The bulls punched up thru the SPX 12-month MA like a hot knife thru butter. The NYA 8000 level was also no match for the bulls. The VIX 16 level folded like a cheap suit which awarded the market bulls a trifecta of victory today. It is interesting that the 8 MA and 34 MA cross accurately foretold the bullish direction from 3 PM Friday on. The SPX took out the 1366-1369 resistance guantlet at the opening bell. That was not a gauntlet, that was a paper ceiling. The SPX then punched up thru 1375 resistance. It is all coming up roses for the bulls, but stop and consider the total move off the top. The indexes were beaten down and needed a bounce. Keystone's SPX 12-Month MA Cross Indicator signals a Cyclical Bull Market ahead (bulls and bears will continue to fight over this in the days ahead). Keystone's NYA 40-Week MA Cross Indicator signals a Cyclical Bull Market ahead (bulls and bears will continue to fight over this in the days ahead).
The SPX HOD is 1381.55 and the 1375 level was not back kissed as yet today. The 200-day MA is 1382.45. The 150-day MA is 1384.41. The 10-month MA is 1386.44. These three stooges form the 1382-1386 moving average resistance gauntlet, and it has held thus far. So the 1375-1382 range serves as a sideways channel for now. The bulls can throw confetti if the 1382-1386 resistance gives way, the next stop would be 1391. The bulls can develop strong oomph higher if the XLF moves above 15.61. The bears can stop the upside momo if they move the VIX above 15.95. Thus, the main driver's of market direction now are VIX 15.95 and XLF 15.61. If bullish, you want XLF 15.61 and higher. If bearish, you want VIX 15.95 and higher. Keep listening for news concerning the ongoing Israel-Hamas War and Greece decision on aid tomorrow. The thoughts of a resolution to Greece this week is bouncing the European markets strongly and that happiness bled over to the U.S. markets. The happy fiscal cliff talk likely has less to do with the push higher although the smiles and back-slapping does set a positive tone for markets. Keystone took profits on the WLT exiting this long trade, will look to reenter. Keystone also took profits on DNDN exiting this long trade, will look to reenter.
Note Added 11/19/12 at 11:12 AM: The VIX moved above 15.95 around 10:40 AM but the bears could not hold it. The VIX is now printing 15.86, under the 15.95 and contributing bullishly to markets. The XLF made a run towards the 15.61 printing a HOD at 15.59, now printing 15.56, so this remains in the bear camp contributing bearishly to markets. The SPX is printing 1381.46, the 1382 is providing a ceiling today, so far. VIX 15.95 and XLF 15.61 will tell you the story today.
Note Added 11/19/12 at 12:07 PM: VIX is taking a strong leg lower now at 15.55 which provides bull fuel. The SPX is knocking on the 200-day MA at 1384.45. See if price can overtake this important moving average, or not. XLF is 15.57 four pennies away from 15.61. The 10-year yield is 1.62% rather subdued for such a large equity day. A lot of the dough is remaining in the notes and bonds and not moving towards equities so today's rally smells more like a short term trade, at this juncture. Watch to see if the 10-year yield moves higher to 1.63% or 1.65%, which would verify market bullishness, and be expected for such a big equity market bounce today. If the yield stays at 1.62% or lower, the market rally would be suspect.
Note Added 11/19/12 at 2:06 PM: The 10-year yield drops to 1.61 %, this is curious. The SPX fought the good fight to try and move up thru, and stay up thru, the 1382-1386 moving average resistance gauntlet described above, specifically the 200-day MA at 1382.45, so far the bears have placed a barrier here. The XLF is drifting lower now at 15.52 almost a dime away from 15.61 that the bulls need to be able to throw confetti. The VIX is psycho today now lining out sideways at 15.64, under the 15.95 so bulls are happy here. The broad markets launched at the openign bell and then have moved sideways ever since; the SPX thru 1378-1382 all day long, so watch which side price exits from this channel. The 1375 back kiss has not yet occurred, this is a strong S/R so price should show it respect. Keystone's algo is now tracking RTH 43.95 in addition to the VIX 15.95 and XLF 15.61. RTH 43.95 would allow the bulls to throw confetti just like XLF 15.61, otherwise, they will run out of gas. The TRIN has printed a LOD at 0.33 and is now at 0.59, uber bullish. Likewise the NYAD hits near +2500 today. Note that this uber bullish +2500 remedies the uber bearish -2500 from last week, but, the broad indexes will now need to snap back and move lower either into the close today or tomorrow to relieve this uber bullish pressure displayed by the TRIN and NYAD today. The SPX downside targets would be the 1375 back test, and the 12-month MA at 1368-1369. If the SPX comes down to test the 1368-1369 level, that will tell you if the rally is real, or not. If real, the SPX will recover off the 1368-1369 back test and launch higher again, and RTH and XLF will turn bullish. If price comes down and falls thru 1368, the markets will start to sell off in force again, and the VIX will spike up thru 16 and move higher. VIX 15.95, XLF 15.61 and RTH 43.95 dictate market direction.
