Monday, December 31, 2012

Keybot the Quant Turns Bullish

Keystone's algorithm, Keybot the Quant flipped to the long side a short time ago at SPX 1419. The fiscal cliff rally is taking the markets higher. Stay alert for a whipsaw especially in these markets considering that the Congress only has hours to approve the bill. Markets are set to close out the year in the minutes ahead. More information is found at Keybot's site;

Keybot the Quant

Keystone's Midday Market Action 12/31/12; Last Trading Day of 2012; EOM; EOQ4; EOH2; EOY2013; Happy New Year's Eve

China was up overnight on the positive 51.5 PMI news so a global cascading market event was not on tap. With the holiday, some markets are closed, such as Japan, and others are closing early in Europe, so today may be a push into Wednesday where the new year in trading begins.  The futures are up but compensating for the big drop on Friday evening and fair value, the SPX may drop about 5 to 8 points at the opening bell.  Watch the support levels as described in this morning's SPX chart and on the weekend in the SPX Support, Resistance and Moving Averages missive.

The euro is under 1.32, by a hair, so sub 1.32 is a negative for equity markets and above 1.32 is a positive for equities. The 10-year is at 1.70%, use that as a pivot, above 1.70% is equity market friendly, below 1.70% is friendly to the equity bears.  Watch Keystone's SPX:VIX Ratio Indicator to see if it remains under 68, if so, the markets have big problems moving forward. Watch the 12-month MA at 1384.53 that represents the waterfall edge for the markets, the point of no return. Today provides the month-end, quarter-end, half-year-end and year-end prints today (EOM, EOQ4, EOH2, EOY2012).  Check the SPX monthly chart after the close to see if a negative month is logged.  The months were all up thru September, then October logged a negative month closing at 1412.  In November the markets recovered and the month ended at 1417 allowing the bulls to walk around with puffed chests. Thus, the market bears want to see the SPX close under 1417 to log a negative monthly print and further verify market sickness ahead.  Starting at 1402 today and heading lower should lock this in but you have to let the whole game play out today.

SOX 377.15 is key, ditto JJC 45.36, XLF 15.85 and RTH 43.65. Any changes to these four parameters will move markets in that respective direciton.  The fiscal cliff drama continues and has deteriorated into a chaotic circus. The latest is that Leader McConnell and Vice President Biden are talking. They are probably deciding what type of donuts to have delivered. Markets remain somewhat resilient and hopeful for a solution. Watch to see if the BPSPX drops under 70%, or not, as well as how low the NYMO moves, and if the CPC put/call moves above 1.20.  Markets are closed tomorrow for New Year's Day. Old Man 2012 is stumbling out the door while Baby New Year 2013 enters. The New Year celebrations are now rotating the globe. Quick, call an Aussie and ask if 2013 is any different than 2012.

Note Added 12/31/12 at 9:10 AM:  The euro is back above 1.32 at 1.3220. The 10-year is 1.72%. Note how these subtle changes add buoyancy to equities.  A confluence of support exists for the SPX at 1394 with strong horizontal support, the 10-month MA and the 150-day MA. Thus, price may be attracted to test 1394 support this morning.

Note Added 12/31/12 at 10:28 AM:  AAPL is receiving the positive divergence bounce today from the daily chart.  Semiconductors and copper strength, due to the China PMI, are providing the bull strength in the broad indexes.  SOX is over 377.15, bullish.  JJC is over 45.36, bullish. The broad indexes are moving higher today but note that Keystone's SPX:VIX Ratio Indicator remains under 68 and bearish. The SPX now up over 1407.  If the SPX moves above 1418 and holds that level, Keystone's algo, Keybot the Quant will likely flip to the long side.  The markets must be anticipating a positive fiscal cliff deal more and more as time moves along. The Senate is back within the half-hour, at 11 AM, so traders are pulling out the pointed colored hats, noisemakers and confetti, anticipating happy talk, and an opportunity to begin the New Year's celebration early.

Note Added 12/31/12 at 10:52 AM:  The big shots are arriving at the Capital to reconvene the Senate. The negotiations are now expected to continue today.  Watch SOX, now slipping at 377.15. Euro losing 1.32.

