Friday, November 30, 2012

Keystone's Midday Market Action 11/30/12; EOM

Say goodbye to November and hello to the cold December winds. The monthly charts receive new prints today. The euro popped overnight up to about 1.3030, tagging the target we discussed yesterday with the $XEU euro chart. Scroll back a couple pages to study that chart or type XEU into the search box above, or find it in the lower right hand margin with the archives.  The euro hit this target and fell on its sword, dropping thru 1.30, now printing 1.2981. Euro down = equities down. The futures are flat. As shown this morning, the 10-year yield is of great interest moving forward so keep a close eye on that, now printing 1.60%. Yields down = equities down. 1.60% is an important pivot point so if the 1.59% and lower prints for the ten-year it will receive lots of attention and would be in concert with the equties markets selling off. Commodities are favoring some moderate weakness today.

Watch SOX 372.42, XLF 15.65, VIX 15.85.  All three are bullish.  If the markets sell off  but none of these three turn into the bear camp, then the bears got nothing and the markets will move higher. If any of the three move into the bear camp, then the markets will sell off. The degree of market selling will be impacted by whether one, two or all three of these parameters turn bearish, or not. For the SPX today starting at 1416, the bulls need to touch the 1420 handle to set off an upside acceleration. The bears need to push under 1409 to create a downside acceleration.  A move thru 1410-1419 is sideways action.

Watch the COMPQ versus SPX relationship to see if tech leads lower, or higher, so the strength of the market move today can be measured.  The politico's will likely don their top hats and tails and tap dance in front of the camera's again todaym, creating market volatility. President Obama is speaking at noon so note the market reaction at that time. As both the democrats adn republicans profess that they want to control spending, the president's proposal includes 50 billion dollars in new spending. Welcome to the circus. Chicago PMI hits fifteen minute after the opening bell. Farm Prices are at 3 PM. Watch to see if the 8 MA stabs down thru the 34 MA on the 30-minute chart, or not. Also watch the potential ascending triangle on the 5-minute chart posted after yesterday's close. The opening bell is about twenty minutes away.

Note Added 11/30/12 at 9:48 AM:  Chicago PMI disappoints.  The wild ride in volatilty is eye-catching, the VIX was higher at the start, then plummeted to under 15, now spiking all the way back up to the highs of the day at 15.28.  Overall, however, SOX, XLF and VIX remain bullish so the long side continues to run the show.  Tech is slilghtly leading the broad market to the downside so this is a feather in the bears cap.

Note Added 11/30/12 at 12:16 PM:  The SPX is testing the strong 1413 support.  The VIX is over the important 15.85, identified by Keystone's algo, albeit by a few pennies, but this will create market negativity as long as the VIX remains above 15.85. XLF and SOX remain in the bull camp. The euro is 1.30, bulls will be happy if it stays above 1.30, bears will increase the selling pressure if it drops under 1.30 and leaks lower. The 10-year yield is steady at 1.61%. Keystone took profits on the ZSL trade, nice launch today, exiting the position. Will look for a place for a potential reentry.  Also shorted EXPE opening a new short position. Keystone is hanging the outside Christmas lights today a la Chevy Chase in Christmas Vacation. Perhaps the smartest follks are those that let the holiday lights remain up all year long, although the lights would be an eye sore during the July 4th picnic.

Note Added 11/30/12 at 12:56 PM:  A skunk shows up at the garden party. Speaker Boehner walks to a microphone and says "Who are we kidding, we are at a stalemate, and the talks are going nowhere." The SPX drops under the strong 1413 support level.  The Dow Industrials drop under 13K.  The Nasdaq is at 3000. All in all, no great shakes, the broad indexes continue along sideways. The 8 MA is curling down and converging with the 34 MA on the 30-minute chart but remains above for now so the bulls rule. Keep an eye on this since it is a firm bearish signal that short is the place to be should the cross occur.  VIX is now over 16 solidly in the bear camp which will create futher market selling.  SOX and XLF remain bullish so the bulls can hang their hat on these two parameters, for now. Keystone is adding more to the ongoing long EGLE trade, a speculative shipping industry play. EGLE keeps sliding south and analysts are expecting 1.7-1.8.  The charts show attractive positive divergence; EGLE needs to hold the 2.15-2.30 area to set up the potential launch move.

Note Added 11/30/12 at 2:34 PM:  The 8 MA is nearing the 34 MA on the 30-minute chart but the bulls are trying with all their might to push price sideways or higher to stop the cross from occurring. The SPX is at 1415. The VIX is bearish and XLF and SOX bullish. Status quo. The euro is 1.3002. The 10-year is 1.61%. The bulls got nothing unless they drop the VIX under 15.85. TRIN is moving up from 1.00 to 1.26 in the last twelve minutes. The TRIN moving up would correspond to increased market selling. Tech and the broad markets are moving down coincidentally so the bears cannot receive any oomph from tech leading lower, however, the bulls do not receive any benefit either since tech is not leading higher either.  AAPL is down five bucks today, almost a percent.  Yesterday, Apple bumped its head on the 200-day MA at 596 and received a spank down, unable to move above this important moving average, a bearish signal for AAPL.

Note Added 11/30/12 at 2:52 PM:  The 8 MA is coming down too cross the 34 MA.  The SPX is dropping towards the lows at 1412. VIX is 16.06 just printed the HOD. XLF printing the LOD at 15.71. SOX dropping like a stone; one more point lower and all Hades will break loose in the markets. The 10-year is 1.60% down a tick favoring equity bears. The euro is 1.2998, under the 1.30 albeit by tow ticks. Things may get ugly into the close, hang on to your hat.

Note Added 11/30/12 at 3:18 PM:  The Nasdaq is now down 0.22% with the SPX down 0.11%, tech is leading to the downside so place a feather in the bears cap.

Note Added 11/30/12 at 3:50 PM:  Markets are typically buoyant on Friday afternoon's since short traders pare back positions due to weekend event risk. The weekend news events tend to be on the positive side so short traders may cover one-third of their holdings to reduce exposure and avoid having their head handed to them on Monday morning. Of course, with this fiscal cliff drama, the weekend will be a jump ball.  The goose into the close right now will keep the 8 MA a hair above the 34 MA on the 30-minute chart which keeps the bulls in charge and sets up Monday morning as a showdown. VIX is 15.93 remaining bearish. SOX and XLF remain in the bull camp all day and prevented the SPX from falling to the low 1400's today.

Note Added 11/30/12 at 4:00 PM: Goodbye November. Lots of volume at the close with a rebalancing. The SPX came up to tag the 1418 from yesterday.  The session was flat today. Wait to see where the VIX settles out; looks like the bears will be happy with that victory today.

Keystone's SPX 30-Minute Chart with 8 MA and 34 MA Cross Indicator

For the first sign of any cracks in the bull rally, watch the 30-minute chart today to see if the 8 MA stabs down thru the 34 MA, or not. For now, the 8 is above the 34 so the bulls rule for the hours and days ahead.  Note the rising wedge, overbot conditions and universal negative divergence that already created the start of a smack down late yesterday.  Price fell thru the lower trend line as well. Thus, she should roll over. The 1419 level is sturdy overhead resistance so watch that closely. Today we will see if the bears want to fight back, or if they simply limp into the weekend to nurse their wounds after the bull drubbing for the last nine trading days. 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.

Keystone's Inflation Deflation Indicator Signals DISINFLATION

In May, Keystone's indicator dropped into Deflation. The stock market rally from June into the October top boosted the indicator back up thru Disinflation and into the Neutral zone, only to see it fall again during the November market selloff, dropping down to 2.9-ish on the verge of deflation. The indicator moved higher during the recent two-week market buoyancy and poked back above 3.0 into the Neutral zone but alas, the indicator dropped back under and now indicates Disinflation again.  The 10-year yield moves in the same direction as the equity markets since money moves from stocks into bonds and from bonds to stocks depending on risk-off, or risk-on, respectively.