Note Added 11/19/12 at 2:45 PM: The market maker came up to grab Keystone's CY so profits were taken and that trade was exited, will look to reenter. CY will probably move to 9.75 as the days and perhaps a week or two moves along.
Note Added 11/19/12 at 2:51 PM: The 5, 10, 15, and 30-minute charts are negatively diverged right now. Ditto the 1-hour but it has a long and strong MACD line, and the 2-hour chart is long and strong wanting to see a higher high after a pull back. The SPX is now up thru the 200-day MA but shy of the 150-day MA. Price may want to pull back here in the 30-minute and lower time frames, it is already going on 3 PM with only one hour of trading remaining, so perhaps weakness into the close, weakness in the morning but the 2-hour chart will want to see the SPX back up at these current levels after any pull back. It will be interesting to see if the SPX starts to now weaken in the minutes ahead.
Note Added 11/19/12 at 3:50 PM: The session moves to the close and the set-up on the minute and hourly charts remains as described so perhaps the pull back tomorrow morning, then price will satisfy these levels or higher again into a lunchtime top. All the action occurred in the first ten minutes today, the VIX, XLF and RTH is status quo. The SPX is up thru the 150 and 200-day MA's, but not the 10-month MA at 1386.87. Price is fighting it out inside the moving average resistance gauntlet at 1382-1386 in the final minutes.
Note Added 11/19/12 at 3:59 PM: Keystone took profits on IWM exiting this long trade.
Note Added 11/19/12 at 4:02 PM: VIX is 15.21 well under 15.95, complacent and bullish. XLF is 15.55 under the 15.61 and bearish. RTH is 43.97 jumping over the 43.95 and bullish, however, that is a cheesy close, so the bulls must wait for the morning before throwing confetti. The SPX 10-month MA is 1387.02, price closed at 1386.88, perhaps still settling out. The bulls fell 14 cents short of the 10-month MA, thus, did not make it thru the resistance gauntlet of 1382-1387. The bulls came to play today. Tomorrow is going to be extremely interesting. The CPC put/call will provide a check on complacency tonight. An interesting set up is in place, lots of traders jumped on the long bandwagon today. Will they be happy they did come tomorrow?
Note Added 11/19/12 at 8:11 PM: Moody's downgrades France knocking them off the AAA pedestal. This downgrade now matches S&P's downgrade so its shock value to markets may be limited. The euro fell on the news to 1.2778.
Looks like I wasn't the only one worried about missing the drop last week!
ReplyDeleteWhen I was reviewing the 2008 crash to compare to today I noticed a huge short covering rally that looks awfully similar to right now which was just before the REAL part of the crash started.
You can see it right at mid September: 1133.50-1265.12 (11.6%) in only a few hours, basically straight up, then the market fell off the cliff to the 800s in a few weeks.
The count is not the same (the market always keeps it just a little different to keep you guessing), and this looks like a smaller version (which makes sense since I am expecting a smaller crash), but otherwise is remarkably similar: One last flush of the weak shorts before we really go down hard?
NYAD over 2400 and TRIN as low as 0.33 this morning. Aren't we going to need a move down or at least a couple of hours of sideways movement to burn off all of that excess bullishness?
