergence you will be fried like in August and September. No QE3 right KS? Cover your shorts and get ready for January when more retail rides high.

    ReplyDelete
  18. I think we rally from here, for both election and TA reasons. Maybe get another head-fake next week, maybe not. Not sure about Santa Claus this year, he is reliable but the euro and EU could slip a shiv in Santa's back around early Dec.

    ReplyDelete
  19. What would the Keybot need to see to flip to the long side? Thank you for all the great info KS!

    ReplyDelete
  20. Tuesday will be a big day. If UTIL moves above 478.43 and holds that level, and the SPX moves above 1441, Keybot will likely flip to the long side.

    The markets continue to move in conjunction with the European news, specifically Spain's bailout. This is the number one driver of markets for the last month. If the news says Spain is close to a bailout, such as the FT article overnight, then the markets move up, if the news says that Spain may delay the bailout, the markets sell off.

    ReplyDelete
  21. Charles you are a wise man. Santa Claus will bring a rally like usual, January pull back and then consumer junkie earnings next year and the rest. Hell I wouldn't be surprised if the market repeats the same patterns next year. The TA is garbage, it's like predicting the weather. If the barometer drops it's really going to storm, it does and then it's all of a sudden sunny, it doesn't and we are in for the end of the world, until of course it's sunny again. Divergence is ridiculous, as it's obvious until something else gets's in the spokes (bad news, bad company). It's liek saying it's getting so dark the storm is over, well yeah eventually of course. What goes up must come down, etc. A disease of an over thinking brain.

    ReplyDelete

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