Note Added 12/31/12 at 11:09 AM:  The Senate reconvenes and announces that the fiscal cliff talks continue. Markets bounce clearly wanting to believe in the bull case. The SPX punches out another high at 1409 with a +1200 TICK. The TRIN is 1.10 actually favoring the sell side. The SPX:VIX ratio moves back above 68 showing that the bulls are making headway to the upside. SOX is above 377.15. The bulls have the upper hand as the day motors along but the action is very much a mixed bag. SPX HOD is 1409.17.

Note Added 12/31/12 at 12:24 PM:  The SPX moves up after Leader Reid coughs, but then moves back to the flat line when Senator McConnell adjusts his glasses.  SOX above 377.15, bullish.  JJC above 45.36, bullish. SPX:VIX ratio back under 68, bearish. The SPX is 1406.64. The 50-day MA is 1411.10. Tech is leading the upside today so the semiconductors and AAPL are important. VIX drops today but is now only a few pennies away from regaining 21.

Note Added 12/31/12 at 3:48 PM:  Keybot the Quant flipped to the long side at SPX 1419. The fiscal cliff resolution is creating a party atmosphere. Markets want to close on an up note but the fiscal cliff bill has to be passed by Congress in the hours ahead. The bulls mounted a serious recovery today regaining serious technical levels. Keystone took profits on BBY exiting the trade. Will look to reenter.

Note Added 12/31/12 at 4:05 PM:  That was perhaps the wildest last day of trading to close out a year in the market's history.  The broad indexes experience a dramatic 2% up move today.  The semiconductors, SOX, and copper, JJC, led the way, then retail, RTH, by the bell, most everything was participating in the upside. The SPX closes above the 200 EMA on the 60-minute chart. The 8 MA crosses above the 34 MA on the 30-minute chart. The SPX:VIX ratio is over 68. The bulls ran with the ball today and did not look back. Considering the recent down days, give-back would be expected.  VIX was crushed back down to 18.11. Reference this morning's chart and see that the VIX was spanked down from the 200-week MA.  The House does not plan on voting on the bill tonight but the markets were unaffected by this news in the final minutes of trading. The 10-year yield is 1.76%. Interestingly, the euro is under 1.32. The TRIN is at a ridiculous 0.22 low identifying excessive bullishness. Ditto NYAD printing +2200. Ditto the TICK printing a high at +1428, this is a huge number. The CPC put/call and NYMO prints will be interesting. Some market selling will be needed to remedy the uber bullish pressure displayed today. The SPX monthly chart prints a positive month for December. Happy New Year.

SPX Daily Chart Fibonacci Retracements Channel Failure

The SPX fell out of the upward sloping channel. Price poked up thru the 62% Fib retracement a couple weeks ago but using a 76% retracement, which is a useful extension number to remember, targets 1444 where price topped. The 24% Fib on the bottom side is 1374-ish, which serves as the cliff edge for the markets, the 1374-1385 zone, that is where markets do not return if they fall thru.  The slope of the 150-day MA is one of Keystone's cyclical indicators, and it continues to move higher which keeps the bulls in the driver's seat, however, note that the 200-day MA is flat and may roll over now which would be bearish.

The indicators are all in a weak and bleak profile (red lines) which want to see lower lows in price even if a bounce occurs. The stochastics are not oversold as yet. Key SPX S/R is 1403, 1402, 1399, 1397, 1394.31 (150-day MA), 1394, 1393.62 (10-month MA), 1391, 1390.22 (200-day MA), 1388, 1385, 1384.53 (12-month MA Keystone's point of no return), 1384.03 (50-week MA), 1380, 1377 and 1375. Under that, 1366 is very strong support. If 1384.53 fails, it's ovah. Bulls will continue to have hope if the SPX stays above 1384.53. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