ReplyDeleteHello Trader adn Weaver, yep both of you have good thoughts. The move in July 2011 may be more pertinent to now. The seasonality may help to hold markets up into the holiday now and the regaining of the cyclical bull levels SPX 1369 and NYA 7995 does now provide the bulls some street cred. The first week in December is where the highest amount of tax loss selling occurs for the year, lets call it the first couple weeks, and expecially this year, as traders lock in profits and exit the markets with politicians driving the bus, the early December selling may be strong. So, yes, perhaps up to test 1391 if the 1382-1386 moving average gauntlet cannot offer resistance, even a look at the important 1403, but the weakness should reenter the markets moving forward, perhaps the first half of December will kick off the next strong leg down for markets. Just take it day to day. Yep, Weaver a snap-bck move would be needed, that would be applicable to the SPX back kissing 1375, and perhaps the 1369 (12-month MA) level, which would be an important test when it occurs since markets wil have to decide if they truly want to go up, or collapse.
ReplyDeleteA lot of good traders are looking for a new low (1321) next week, or by 12/5, but if Keybot stays bullish I would be wary of writing this off as a dead-cat bounce. As for tax selling, the past 3 weeks looks like tax sellers/profit takers have already exited.
ReplyDeleteThe rallies that are "hated" (i.e. "this can't last, the fundamentals stink") are the most dangerous IMO, and this is shaping up to be just such a hated rally....
Everybody is scanning for black swans but nobody's looking for white swans.
VIX 15.95 will be a major tool to watch, if VIX moves above the rally will fade away and then it will be time to watch SPX 1369 and NYA 7995 again. If the VIX stays under 15.95, and the XLF moves above 15.61, it will definitely be a sustainable rally with a few days of legs ahead. The 8 MA and 34 MA on the 30-minute chart is a very important tool moving forward as well. But right now, VIX 15.95 is perhaps the siingle most important item affecting the broad indexes right now so watch that closely. The selling volume was never capitulatory in nature, it actually looks like many traders held tight thru the selloff move, so there is probably more tax selling ahead, but we will have to wait until early December to note the action and see what happens. The 12-month MA at 1369 is uber important as well, this is a key and more important tool than others, so above 1369 is happy bulls, under 1369 is happy bears.
ReplyDeleteShanebot remains skeptical. The underlying fundamental case isn't there for an extended rally. We're looking a zero S&P earnings growth and not any better growth expected for the fourth quarter.
ReplyDeleteI agree, there are a huge number of fundamental and long term technical bearish forces, but it depends on your timeframe. If you are looking for a 3 day trade then the 30 min RSI is more important then those things. I am happy to trade any timeframe, but I don't see this as the type of market to play back and forth right now, so I have lengthened my perspective and am building shorts on the bounces to ride the trend until it looks far closer to complete than it does now.
DeleteI usually end up losing my ass when I try to play the game too short, like over 3 days. Even if I'm right about the overall thesis, the market can and probably will take the choppiest course to get there.
DeleteIndeed, you have to wait for the perfect setups. A day trader glued to the screen watching every tick in the minute bars that must grab the entry at just the right time ironically has to be super patient because you have to keep passing up mediocre trades until you really find the ones worth taking. A trade that only lasts an hour takes a long time when you are sitting watching it.
DeleteThe other problem with short term trades is that, while it can make a good steady income if you can do it well, you can't ever make a really big dollar win if you don't hold positions (not that that has to be the goal of course).
KS,
ReplyDeleteRecently, I've begun keeping an eye on this:
http://www.screencast.com/users/strikefirst/folders/Default/media/f2c0b481-9e32-4b86-a91e-33239f0c3acf
It's a chart of the SPY, with a left price scale of the TLT added.
When SPY is above TLT I'm thinking bullish, and vice versa.
What do you think - is this useful?
Sure it is useful, it demonstrates the relationship of bonds versus equities. When stocks go up, typically traders are moving money out of the bond safety into the riskier stocks. Thus bond prices go down. Yields move opposite to bond price so yields go up with stocks. But the chart is showing the inverse relationship. TLT moves in the same direction as the SPX, TBT moves inverse.
DeleteThe odd thing about today is hte 10-year yield was 1.62% a while ago and it dropped to 1.61%, the yield should be moving up today with equities so this is a flag that says caution about todays action.