The note price is used for the denominator of Keystone's equation. The 10-year yield is 1.61% with a price at 100.172. The CRB (Commodities Index) languished at 270-ish on the cliff edge during June-July but recovered when Draghi said he would support the euro by all means necessary in late July.  The CRB launched from sub 270 to 320 at the September top, then rolled over as evidence of a weakening global economy occurs. At the market bottom a couple weeks ago, the CRB was at 291 on the verge of falling into Deflation, but recovered.  Taking a look at the numbers;

CRB/10-Year Price = 299.35/100.172 = 2.99

Over 4 = Inflation
Between 3 and 4 = Neutral; inflationists and deflationists fight it out
Between 2.9 and 3.0 = Disinflation
Under 2.9 = Deflation

Chairman Bernanke announced QE1 in 2009 and QE2 in 2010 as the country became mired in deflation with Keystone's indicator in the 2.5-2.6 range each time. The indicator dipped into this area in May of this year but then recovered when the central banksters started talking stimulus from 7/26/12 forward (Draghi's proclamation). The oddity was that the ECB's OMT Bond-Buying program and the Fed's QE3 announcements in early September occurred when the stock market was already elevated; this thru a wrench in Keystone's prognostications at the start of the year.

The prior stimulus measures (QE1, QE2, Operation Twist, LTRO 1 and 2) all occurred when the markets slipped into deflation (under 2.9) so that expected trend was broken with this year's QE orgy rally.  It smacks of desperation, a 'throw the kitchen sink at it' approach. The SPX actually dropped under the levels where QE was announced in early September by both the Fed and ECB but the SPX has recovered this week.  Bernanke fears deflation since he is a student and scholar of the The Great Depression.  Bernanke says the Fed did not act quickly and forcefully enough in the 1930's, hence, he has the nickname Helicopter Ben since he said in a speech a few years back that money should be dropped from helicopters to stop a deflationary spiral.  Japan's deflationary spiral is now in its second decade.

Keystone's indicator is now signaling Disinflation. The pundits and analysts that say Inflation and even Hyperinflation are at the doorstep are likely premature.  Inflation will likely not appear until two, three, or even more years down the road to line up with the 18-year stock cycle of 1964 (bear), 1982 (bull), 2000 (bear), and 2018 (bull). That will be a new and intense problem, especially hyperinflation, but for now, the disinflationary and deflationary scenario's are far more important. Look at Japan's funk for the last twenty years; deflation can be nasty and will surely change all our lives.  Large-scale layoffs are now occurring in the U.S. with more frequency. The stagnant wage growth screams of deflation.  Technology, computers and the Internet are huge deflationary machines.  Robots continue to replace human's on the job. The coming months will provide epic economic and market drama.

Watch Keystone's formula above, you can crunch the numbers to check on the indicator every few days. Markets are in trouble when the indicator drops under 3.00 into Disinflation.  Markets are going over the falls if 2.90 fails since it indicates a deflationary spiral is occurring and the U.S. is headed straight for a Japan scenario. As long as the indicator stays above 3.0, in the Neutral territory and higher, the equity market bulls are happy. The slip back under 3.0 into Disinflation has the market bears salivating again.

TNX 10-Year Treasury Daily Chart Sideways Symmetrical Triangles Channels

The 10-year Treasury yield chart looks like spaghetti with the exessive annotation but it all serves a purpose.  The yield is moving thru the 1.45%-1.85% sideways channel (thick white lines) and more specifically thru the 1.55%-1.74% sideways channel (thin white lines). The positive divergence at the end of July launched the yield. This was in concert with Draghi saying he would support the euro by all means necessary. Euro up = equities up = Treasury yields up.  Ever since, the TNX continues sideways funneling thru the yellow triangles. The thicker yellow lines show show a breakout of the triangle at 1.74% in mid-October, which turned out to be a fake-out. The yield returned to the apex of that triangle at 1.70% in early November and failed, printing down at 1.55% before bouncing.  The thickest veritcal yellow line at August is about 40 or 50 basis points in length (1.0% = 100 basis points), thus, the breakdown at 1.70% would target the 1.20%-1.30% area, a lower low than July. That would occur in concert with deflation firmly in place.

The triangle described, however, is short, and typically, when a fake-out move occurs, such as in mid to late October, the fake-out moves tend to occur about two-thirds of the way thru the sideways symmetrical triangle rather than towards the end. Therefore, the thin yellow lines show a gentler-sloping sideways symmetrical triangle in play.  This pattern would perfectly show the fake out move in late October occurring about two-thirds of the way thru the triangle.  Thus, a failure would be expected at this lower trend line, the lower rail of the thin yellow line sideways symmetrical triangle, at..... 1.62%.  Lo and behold, we sit exactly at this lower thrend line now. The thin triangle shows a vertical side in early July at about 40 or so basis points, thus, a breakdown at the 1.62% trend line would target 1.22%. The inflationists just spit their coffee across the kitchen table hearing such dire targets as 1.2%-1.3% for the ten-year. These are deflationary numbers.

The equity markets rallied strongly the last two days but note how the 10-year yield does not show the same level of optimism.  Yields should be moving up strongly as equities move up. This tells you that folks are very content with staying in notes and bonds and do not have the desire to chase into stocks as the crazy Fiscal Cliff and European drama's play out. The yield is under the 20-day MA which is under the 50-day MA which is under the 200-day MA is a bearish signal verifying steady downside action in place.  The yield poked its head on the 20-day MA yesterday at 1.64%, and failed. The RSI and MACD are very agreeable to seeing lower yields moving forward. The RSI is under 50%, bearish, watch to see if the stochastics fall under 50% and/or the ROC under hte zero line which would indicate further bearishness and lower yields.

Projection is a breakdown at 1.62%, now, with yields trending steadily lower moving forward. Lower yields would correlate to lower equities markets.  If the yield bounces, say on fiscal cliff happy talk today, watch the top rail of the triangle at 1.68%-ish. That will likely hold with the yield reversing again and coming down to drop thru the triangle and lower trend line in the days ahead. The chart can be reassessed once the yield prints 1.55%. At this juncture, lower yields are the projection with tests of the July lows in store for 2013, which says that disinflationary and deflationary behavior will rule the weeks and months forward.

Keystone is definitely in the minority with this view since 95% of Wall Street expects inflation or hyperinflation any day.  Based on the 18-year cycle, the most reliable cycle, the equities bull run was 1982-2000, the bear continues now thru 2000-2018, thus, the inflation and hyperinflation scenario's are likely a few years ahead still yet, say 2015-2020. People underestimate deflation.  When was the last time you had any meaningful raise? Wage deflation is a killer for the global economy.  Technology and computers are huge deflationary machines. Deflation would create a very ugly two or three years 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.

Note Added 11/30/12 at 8:27 AM EST:  Very interesting. The 10-year yield dropped to 1.61% as the missive above was released.  The 10-year yield is now printing 1.60%.

Thursday, November 29, 2012

NYMO McClellan Oscillator Daily Chart

NYMO is back up to the signal area where it is best to prepare for a market selloff again, at the 55-60 area and higher. Scroll back a few pages to see the prior NYMO chart we used as one tool that signaled the strong Tuesday selloff.  Below the green bar is where you want to go long the markets while above the red bar is when you want to short the markets. 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.