VIX Volatility Weekly Chart

Lots of eyes on the VIX these days. And with good reason. The red arrows show the spikes in the fear gauge corresponding to market sell offs. The crash in 2008 was remedied by QE1 at the green circle in March 2009.  That calmed the VIX back down to 15 but in April 2010 the party was over once again and markets sold off.  The markets were saved by QE2 in the summer of 2010 which sent the VIX back down to 15. The market sell off in 2011 was remedied by Operation Twist and the now coordinated global intervention with LTRO 1 and 2.  This central banker money-pump sent the VIX under 15 this year until the May sell off. In the summer, the central banksters come to the rescue again, like propping up a drunk using a lamppost, and Draghi announced his pledge to use all means necessary, then announcing the OMT Bond-Buying plan, then Chairman Bernanke announcing QE3 Infinity and QE4 Infinity and Beyond. The VIX is actually heading higher after the QE4 announcement completely opposite of all prior moves over the last four years. The SPX is now under all these latest quantitative easing pumps from this summer thru now.

The pink boxes illustrate the importance of the 200-week MA now at 23, exactly where price sits.  The VIX will either receive a spank down from the 200-week where the markets will rally and recover, or, will spike up thru the 200-week causing very strong selling in the markets. VIX must decide today and Wednesday. Also watch the 20 and 50-week MA cross (blue squares) since the cross provides a very good read on the markets; a market selloff from late 2008 to early 2009, then rally to early 2010, then selling to Fall 2010, then a market rally into summer 2011, then a sell off until the rally was confirmed in January this year, and that is where the cross sits, the 20-week is under the 50-week MA. Remember a low VIX is complacency and bullish markets, a higher VIX is moving up to fear and panic and markets are selling off. The indicators (green lines) show the positive divergence we have watched all year long, but has been painfully slow to develop into substantial volatilty upside, but price is finally moving higher and the long and strong profile points to higher highs ahead and the VIX punching up thru the 200-week MA, which means that equity markets are likely looking at a weak January ahead. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

Sunday, December 30, 2012

NYMO McClellan Oscillator Daily Chart

Recent tops are shown by the red circles so a move above +30 signals that the markets are far too elevated and need to sell off. Conversely, the recent market bottoms are shown by the green circles so a move below -40 signals that the markets are starting to become to far ovesold and a market rally will be needed.  The NYMO is at -39 entering the lower zone. The red lines show the weak and bleak indicators that would like to see lower numbers for the NYMO even if a bounce occurs. The 13 and 34 MA cross in October signaled the continued market downside, then the 13 MA above the 34 MA in November verified the all-clear signal for bulls, then the top occurs about seven days ago at +40.  The 13 MA is about to stab down thru the 34 MA which would signal market behavior like October. Watch for a market bounce from the -50 to -100 area. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

CPC Put/Call Ratio Daily Chart

Time for an update on the CPC put/call ratio.  The market top was identified 7 and 8 days ago with the low 0.70 number showing that traders were far too complacent.  The worry has ratcheted higher ever since, in step fashion. The move up for the CPC over the last week is a begrudging move higher, the bullishness and trust in a positive fiscal cliff resolution remains. An attractive tradeable market bottom occurs when fear and panic is rampant, at CPC 1.20 and higher.

The indicators are long and strong so even if a market bounce occurs (which will send the CPC lower), higher numbers for the CPC are on tap moving forward. The red square shows the 13 MA moving above the 34 MA (CPC moving up) in October as the markets sank like a stone. The mid-November bottom occurred with the 1.23 print and the 13 MA dropped under the 34 MA (green square) which verified a market rally ahead (the CPC is moving down). Now the 13 MA is ready to pierce up thru the 34 MA again which would be in tune with falling equities markets. The projection is that selling will remain in the equities markets until the CPC prints above 1.20 at which time the market long side will begin to look attractive with a tradeable market bottom forming.  This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

BPSPX Bullish Percent Index Daily Chart

The bullish percent index for the SPX shows price moving up thru the 70% level a couple days ago which is a feather in the bull's cap. A market buy signal occurred in early December when the BPSPX reversed six percentage points, from 58 to 64. So this tool favors the market bulls.  A market buy signal occurs when the BPSPX reverses to the upside by six percentage points. If the BPSPX moves up thru 70% that provides extra bullish strength. Conversely, the BPSPX falling thru 70% is a bearish signal, and, if the BPSPX reverses six percentage points, that will create a market sell signal. Thus, the bulls are in fine shape. However, trouble will surface if the BPSPX falls back under 70%, and if the BPSPX falls to 65.5 and lower (71.5-ish minus 6), a market sell signal will occur.