Watch VIX 15.95, XLF 15.61 and RTH 43.95, any change to any of these three parameters and the broad indexes will move in that same direction. The 200-day MA is putting up a big fight today.
ReplyDeleteThanks for the response!
DeleteIf I had to guess the next 7-10 day's action, I'd say we fill the sort-of gap in SPY around 142 and then go back down to fill the gap opened today... the non-confirmation of bonds KS highlighted is noteworthy.
ReplyDeleteKS, Is UTIL not as important at this point? What number will be important to watch re UTIL? Thanks in advance, Rich
ReplyDeleteThe 15-week lookback number is 485.14. The 50-week MA is 466.01. Price is 444 no where close to those values the bulls need. UTIL is important but it is firmly bearish and creating market negativity behind the scenes. If price comes up into the high 450's it will become relevant, otherwise, it sits there and remains a bearish force on markets.
DeleteNo one really believes this pop but I'd wait till after TGiving to even think about shorting.
ReplyDeleteThat's what many thought last year when we saw our first bear thanksgiving. All the noise a year ago screamed bear christmas, all the experts and markets pointed towards this. And what did we see? Bear markets are nothing nowadays but political and MM manipulation.
DeleteThese are funny markets, sometimes days like this lead to give-back days that are almost in reverse. Greece is likely the big deal and that should be known before tomorrow's open. Perhaps weakness at the open which makes the longs today worry, then recovery during the morning session so bears give up at shorting, and bulls go all in, then lunch time roll over, markets head down with lots of shorts on the sidelines not participating and lots of bulls in long watching everything go the wrong way. Just one scenario, we will figure a path forward after the smoke clears.
ReplyDeleteThe RTH 43.93-43.95 is key as soon as the bell rings in the morning, that will tell you the whole story immediately, the move above in the final minute is cheesy, so wait for the opening prints in the morning.
Well let's see the markets crashed down after election becasue Romney bot conservatives decided to punish the markets with their hedge fund MM angry babies. There was never one good reason fro the sell offs. Obama on the microphone my man? Check it. This was like a little kid (republicans and hedge funds) throwing his dinner and ice cream cone on the floor cause he was MAD. Keep reaches for reasons, Greece (Sounds like last year De ja vu) Spain, all the noise of Hamas and middle east. Meanwhile, good earnings posted were being played down by "future projections". Face it retial and techs are going nowhere but up in the mid to near term future , meaning past the holiday season. APPLE was pin pointed shorted and denouced, "noise" not charts run entire market.
ReplyDeleteThe bear gave the bull too much in one day!
ReplyDeleteCPC = 0.75
Wow, what a move. So the low CPC matches the lower move in the VIX, both confirming complacency. The stronger bull rallies will climb a 'wall of worry'. This is where markets head higher since no one believes the market, it is doubted and folks are tense and non-believing, so the market does head higher. Right now, the complacency is back, the bulls are staggering around, bellies full off the Fed punch, not caring about what ticker it is simply buy them all, markets go up forever, buy and do not worry about any downside. Complacency always gets traders in trouble. The CPC alone shows that the markets remain in topping behavior and likely have more downside ahead again.
DeleteKS, it looks like the downgrade of France will deliver the drop to 1369 (or lower) at the open tomorrow... thanks to your read of bond yields, I exited my SSO long for a nice gain from last Thursday. As you say, it's tough to forecast the next day, not to mention next week or next month....
ReplyDeleteChas, perhaps, but S&P rating agency had already downgraded France so the Moody's rating agency move this evening is more of a confrimation move, following S&P, so the negativity may be moderate for the news. The euro did drop so that does hint at market weakness. Greece will probably be the big news in the morning, good or bad. If markets pull back, the strong 1375 would be the first back test, then we can look for 1369. These are tricky markets. It's good to have longs and shorts since at least something is green on the screen. Yep, several pundits are mentioning the stagnant yields today which hint that the rally is simply a tradeable move by professionals which could quickly reverse. For the big rally today, the 10-year yield should be at 1.65% or higher tonight, instead it showed no sign of life.
Delete