ZSL UltraShort Silver Weekly Chart Falling Wedge Oversold Positive Divergence

ZSL is a double inverse ETF which moves two times the direction of the silver price in the opposite direction.  In other words, shorting silver.  The commodities are a wild and crazy sandbox to play in with derivatives stacked on derivatives, millions of dollars riding on a bushel of apples or a glass of orange juice.  The PM's, especially gold and silver have enjoyed lots of love in recent years with the Fed easing destroying the dollars value.  ZSL is setting up nicely, however, with positive divergence on the daily and weekly charts.  The circle shows the launch pad area.  Keystone's 80/20 rule says 42 leads to 38 so the door must be left open to a possible move to 37.7-38.5 which would be an ideal entry. ZSL has been basing nicely already, however, and as far as the charts go, they are not especially concerned about price moving down further.  Price just filled the lower gap on the daily chart which closes up all the unfinished business down below so it would not be suprising to see ZSL jump higher at any time.

Shorting silver is a highly dangerous and speculative trade. Nurse Cratchett has provided a stretcher and says she will help carry Keystone out, if needed.  Projection is for a sharp bounce higher which means the silver price should take a hit. Keystone entered ZSL long and will add as time goes by, or, if she pops, simply take the money and run. 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.

SPX 5-Minute Chart HIghlights 11/29/12 Fiscal Cliff Drama Ascending Triangle

The happy talk, and sad talk, continues with the fiscal cliff negotiations. If employees played out such shenanigans in public, bickering like babies, Keystone would fire all of them.  Today's installment in the soap opera As the Stomach Churns shows the big drop occurring today when Speaker Boehner dropped the bombshell news that there is no progress over the last two weeks withthe fiscal cliff negotiations.  Then Leader Reid stepped up to the microphone espousing his standard rhetoric, promising a solution, but in the next sentence not guaranteeing anything. Both sides simply talk past each other.  They are a very dysfunctional family.  Senator Schumer grabs the microphone from Reid and announces that a deal will occur before Christmas, the new magic words. The markets loved that. He must have had a cell phone app for the markets and knew the Christmas statement would save the downward slide. It is ridiculous, a national embarassment.

The 5-minute chart is in negative divergence receiving a couple spank downs during the afternoon. The move up to 1418 keeps resulting in less and less oomph to the upside. However, note the clear ascending triangle forming. Watch this closely in the morning to see how it plays out. Price will fluctuate between 1414 and 1418 and then will have to pick a side. Bulls win above 1418 and bears win below 1414.  The vertical side of the triangle is 10 handles so the break out at 1418 would target 1428; the 1429 is strong resistance so that would be the target.  The negative divergence is very strong so this places the ascending triangle patten in the questionable department. If you see the SPX at 1418, 1419, 1420, however, 1429 is on the way. The traingle pattern will fail and become nullified if price cannot move above 1418.

Nancy Pelosi is talking as this missive is typed. She delayed her brief talk until after market hours since she did not want painted with any of the market stink.  This sausage-making soap opera drama continues tomorrow. 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.

Keystone's Midday Market Action 11/29/12; GDP; Fiscal Cliff

There is no shortage of market drama. This circus lives up to the billing as the Greatest 'Show' on Earth. Global markets are in a happy mood following along from the strong recovery rally in the U.S. yesterday. The euro is almost at 1.30. Up euro means up markets and the S&P futures are elevated overnight and up about eight points.  As highlighted in this morning's chart, the SPX bounced 15 points off of the euro goose and Boehner optimistic comments, 10 points off President Obama's promise for a fiscal cliff solution before Christmas (about three weeks away), and 8 points on the WSJ article discussing upcoming Fed money-pumping likely to be announced at the FOMC meeting on 12/12/12.  Traders are addicted to the quantitative easing crack cocaine so any hint of this candy and the bulls run. Markets may now shift into a mode of pricing in the upcoming Fed happy talk in December when they should replace Operation Twist with an even grander scheme.  Early December is the heightened activity for tax-loss selling in the markets. Traders will throw losers overboard so they can write the losses off against this year's gains. At the same time this year, the worries of capital gains taxes jumping from 15% to perhaps 40% has traders running to the exits to take the money now and receive the lower tax rate. Thus, oddly, juxstaposed against a now bullish rally is a double whammy of potential selling over the next couple weeks.  Simply group this with the other ongoing mixed market signals.

The run-up yesterday was about 0.8% for the broad indexes, with the Nasdaq and RUT lagging. Tech and small caps should be leading if a rally is real with long legs. Watch the BPSPX chart to see if the bulls can create a maket buy signal. Scroll back a few pages to study the last BPSPX chart or type 'BPSPX' in the search box above to find the chart.  The BPSPX placed a near term bottom at 58.4, so a six percentage point reversal buy signal is 58.4+6 = 64.4.  The BPSPX is 63.00 only 1.40 away; check this tonight after the close to see if the bulls will place a large feather in their caps, or not. The TICK did not become overdone to the downside yesterday but excessive bullish prints over +1000 did occur.  The TRIN was well-behaved for the selling yesterday at 1.0-1.3 but the bullish move resulted in an uber low excessively-bullish TRIN in the 0.5's. The NYAD did not become overdone to the downside yesterday before the rally started.  These three musketeers tell you that the market drop yesterday morning did not end as a panic low as you would expect for such a dramatic comeback.  Quite the contrary, the selling was steady-eddy, and the rally move actually created overdone upside bullish orgy action. Also of interest is the 10-year yield at 1.61-1.63% not wanting to fully jump on board with the equities rally, yet. The yield should have jumped much higher, at least 1.65% or more. The yield is at 1.63% at this writing not showing enthusiasm for the bull rally.

AAPL was down a couple bucks yesterday.   The CPC and VIX continue to remain low, both these fear gauges indicate that all is well with the trading world, no worries at all, markets will stay elevated forever. Remember, the fear gauge is a contrarian indicator, when no one is worried, that is when you should worry.  The SPX 50-day MA is 1423.37. The 20-week MA is 1414.68. The SPX is above the 200 EMA on the 60-minute chart and the 8 MA is above the 34 MA on the 30-minute chart so the bulls rule for the hours and days ahead.

Watch SOX 372.42, XLF 15.65 and VIX 15.85, all three contributing bullishly to markets. If any of these three flip sides, the markets will weaken, however, the strong futures this morning will assure that all three of these parameters likely remain bull friendly for now.  Therefore, the next parameter the bulls need to launch to create more market upside is copper, JJC 44.85. The JJC is twenty cents below contributing bearishly but copper is up a huge 1.6% this morning. This action will launch JJC thru the 44.85 and send the bulls to strongly higher numbers in the SPX such as 1419, 1429 and 1433. Watch JJC 44.85 this morning since it is a useful tool when considering the short side. If copper runs up, then the SPX has another ten handles after the cross would occur, thus, the bear side may not be prudently considered for adds or new shorts until the SPX is at 1424 (50-day MA), 1429, 1433 or 1435.

Refernce Keystone's Key Events and Market Movers missive posted on the weekends to see what is on tap schedule-wise each day for the markets. GDP was just released showing a jump to 2.7% likely on the election year spending. Pending Home Sales are 10 AM so markets may take a slight stutter step, Natty Gas Inventories are 10:30 AM, Kansas City Manufacturing Index at 11 AM. The oddball 7-Year Note Auction is at 1 PM. Watch the interplay with Geithner and Boehner today. The full moon and lunar eclipse occurred last night. The cosmic effects must have manifested in the market behavior yesterday and perhaps this continues a day or two more. TIF earnings took the pipe this morning, the poster child of luxury spending, and a key global indicator since half their sales are international. This bellwether says caution ahead but the stock market is only looking for crack cocaine stimulus that will keep it happy one day at a time, just like a junkie. In a nutshell, watch JJC 44.85, XLF 15.65, SOX 372.42 and VIX 15.85, also the key resistance levels that offer potential shorting opportunities at 1419, 1424 (50-day), 1429, 1433 and 1435.