Note the sideways vibe occurring. The moving averages are lining out sideways as well. The RSI and stochastics are overbot. Price is at the top rail of the sideways triangle providing a logical area where a roll over may occur.  Also of interest is the 50 and 200-day MA crosses, the so-called Golden and Death Crosses. The chart illustrates why the crosses do not mean a whole lot to technicians. In June, the death cross occurs but price had just bottomed and the June rally began that went no where but up. Then when the 50 and 200 realign for a golden cross in September, price was topping and the markets rolled over. Since price is elongating now and stretching out sideways these effects are lessened moving forward but a clear example of why the golden and death crosses are of little value.  Once a major trend change occurs, the 50 will remain over, or under, the 200 for an extended period of time and it is useful as a confirmation signal.

Watch to see if the BPSPX slips under 70% and if price drops under 65.5 to trigger a market sell signal. For now, this tool remains on a market buy signal. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

Saturday, December 29, 2012

SPX Support, Resistance (S/R) and Moving Averages for Trading the Week of 12/31/12

SPX support, resistance (S/R), moving averages and other important levels are highlighted below. A formidable ceiling exists at 1419-1422. The 200 EMA on the 60-minute chart at 1418 is a critical level that signals continual market weakness ahead and must be watched if markets bounce. As long as the SPX stays under 1418, the bears will be growling strongly moving forward. The bulls will regain strength and control of the markets if they can bust up thru the 1418-1422 gauntlet.

The SPX tried to find support at the important 50-day MA at 1412 but that level failed. Note how the three recent major quantitative easing measures have all failed; the ECB's OMT program at 1403, QE3 Infinity at 1438 and QE4 Infinity and Beyond at 1430. There are three key support levels before the markets would go over Niagra Falls; 1394, 1390 and 1384.  The 1384 is the last chance support, the broad indexes would fall into a cyclical bear market that would last weeks, months, perhaps a year or two or more if 1384 fails.

For Monday, the last trading day of 2012, the bulls need to recover Friday's move and push above 1418 to accelerate further upside.  If the SPX recovers and pokes up thru 1418 (which would be on positive fiscal cliff news), the 1418-1422 gauntlet would likely give way with price moving above 1422. The bears need to push under 1402, only pennies lower, to create a downside acceleration that would likely send price to directly test 1394. The Sunday futures and Asian and European markets are not only important to watch to see if a cascading market event is beginning, but also any smidge of negativity in the futures will be enough to create the downside acceleration.  Obviously, if the fiscal cliff news is negative on Sunday evening and overnight into Monday, the SPX can easily cascade down thru the 1390's in quick order.  A move thru 1403-1417 is sideways action.

·         1476
·         1475 (9/14/12 Intraday HOD for 2012: 1474.51)
·         1472
·         1468
·         1466 (9/14/12 Closing High for 2012: 1465.77)
·         1465
·         1461
·         1460
·         1457
·         1453
·         1451
·         1447
·         1446
·         1444
·         1441
·         1440 (5/19/08 Intraday HOD for 2008: 1440.24)
·         1438 (9/13/12 Fed Announces QE3 Infinity)
·         1435
·         1433
·         1431
·         1430 (12/12/12 Fed Announces QE4 Infinity and Beyond)
·         1429 (11/6/12 President Obama Election Top)
·         1427 (5/19/08 Closing High for 2008: 1426.63)
·         1426.74 (10-day MA)
·         1424
·         1422
·         1421.79 (20-day MA)
·         1420.93 (20-week MA)
·         1420.71 (100-day MA)
·         1419
·         1418.10 Friday HOD
·         1417.83 (200 EMA on 60-Minute Chart a Keystone Turn Signal)
·         1416
·         1414
·         1413
·         1412.07 (50-day MA)
·         1409
·         1406 (5/29/08 HOD: 1406.32)
·         1404
·         1403 (9/6/12 ECB Announces OMT Bond-Buying Program)
·         1402.43 Friday Close – Monday Starts Here
·         1402
·         1401.58 Friday LOD
·         1399
·         1397
·         1394.31 (150-day MA; the Slope is a Keystone Cyclical Signal)
·         1394
·         1393.62 (10-month MA)
·         1391
·         1390.22 (200-day MA)
·         1388
·         1385
·         1384.53 (12-month MA; a Keystone Cyclical Signal) (the cliff edge)
·         1384.03 (50-week MA)
·         1380
·         1377
·         1375
·         1373
·         1371(5/2/11 HOD for 2011: 1370.58)(8/16/07 LOD: 1370.60)
·         1370
·         1366
·         1364 (4/29/11 Daily Closing High for 2011: 1363.61)
·         1362
·         1358
·         1357
·         1355
·         1351
·         1348
·         1345
·         1343
·         1341 (7/26/12 Draghi Announces Support for the Euro Starting QE Rally)
·         1338
·         1337
·         1335
·         1333
·         1331
·         1329
·         1326
·         1324
·         1321
·         1319