Note Added 11/29/12 at 9:38 AM:  JJC explodes higher; copper sends equities another leg higher. The 10-year yield remains a paltry 1.63% not wanting to follow equities higher.  The SPX punched up thru the 20-week MA at 1415.03 and is shy of the 50-day MA at 1422.49. Price will set its sights on 1419 and the 50-day.  Keystone took profits on HPQ exiting the trade. HPQ remains attractive moving forward, it was beaten badly and is in the recovery room and should continually improve moving forward and move higher, Meg is a very capable manager. Also bot ZSL, a double X inverse ETF, opening a new long position, a very dangerous speculative trade that moves opposite to silver price.

Note Added 11/29/12 at 9:57 AM:  The four parameters of interest today (XLF, SOX, VIX, JJC) are all bullish and considering that copper was shot out of a cannon today, and semi's leaped as well, focus on XLF 15.65 and VIX 15.85 as the two key signals for broad index movement. Both are bullish and markets will remain bullish unless one of those two characters turns bearish. The day is settling in waiting to see if Geithner and Boehner are skipping hand-and-hand along the Whitehouse sidewalk, or, if they are at each other's throat's like pit bulls. The euro just moved over 1.3000 (reference this morning's chart). The euro topping at 1.3030-ish and the SPX at the 50-day MA may prove to be an inflection point on deck. Keystone added more ZSL.

Note Added 11/29/12 at 10:51 AM:  The euro punched up thru 1.3000 and then promptly fell on its sword, now down to 1.2975, thus, the SPX moved up to a HOD at 1419.70, less than three points away from the 50-day MA), and has now pulled back to 1416. The Nasdaq is up 0.7% and the SPX is up 0.5%, thus, tech is leading the broad markets higher providing bull street cred for today. This is probably just a lull in the action. Once Geithner and Boehner are shown arm and arm dancing the Last Waltz together, the markets should pop higher. The Fed manufacturing data is a few minutes away.

Note Added 11/29/12 at 11:47 AM:  Speaker Boehner steps up to the microphone and proceeds to fire a missile at the fiscal cliff negotiations blowing all the 'happy talk' sky-high.  Boehner says the meeting with Geithner was cordial but direct.  He said that there has been "no progress with the talks over the last two weeks and that the democrats need to get serious." The SPX immediately drops five handles and the Dow Industrials drop over 50 points in a heartbeat. The 10-year yield is 1.62%.  The euro is 1.2957 far from 1.3000.  The VIX, XLF, SOX and JJC remain bullish so the markets will remain elevated.  The markets are a treacherous road to drive with the politicians dropping tape bombs (news bites) from above. Right now, traders are watching Geithner to see if he coughs, or Reid to see if he picks his nose.

Note Added 11/29/12 at 12:28 PM:  Harry "Happy Talk" Reid steps up to the podium dishing out his same schpeal. Senator Schumer grabs the microphone and tells everyone that progress is being made so the markets recover. He must have an app on his cell phone and wanted to reverse the negative market action.  One side says no progress is being made while the other says there is progress. Who do you believe?  Probably neither.  The old political joke comes to mind. How do you tell if a politician is lying? His lips are moving.  The XLF and VIX stays in the bull camp so markets recovered. If one of them would have turned bearish, then the broad indexes would have weakened.  The euro is 1.2968. The 10-year is 1.62%, yields are not moving up. During the excitement and drama at 11:40 AM, the semi's, SOX came down to test the important 372.42 level, and bounced. Watch SOX 372.42 since this will create broad market weakness should it fail. The sideshow continues.

Note Added 11/29/12 at 2:27 PM:  Status quo. Traders need a rest after yesterday's excitement. The 10-year yield is 1.61%, very interesting. The SPX is 1417. The 20-week is 1415.02 and 50-day is 1422.48. The 1419, 1416 and 1413 are strong support levels. Resistance is 1422, 1424, 1427 and 1429.

XEU Euro Daily Chart Bollinger Bands Gaps

The euro runs the show. At the market bottom yesterday around 10 AM, the euro started upwards first. Up euro = down dollar = up commodities = up equities. Whichever way the euro moves, the broad indexes follow.  Once price violates the outside BB it typically moves back to touch the middle BB, at a minimum, and also the opposite BB. The September upper BB violation led to a move back to the middle BB, then back up for another upper violation, then down to violate the lower BB in early November as the markets were selling off, now recovery again with price a stone's throw away from the upper BB again.  The euro is 1.2989 as this is typed.  The gap from late October remains unfilled and this is exactly at the upper BB level as well, at 1.3020-1.3040. The indicators are long and strong and want to see one more price high as compared to the high from three days ago at 1.2990-ish. This morning's print is already satisfying this goal. The euro will likely print a high in the purple circle today or tomorrow, this will occur in concert with the indicators rolling over, losing the long and strong profiles shown, in favor of negative divergence.

Note how the moving averages are lining out sideways now which hints at sideways action ahead for the euro. In general, the euro has been moving sideways thru the 1.2700-1.3100 channel for three months. In September price jumped up thru the gap at 1.2650-1.2700 creating an island that they euro has been living on ever since. At some point, price will come down for a potential island reversal, which would drop price thru the gap as fast as the upside move occurred. Key support levels are identifed. Of special interest is the 1.3020 (satisfies the gap fill and upper BB touch), 1.2960, 1.2913 (50-day MA), 1.2820 (confluence of the 20-day MA which is the same as the middle BB, the 200-day MA and horizontal support), 1.2780, 1.2700 (island bottom) and 1.2640.  Projection is up for a day or three to 1.3030-ish, then reversal back down. Watch to see if negative divergence forms. The euro is now printing 1.2991. 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.

SPX 5-Minute Chart Highlights 11/28/12 Dramatic Reversal Rally

The chart illustrates yesterday's trading drama.  The SPX dropped from 1399 to 1385 during the first half hour of trading.  The euro jumped higher and also Speaker Boehner discussed the fiscal cliff in optimistic terms. The SPX recovered sharply off the bottom then drifted lower into President Obama's noon speech. The SPX dropped three handles as the president spoke but shortly after trader's realized that he promised a solution to the fiscal cliff by Christmas so markets catapulted higher. Do you think the fiscal cliff negotiations will end happily within three weeks time?

Markets flattened out again thru the early afternoon and then the Wall Street Journal (WSJ) released an article talking about more bond-buying and quantitative easing to replace Operation Twist which will likely be announced at the 12/12/12 FOMC meeting (that is an interesting numeric; 12-12-12, twice 6-6-6). Jon Hilsenrath always appears to have the inside track at the Fed so when his articles are released the markets always rally on the money-pumping news.  The crack cocaine created the third thrust of the day from 1402 to 1410. Thus, the SPX dropped 14 handles, then recovered 25 handles, in all a near 40 handle move from bottom to top in one day's time, a 3% move for a major index within one day's time, truly remarkable action. The power of words is clearly visible in the chart above. 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.

Wednesday, November 28, 2012

Keybot the Quant Turns Bullish

Keystone's algorithm, Keybot the Quant, flipped long at 3:51 PM EST at SPX 1409. A whipsaw occurs after a wild day of erratic and unstable market action. Semi's, financials and volatility created the buoyancy from the technical standpoint. Keep watching these three amigo's tomorrow. The bulls are driving the bus again.  Stay alert for a whipsaw back to the short side either tomorrow or Friday. Further details are at Keybot's site;

Keystone's Midday Market Action 11/28/12; Beige Book; Fiscal Cliff

Today we see if the bears have what it takes to move markets lower.  Semiconductors, financials and volatility all jumped into the bear camp yesterday afternoon which started the growling. The SPX fell thru the 200 EMA on the 60-minute chart which forecasts bearishness for the days and hours, perhaps weeks ahead. The 8 MA is probably going to slice down thru the 34 MA on the 30-minute chart which would forecast bearishness ahead. XLF 15.65 and VIX 15.84 will directly dictate market direction today. Both are bearish only by pennies, thus, the bulls must immediately reverse the moves and push one or both into the bull camp. If both remain as is, XLF under 15.65 and VIX over 15.84, the bears will rule.

For the SPX today starting at 1399, the bulls need to touch 1409 to set off an upside acceleration but this does not appear to be on tap. The bears only need a smidge of red in the futures and this will ignite a downside acceleration at the opening bell. The futures are negative all thru the overnight session and now down over five S&P's.  A test of the strong 1391 support is likely on tap, if so, markets will either bounce or die from 1391.  The action will revolve around the following key S/R; 1414.13 (20-week MA), 1413, 1409, 1407.57 (100-day MA), 1406, 1404, 1403, 1402.50 (200 EMA on the 60-min), 1401, 1399, 1397, 1394, 1393.34 (20-day MA), 1391, 1389, 1388.02 (10-month MA), 1385.08 (150-day MA), 1385, 1383.76 (200-day MA), 1380, 1378 and 1375. Keystone's uber important 'Decider' is the 12-month MA cross now at 1371.02, also known as the cliff edge or the waterfall, where all bullish hope is lost.

New Home Sales are 10 AM-markets may pivot on the news.  Oil Inventories are 10:30 AM.  Fed's Tarullo talks at lunch time.  A 5-Year Note Auction goes off at 1 PM. The big excitement of the day is the Beige Book at 2 PM where a market pivot point will occur. Retail earnings are important.  PLL will provide a clue as to how the global economy is doing. The full moon and lunar eclipse is this evening. Markets tend to be buoyant about two-thirds of the time into the full moon.  The Aussie's and Asian folks will enjoy the eclipse but North America will not see it. Nonetheless, if you see odd human behavior today or tomorrow, chalk it up to the heavens. The politico's will continue to drop tape bombs on the markets as the fiscal cliff drama plays out in public view. The Egypt turmoil continues. Europe remains a mess, the euro fell thru the psychological 1.29 level about one hour ago. Copper is weak.  The 10-year yield is 1.62%. The asset relationship in play is the euro down = dollar up = commodities down = gold down = copper down = oil down = equities down = bond yields down prices up. In a nutshell, the whole ball game is XLF 15.65 and VIX 15.84 today.

Note Added 11/28/12 at 10:32 AM:  XLF and VIX gave up the fight from the get-go, very happy in the bear camp.  The 8 MA stabbed down thru the 34 MA on the 30-minute chart signaling bearihsness for the hours and days ahead. The bulls did not show up to fight today, instead, they folded like a cheap suit.  Gold and other commodities down large. The SPX dropped down to test the 1391 support and failed. Price comes back up for a back kiss of the 20-day MA at 1392.33.  The Nasdaq is leading the broad markets lower, another feather in the bear cap.  AAPL is off -1.5%. Oil Inventories do not change the weak oil price today; WTIC has an 85 handle.  Markets typically never bottom on a Wednesday so if short, a lower low in price usually occurs on Thursday morning. The 10-year yield is 1.61%. VIX 16.50. XLF 15.52. The euro is 1.2916, back above the 1.29 level no doubt creating the market buoyancy now.

Note Added 11/28/12 at 10:42 AM:  Speaker Boehner provided happy fiscal talk but the euro moving up caused the market bouyancy. SPX now at 1396. The 20-day MA should receive a lot of attention today.

Note Added 11/28/12 at 11:32 AM:  Bulls stage a strong come back. The euro now at 1.2924, quite a move; up euro = up equitiesXLF is 15.60 and VIX 15.96 so the bears are fine, however, they must not give up anymore ground. The TICK only shows a couple spikes downward at -700 and -800. Keystone was looking for a -900 or -1000 or lower TICK to take profits on a couple of the short plays, alas, it did not occur and markets moved higher.  The TICK is well-behaved today, not showing the selling overdone, but printing +1000 prints which indicates the buying is too overly enthusiastic. The TRIN is 1.0-1.3 reflecting steady-eddy selling, no panic selling at all.  The NYAD printed -1500 also well short of a -2000 or lower print so the selling was not overdone by any means. TICK, TRIN and NYAD all show that the selling was steady-eddy and this type of selling can continue indefinitely. Typically a panic low will cause a relief pop, but today Speaker Boehner and the euro moving higher created the market pop. Markets may stumble along until the Beige Book at 2 PM. The final couple hours today may be eventful.

Note Added 11/28/12 at 12:00 PM:  The television screens are showing the podium where President Obama will speak any minute.  The SPX is 1398.50. Here's the president, let's see what happens to the SPX.

Note Added 11/28/12 at 12:13 PM:  President's speech was short and sweet resulting in a three-point drop in the SPX, he sure does have the touch.  The SPX is recovering now that the speech is over.  The 10-year yield is at 1.62% not moving higher. This hints that the equity rally is more of a dead-cat bounce since money is not leaving the safety of bonds for stocks. XLF is 15.57.  VIX is 16.07.

Note Added 11/28/12 at 12:19 PM:  Big spike upwards. SPX 1402. VIX is testing the bull-bear line at 15.84, this is important.

Note Added 11/28/12 at 12:41 PM:  VIX drops under 15.84 so the bulls gain a feather for their caps. XLF is at 15.66 trying to punch up thru to help the bulls further.  The SPX is 1404.45. This scenario is the jog scenario discussed a couple days ago, sharp down, shorts become frustrated, markets spike higher, now the bulls see the all-clear and jump in big, but then sharp reversal occurs again with bulls and bears standing on the sidelines as markets drop. Time will tell if the last move occurs, or not.  Keystone's algorithm, Keybot the Quant, will likely want to whipsaw long if the SPX 1409 is tagged; if the 1409 is not achieved then Keybot will likely stay short thru the closing bell. XLF 15.66 and VIX 15.85 will tell the story as the day plays out. XLF is now printing 15.66 and VIX is 15.71. The 10-year yield is 1.63% remaining somewhat tame. The SPX is above the 200 EMA on the 60-minute at 1402.29 which is bullish for the hours and days ahead.  The 8 remains well under the 34 MA on the 30-minute chart which is bearish for the hours and days ahead.  The bulls and bears continue to fight it out each day.

Note Added 11/28/12 at 2:51 PM:  Dramamine is required for these markets. One minute the broad indexes are moving one way, the next minute the opposite, it is difficult to update the action since it moves the other way before a comment can be written. Days like this it is best to let your hands off the steering wheel and sit in the back seat taking it easy.  The pivot occurred at 2 PM with the SPX dropping from over 1405 to 1402, but then recovering again to 1405, now at 1403.  The 200 EMA at 1402.29 is key.  Likewise, three parameters are moving the broad indexes right now; XLF 15.65, VIX 15.85 and SOX 372.42.  All three are currently bearish but anything can happen with this erratic and unstable market action.  Keystone's algo will likely stay short unless SPX 1409 is achieved.  For now, Keystone is simply riding in the back seat taking in the drama. Higher volatility will bring even more wild intraday and day-to-day market point moves going forward.