Keystone's Key Events and Market Movers for Trading the Week of 12/31/12; Happy New Year

Key Dates and Times for the Week Ahead:

·         Keystone’s Comments on the Upcoming Week: Monday is the last day of trading for 2012, the end-of-month, end-of-fourth quarter, end-of-second half, and end-of-year (EOM, EOQ4, EOH2, EOY2012).  Markets are closed on Tuesday and then the fireworks begin Wednesday thru Friday with the Fiscal Cliff, ISM Mfg Index, FOMC Minutes and the Monthly Jobs Report. The fiscal cliff drama heats up on Friday evening with the Whitehouse meeting and large drop in the S&P futures.  Leaders Reid and McConnell are attempting a skinny-mini Plan C this weekend.  If the debt ceiling is part of the plan, markets will react positively.  If the debt ceiling is not addressed, that means the political shenanigans will continue thru January, and the markets will likely sell off strongly. The economy is already taking a negative hit from this ongoing political drama as evidenced by weak Consumer Sentiment and Consumer Confidence data, and weak retail sales. These trends are difficult to reverse. The debt ceiling hits in February. The SPX is below the 1438 and 1430 levels, where QE3 Infinity and QE4 Infinity and Beyond were announced, respectively.  The European news flow directly dictates global market direction. Euro up = up markets. Euro down = down markets. Watch the 1.32 level as a pivot point this week. Spain is delaying their bailout request so the ECB’s bond-buying program cannot be unleashed.  Spain is reluctant to give up sovereignty and accept conditionality.  Italy wants Spain to request a bailout since the ECB bond-buying will immediately improve Italy’s debt situation. Look for a strong market bounce and rally if Spain requests a bailout. The SPX is below the 1403 level where the ECB’s OMT bond-buying program was announced.  A flight of deposits out of Greece, Spain and Italy is ongoing which may lead to bank runs. European riots and violence are increasing. The slow-motion development of a European banking union continues.  Merkel likely wants Greece to stay in the euro until her election in September. The next ECB Rate Decision and Press Conference is 1/10/13.  A cut is expected in early 2013, perhaps January, but maybe more likely in February or March. If a cut occurs, the euro will drop and so will equities markets.  If no cut occurs, the euro will move flat with a slight upward bias, and so will the equities markets. Europe must cut rates to weaken the euro and help the Eurozone grow out of the debt mess.   The China hard versus soft landing saga continues. Watch for further China easing measures such as lowering rates or triple R’s, which will bounce copper, commodities and equity markets, but, do not hold your breath.  China appears hesitant to act since they correctly worry about the commodities inflation and asset bubbles that will be created (Chairman Bernanke incorrectly defends QE saying it does not create asset bubbles). China continues to provide lip service about easing measures and the markets bite each time raising copper, commodities, and equities, all on promises. This lip service act may no longer work since copper and commodities are leaking lower for the last couple weeks. New leaders President Xi Jinping and Premier Li Keqiang will supply economic targets in March. China professes a 7.5% growth rate but no one asks how this is possible when their number one customer, Europe, is in recession, Greece and Spain a depression, the U.S. is flat and uninhabited cities litter the China countryside, waiting for the urban shift to a domestic-led economy.  Perhaps the simple reason is the fudged 7.5% number.  A weak global economy is driving the oil price lower but the Iran-Hamas War and Egypt and Middle East violence wants to take oil prices higher. Use the WTIC oil 90 and Brent oil 110 as pivot points. The Middle East violence is not a major concern in the context of oil price if Brent stays under 110. The SPX typically moves in the same direction as oil.  