Note Added 11/28/12 at 3:10 PM:  The bulls are pushing hard, XLF 15.67 now bullish, ditto VIX at 15.84, by a single penny for each.  SPX printing the HOD at 1406. Two heart pills are required for this market stress.

Note Added 11/28/12 at 6:13 PM:  That was a wild day at the circus. Keystone's algo, Keybot the Quant, flipped back to the long side a few minutes in front of the closing bell. The bears were holding their own and then once SOX 372.42, XLF 15.66 and VIX 15.85 clicked over to the bull side, the markets took off vertically.  Watch these three parameters closely tomorrow.  Speaker Boehner provided a market lift this morning with soothing fiscal cliff words, ditto the president at noon time, who also promised a resolution to the cliff by Christmas, and then a Hilsensrath (considered to have an inside track at the Fed so when he writes about further bond-buying and QE the markets always bounce higher) article in the afternoon created the bull frenzy into the close. What a circus.  These are very treacherous markets. The SPX stayed above the 200 EMA on the 60-minute chart, bullish.  The 8 MA crossed back above the 34 MA on the 30-minute chart signaling bullishness for the hours and days ahead.  The action for the last four months is not for the faint of heart, unless of course, if you are prepared with heart pills at the ready.

Keystone's SPX 60-Minute Chart with 200 EMA Cross Indicator

Bulls are happy with the SPX above the 200 EMABears celebrate when price is under the 200 EMA. The bulls and bears are Rockem Sockem Robots fighting it out over the 200 EMA the last few days; there is a lot on the line since the winner will likely run with the ball for a couple weeks. Yesterday the SPX dropped back under the 200 EMA so the day starts with the bears in charge. The negative divergence created the spank down in price yesterday. The indicators are weak and bleak wanting to see lower lows in price. See if the RSI drops under 50% today.  The down volume late yesterday is strong. The previous strong volume was a few days ago in the 1380-1390 zone. If the SPX stays under the 200 EMA, the bears will rule moving forward. 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.

Note Added 11/28/12 at 6:42 PM:  The SPX ended the day above the 200 EMA so the bulls rule again.

Keystone's SPX 30-Minute Chart with 8 MA and 34 MA Cross Indicator

The 8 MA should stab down thru the 34 MA at the opening bell. Watch this closely since it would represent a nail in the bull coffin.  The bulls rule when the 8 is above the 34 (green circles) and the bears are in charge when the 8 is under the 34 (red circles). Key S/R levels shown in black are 1433, 1413, 1406, 1403, 1391, 1375, 1366, and the low from a few days ago at 1434. The 1375-1391 sideways channel envelopes much of the price action over the last couple weeks. The Thanksgiving holiday sideways channel is 1398-1409 and today we see if price wants to collapse under. The 1391-1403 sideways channel may be a forward destination for price as well. Negative divergence spanked price down yesterday. Indicators are weak and bleak wanting to see further lows in price. The money flow should turn weak and bleak once the SPX moves lower after the opening bell. Look for the 8 and 34 cross as the day begins; bears will smile if the 8 stabs down thru the 34. 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.

Note Added 11/28/12 at 6:43 PM:  The 8 MA stabbed down thru the 34 MA at the opening bell so the bears were rolling along, however, as the day progressed, the 8 moved back above the 34 placing the bulls back in charge for the hours and days ahead

Tuesday, November 27, 2012

SPX Daily Chart Showing Keybot the Quant Algorithm Turns

Current signal remains valid until a change occurs.
11/27/12:  Keybot the Quant flipped to the short side at 3:56 PM EST at SPX 1399; for the year thus far, SPX Benchmark is up 11.2%; Keybot is up 22.4%; Keybot actual trading is up 21.1%. Stay alert for a whipsaw.
11/19/12:  Keybot the Quant flipped to the long side at 9:30 AM EST at SPX 1370; for the year thus far, SPX Benchmark is up 8.9%; Keybot is up 20.3%; Keybot actual trading is up 17.5%.
10/19/12:  Keybot the Quant flipped to the short side at 11:49 AM EST at SPX 1442; for the year thus far, SPX Benchmark is up 14.6%; Keybot is up 15.3%; Keybot actual trading is up 8.6%.
10/16/12: Keybot the Quant flipped to the long side at 9:31 AM EST at SPX 1446; for the year thus far, SPX Benchmark is up 14.9%; Keybot is up 15.6%; Keybot actual trading is up 9.3%.
10/9/12: Keybot the Quant flipped to the short side at 10:42 AM EST at SPX 1452; for the year thus far, SPX Benchmark is up 15.4%; Keybot is up 15.2%; Keybot actual trading is up 8.8%.
10/1/12: Keybot the Quant flipped to the long side at 10:00 AM EST at SPX 1453; for the year thus far, SPX Benchmark is up 15.5%; Keybot is up 15.3%; Keybot actual trading is up 8.9%.

9/17/12: Keybot the Quant flipped to the short side at 2:11 PM EST at SPX 1460; for the year thus far, SPX Benchmark is up 16.1%; Keybot is up 14.7%; Keybot actual trading is up 7.7%.
9/4/12: Keybot the Quant flipped to the long side at 2:13 PM EST at SPX 1402; for the year thus far SPX Benchmark is up 11.5%; Keybot is up 10.6%; Keybot actual trading is up 3.5%.
9/4/12: Keybot the Quant flipped to the short side at 10:34 AM EST at SPX 1399; for the year thus far SPX Benchmark is up 11.2%; Keybot is up 10.8%; Keybot actual trading is up 3.8%.
8/3/12: Keybot the Quant flipped to the long side at 9:30 AM EST at SPX 1377; for the year thus far SPX Benchmark is up 9.5%; Keybot algo is up 9.2%; Keybot actual trading is up 2.5%.
8/2/12: Keybot the Quant flipped to the short side at 11:42 AM EST at SPX 1360; for th eyear thus far SPX Benchmark is up 8.1%; Keybot algo is up 10.4%; Keybot actual trading is up 5.8%.
7/26/12: Keybot the Quant flipped to the long side at 9:30 AM EST at SPX 1349; for the year thus far SPX Benchmark is up 7.2%; Keybot algo is up 9.6%; Keybot actual trading is up 5.4%.

Keybot the Quant Turns Bearish

Keystone's proprietary algorithm, Keybot the Quant, flipped short at 3:56 PM only four minutes in front of the close at SPX 1399. In the final hour of trading semiconductors, financials and volatility all moved into the bear camp causing the algorithm to flip short.  As always stay alert for a whipsaw. XLF 15.65 and VIX 15.84 are very important once the bell rings in the morning. More information is found at Keybot's site;

Keystone's Midday Market Action 11/27/12; Egypt; Fiscal Cliff

The four key parameters remain status quo. Keystone's algo is tracking SOX 372.20, JJC 44.90, XLF 15.65 and VIX 15.90. SOX and JJC are causing market bearishness and XLF and VIX are causing bullishness. Any change to any of the four will result in a corresponding move for the broad indexes in that same respective direction.  The early lift in the SPX after the opening bell was due to the stronger semiconductors but they quickly petered out and fell on their sword.  The TICK marks the top today thus far at 9:50 AM with a +880 TICK and the bottom at 10:30 AM with the -840 TICK.  The SPX came up for a look at 1409 resistance but was unable to punch up thru.  The SPX is moving sideways thus far today, not yet testing the lower boundary for today at 1398. The VIX is flat to down which favors bulls. Tech is not leading the broad markets lower so the bears cannot develop any mojo and hte markets remain buoyant. The SPX and COMPQ are moving coincidentally, however, so watch to see which way the COMPQ prefers. The SPX is playing around at the critical 1403 S/R. The 200 EMA on the 60-minute chart is 1402.41. Bulls win above 1403, bears win below 1402.41. Note the pivot point at 10 AM where the markets took a turn south. The asset relationship of the euro down = dollar up = equities down is in play. AAPL is negative. The fiscal cliff negotiations and Egypt drama's will receive trader's attention.

Keystone sold USD, the ultra long semiconductor ETF, closing out the position at a minor loss. Keystone took profits on TLAB and RSH exiting those long trades. Also bot TWM opening up a new long position (which is a leveraged short of small caps). TLAB and RSH remain attractive moving forward but it appears prudent to start reducing long positions, building cash, and bringing on additional shorts. If the VIX and XLF highlighted above would move to the bear camp, Keystone's algo, Keybot the Quant, will likely flip short.

Note Added 11/27/12 at 11:07 AM:  The 8 MA and 34 MA on the 30-minute chart continue to converge.  The euro is 1.2932.  The 10-year yield is 1.65%.  The SPX is deciding which way to go right now from the 1402-1403 inflection point.  The SPX is down -0.19%. The COMPQ is -0.13%. Tech is not leading lower so the bears cannot develop any downside oomph. If the Nasdaq starts to lead the SPX lower, that may serve as a signal to nibble on more shorts. Egypt is calm.

Note Added 11/27/12 at 11:42 AM:  Keystone added more TWM on the +953 TICK a couple minutes ago. Also added more SPXS to that ongoing long position (which is short the markets).

Note Added 11/27/12 at 11:54 AM:  Semiconductors are running hgher which is causing the market bullishness. SOX is printing 372.76 well above the 372.20 level mentioned above. This will send the SPX up and thru 1409 if the SOX 372.20-372.50 support holds. If the SPX moves thru 1409, the 1412-1413 resistance is next. Tech is leading the broad markets higher despite AAPL down a couple bucks. The VIX is printing at the lows of the day at 15.03 which emboldens the market bulls. Look for the test of 1409 resistance and see what happens.

Note Added 11/27/12 at 12:04 PM:  Here's the test of 1409, very important, who will win?

Note Added 11/27/12 at 12:43 PM:  The semiconductors are dictating market action today as well as the lower volatility.  The SOX fell on its sword again so the SPX backed off from 1409.  The SOX is now at 372.34.  Keystone's algo has now settled on SOX 372.42 as the bull-bear line in the sand, which will remain applicable for a couple days forward give or take a few pennies. VIX is 15.06.  Tech is leading the broad indexes higher so this continues to aid the bulls.  The SPX 100-day MA is 1407.65.  The SPX is printing 1407.42. SOX 372.42 will provide the market answer today. AAPL is flat wanting to turn positive.

Note Added 11/27/12 at 1:46 PM:  The SOX jumps above 373.  It is surprising to see the SPX at 1406, the expectation would be the SPX moving up thru 1409 due to the strong semiconductors.

Note Added 11/27/12 at 2:27 PM:  SOX collapses under 372, it was a fake out move a short time ago to suck in bulls.  The SPX falls under the 100-day MA, thru the 1406 support, thru 1403 support, now thru the 200 EMA on the 60-minute chart at 1402.52. The 200 EMA signal says bulls will rule for the hours and days, perhaps a few weeks ahead.  The 8 and 34 MA's continue to converge on the 30-minute chart. SOX is 371.14. The euro is 1.2929. The 10-year yield is 1.64%. VIX now pushing strongly higher, at the highs at 15.40. XLF is in trouble, now at 15.67 and falling lower a few more pennies and this will cause another leg lower for the broad markets. The weak financials will create ugliness into the close. The SPX is at 1400.......

Note Added 11/27/12 at 2:38 PM:  Keystone took profits on the TWM trade using it as a day trade exiting the position. Will probably reenter before the close.

Note Added 11/27/12 at 2:43 PM:  Keystone is back in TWM opening a new long position. Harry Reid Senate Leader says he is disappointed in the Fiscal Cliff negotiations and he says "No more happy talk." Markets immediately sell off.  XLF is hanging on by a single fingernail. If XLF would drop a couplemore pennies, that would cause the SPX to drop thru 1398 and send it to test 1391. What say you XLF, now at 15.66?

Note Added 11/27/12 at 2:54 PM:  XLF is hanging on by a chinny chin chin. Now the bears are pushing the VIX higher as well, this could get serious to the downside if XLF and VIX tag-team into the bear camp; the SPX would easily drop through 1391 in short order.  Watch VIX 15.90, now bullish at 15.80.  Watch XLF 15.65 now bullish at 15.69. Either one failing will create immediate market weakness, both turning bearish and the SPX will be in the 1380's in a blink of an eye. The key for bears is to simply keep the SPX under the 200 EMA as described above which would be a huge and important victory today for the short side, otherwise, if the SPX moves back above the 200 EMA the bulls will not be worried.

Note Added 11/27/12 at 3:10 PM:  The 8 and 34 MA's are converging on the 30-minute chart and the closest to crossing since the bulls took over six days ago. The SPX is fighting across that 200 EMA level at 1402.53. The XLF is 15.69 only four pennies away from causing market mayhem. Ditto VIX at 15.76 now only fourteen cents away from causing market turmoil. Keystone needs a heart pill and has also wheeled the difibrillator closer to the computer. The closing may be dramatic.

Note Added 11/27/12 at 6:07 PM:  It was quite a show into the close, especially the last five minutes since XLF collapsed and VIX spiked, both jumping into the bear camp.  This action caused Keybot the Quant to flip to the short side at SPX 1399 at 3:56 PM EST.  XLF 15.65 and VIX 15.84 are the two most important things to watch tomorrow morning, they will dictate broad market direction. Both are bearish causing market negativity; the bulls must reverse one or both to stop a market downward slide. The SPX closed under the 200 EMA on the 60-minute chart which means bearish markets for the hours, days and week or three ahead.  The 8 MA is a tiny nose hair from crossing the 34 MA on the 30-minute chart; this should occur at the opening bell and would be another nail in the bull coffin. There is only one way for the bulls to save the day and that is by coming to play tomorrow and immediately driving the financials lower and/or volatility higher. A sharp upside move at the open will be needed to stop the market negativity that has now rolled into a big snowball and is already rolling down the hill.  Any events overnight are hugely important. The European markets will open at 3 AM EST. The first hour of trading tomorrow will tell you if the downside has begun in earnest again, or, if the bulls can stop the downside momo and recover.

Keystone's Morning Wake-Up 11/27/12; Greece Resolution; Egypt; Consumer Confidence

Greece resolution is reached overnight after continual delays since August. The S&P's bounced to up three but then petered away and are now down one.  The euro hit 1.30 overnight on the cancellation of the Egypt pro-Morsi rally today and the anticipation of the Greece deal.  Alas, the euro is dropping now to 1.2944. The 10-year Treasury yield is down a tick to 1.65%. The dollar is bouncing higher with the euro weaker. At this juncture, the Greece resolution appears to be a sell-the-news event. The markets continue along with mixed signals. Even the major indexes could not agree on direciton with the Nasdaq up yesterday and the SPX down.

The CPC put/call chart last evening clearly shows that traders are completely fearless with no worries that the markets will sell off. This typically means that the markets will sell off.  BPSPX remains on a market sell signal and the NYMO is agreeable to a near term market top.  