The earnings season winds down and confessional season begins so listen for any companies that start to warn of lower numbers.  Tech (COMPQ) and small caps (RUT) lead the markets and verify the direction of the broad indexes. Watch AAPL closely moving forward, it appears destined to break the 500 support.  As AAPL goes, so goes the markets.  Volatility moved higher last week with the VIX moving up over 20 towards 23. The higher VIX will lead to larger intraday and day-to-day point moves for the indexes. The major Bradley turn date occurred last weekend and appears to have created a market top.  Keystone’s Eclipse Indicator identifies this period, ending in the days ahead, as having a high potential for a large market selloff. Obviously, the fiscal cliff drama playing out this weekend will determine if a market event occurs on Monday, or not.
·         Sunday, 12/30/12: President Obama appears on Meet the Press Sunday political talk show. Leaders Reid and McConnell are trying to come up with Plan C. Is there a vote on Sunday evening? Watch the futures, currencies, and Asian and European markets overnight to see if a cascade event is forming, or not.
·         Monday, 12/31/12: What is the result of the fiscal cliff drama overnight? EOM, EOQ4, EOH2, EOY2012. Last day of trading for 2012. Dallas Fed Mfg Survey 10:30 AM.  Farm Prices 3 PM. Earnings: PRGS.
·         Tuesday, 1/1/13: New Years Day. U.S. Markets are Closed. ESM is officially open for business but ‘will not be fully operational’.
·         Wednesday, 1/2/13: If Congress does not act, the U.S. drives off the “massive fiscal cliff” (a phrase coined by Chairman Bernanke in early 2012) that will cut the GDP, increase unemployment and immediately launch the country into recession, but, on the positive side, the nation’s debt will decrease. Chairman Bernanke stated that the Fed does not have the tools to help should the fiscal cliff occur. First day of trading for 2013. Typically new money is put to work in early January creating market lift. Seasonality-wise, as the first few days of January goes, so goes the month; as the way that January goes, so goes the year. Motor Vehicle Sales.  PMI Manufacturing Index 8:58 AM. Construction Spending and ISM Mfg Index 10 AM--a market pivot point will occur.  FOMC Minutes 2:00 PM--a market pivot point will occur.  Earnings:  GBX, SABA, PER, TXI, VALU.
·         Thursday, 1/3/13: Chain Store Sales.  Challenger Job Report 7:30 AM. ADP Job Report 8:15 AM. Jobless Claims 8:30 AM.  Oil Inventories 11 AM. Earnigns:  FDO, UNF, WOR.
·         Friday, 1/4/13: Monthly Jobs Report 8:30 AM. Factory Orders and ISM Non-Mfg Index 10 AM-a market pivot point will occur. Natty Gas Inventories 10:30 AM. Earnings:  FINL, MOS.


·         Friday, 1/11/13: Crop Report-watch corn and soybeans.


·         Monday, 1/21/13: Presidential Inauguration. Martin Luther King Day. The president does not want a fiscal cliff mess and fiasco hanging over him on this day so it serves as an absolute deadline for the fiscal cliff and debt ceiling resolution.
·         In February:  Debt Ceiling limit is hit.
·         In February: Italy elections.
·         In February or March:  New China President Xi Jinping and Premier Li Keqiang take over complete control and the ten-year transition of power is finished. China now sets inflation and budget targets moving forward.
·         In March and April:  The BOJ head’s will be replaced and strong QE will likely occur. Perhaps a low in the Nikkei in January or February may provide a point of entry ahead of the money-pumping?
·         In September:  Merkel (Germany) seeks re-election and will not want Greece to exit the euro before the election, but will not care afterwards.  Perhaps Greece and Germany will both exit the euro in the future.

----------------------------  2014  ----------------------------------

·         In March 2014: ESM is officially ‘fully operational’. The banking union schedule has been delayed from January 2013 to January 2014 and now to March 2014.