The SPX printed a hanging man candle on the daily chart yesterday which hints that markets would be agreeable to a trend change, and the last six days show a clear uptrend. Despite the increasingly bearish vibe, markets are always focused on hurting the maximum amount of traders. The Nasdaq futures are up right now with the S&P's down so tech is not leading lower today. Yesterday, AAPL continued higher which kept the Nasdaq elevated and tech leading the broad markets on the bull side, which prevented the bears from making any significant progress to the downside. A quickie jog move could hurt the maximum amount of traders in the hours and days ahead where a sharp down move occurs today, traders jump into the short side, only to see the markets spike vertically, perhaps the SPX to 1409, 1413 and higher, wiping out the short trades, only to reverse sharply again for a strong market down move equalling or exceeding the October-November selloff, which crushes the traders that jump in long. This type of jog move would frustrate bulls and bears alike and most traders would likely miss the intial move to the downside. Perhaps a prudent approach of using key SPX resistance levels such as 1406, 1409, 1413, 1419, 1426 (50-day MA), 1429 and 1433, as levels where longs are exited and shorts are scaled in. Of course, the markets may simply head lower in earnest. The 20-day MA at 1394 is key support and would immediately lead to 1391 if it fails. If the 1391 support holds, the SPX will come back up for the potential jog move discussed above, say to 1409, 1413 or 1419, then roll over. If SPX 1391 fails, the bears are likely on the way with the next leg lower for the broad markets.

For the SPX today, starting at the strong 1406 S/R level, the bulls need to move up and over 1409 and an upside market acceleration will occur immediately attacking the strong 1412-1413 resistance. The bears need to push under 1398 which wil accelerate the downside and set up a test of the 1391 support in quick order, where, markets would bounce or die.  A move thru 1399-1408 is sideways action today. Four key parameters are influencing market direction today; JJC 44.90 (now bearish at 44.70), SOX 372.50 (now bearish at 370.63), VIX 15.91 (now bullish at 15.50) and XLF 15.62 (now bullish at 15.68). Any change by any of these four parameters will immediately force the broad markets in the same direction.

The Fed's Fisher spoke about an hour ago and his mention of less QE sent the dollar higher and the euro lower.  Fed's Lockhart is also making comments.  Also, the top dog, Chairman Bernanke speaks at 8:30 AM EST.  Durable Goods are 8:30 AM.  Case-Shiller House Price Index is 9 AM and the housing sector greatly impacts the Fed's game plan moving forward. The FHFA House Price Index, Richmond Fed Manufacturing Index and  Consumer Confidence all hit at 10 AM which will create a market pivot point. The demonstrations against Morsi will go on today in Egypt so traders will be watching the television screens to see if the rioting grows ugly, or not. The 2-Year Note Auction occurs at 1 PM.

Now that the Greece debt plan is achieved, and Egypt and Gaza may remain somewhat calm, all eyes will focus on the Fiscal Cliff. The political bickering is ramping up again with the right referencing the radical liberal left in their speeches, and the left remaining in campaign mode on a mission to tax families making over 250K, in other words, the poisonous political atmosphere remains in place just like before the election. In a nutshell for today, watch JJC 44.90, SOX 372.50, VIX 15.91, XLF 15.62, SPX 1409 and 1398, as well as the market pivot that will occur at 10 AM, and, of course, as AAPL goes, so goes the markets.

NYMO McClellan Oscillator Daily Chart

NYMO printed +55 which is close enough for government work to identify a market top, or a near market top. There may be another bullish move higher to click in the +60 but it is just as likely that the +55 is good enough to start the bears moving lower. When the NYMO is over +60 that is a great sell signal (red circles) and when the NYMO drops under -40 and lower that is a great buy signal (green circles). Ideally, it would be great if the markets did move a bit higher which would offer further opportunity to exit longs and bring on shorts at more attractive levels. Regardless, NYMO shows that the bull rally is reaching its limits. 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 Daily Chart

The BPSPX remains on a sell signal. A sell signal occurs when price reverses six percentage points. The sell signal is locked in if price falls under the important 70% level.  Conversely, a buy signal occurs when price reverses six percentage points off a bottom. The buy signal is locked in if price moves above the 30% level.  If price does not print above 70%, or below 30%, the six percentage point rule runs the show.  In June, the rally was confirmed in mid-month as the BPSPX bottomed at 45 and then moved above 51 (45+6). The green circles show fake out moves back to the downside. The bears could not muster up a six percentage point reversal for the green circles, so the bulls ran over the bears and continued higher with the upside orgy rally.

The punch bowl started to go empty in September as the BPSPX topped out at 79.  Thus, 79-6 = 73. The BPSPX teased a move lower off the top (red circle) but could only muster up a move to 75; the bears need 73 for a market sell signal.  Markets played around with the triple top formation as highlighted in the SPX charts by Keystone over the last three months. The three blue dots correspond to the triple top in the markets. For the future, always reference the BPSPX if you see a triple top or bottom since it clearly foretold the outcome. As the triple top printed consistent highs at matching levels for the SPX, the blue dots for the BPSPX was leaking lower.  If a triple top breakout was on tap for markets, the blue dots should have been moving higher.  You can use this concept in reverse for a triple bottom. The BP's are available for a multitude of indexes such as BPENER (integrated oil), BPNYA (NYA), BPINDU (Dow Industrials), etc... has a complete listing. Obviously, BPSPX is most important since the SPX is the key index that reflects the broader markets and about 70% to 80% of the stocks move with the broad market on any given day.

So the market sell signal clicked in at 73 in late October. Then the 70% failed in early November sealing the fate of the markets and firmly verifying the market downside ahead. Right now the bulls are trying to reverse the markets. The bulls will succeed with a buy signal if they can push above 64 (58+6), however, they are only halfway there, now at 61.  The sell signal remains in effect until a buy signal would occur. The BPSPX is a useful tool moving forward, as long as it stays under 64, the sell signal remains and the bears are fine. If the BPSPX moves above 64 the bears will have to run for their lives. 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.

Monday, November 26, 2012

CPC Put/Call Ratio Signals Significant Market Top Extreme Caution Required

The CPC put/call ratio fell out of bed today printing an uber low 0.63.  There is no wall of worry occurring which is what you want to see if long during a rally.  The complete opposite is in place, traders are not worried about any downside at all. There is no worry or fear that markets will ever go down again.  What do you think will happen?  The CPC is a contrarian indicator so a low CPC under 0.80 identifies a market top and a high CPC above 1.20  identifies a market bottom. The red circles show what happened every other time over the last three years.  Today's print is the lowest since the CPC identified the exact top in the market in front of the August 2011 waterfall crash.

The charts tell the story. Extreme caution is required since a significant market top is now in place. Perform your soul searching for any long positions held. Decide if you are willing to hold them for a few months, even a year or more. If not, consider unloading them regardless of whether they are profitable or not. The red circles say that the bears will have a fantastic December and joyous Christmas, and ample profits to help the needy and donate to the local food bank. The red circles also say that the bullish traders will be the needy at the food bank come December.

The CPC is always give or take a few days or couple weeks but, hang on to your hat, the charts above say that something wicked this way comes. The markets have a very high potential of a significant selloff ahead perhaps a move down that is stronger than the October-November selloff of over 120 handles. Hedging any long positions and bringing on protection is a prudent strategy forward. 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.

Keystone's Midday Market Action 11/26/12; Greece Decision; Egypt Turmoil; Fiscal Cliff

Checking the key parameters, SOX, JJC and GTX remain bearish.  XLF and VIX remain bullish. Status quo. For the SPX, the bears have stopped further upside but are not making any dramatic move lower.  The uber strong 1403 S/R is playing a key role today; this is also where Draghi announced the OMT Bond-Buying program.  The Greece decision continues to hang in the balance, the positivity from a resolution is likely priced into markets already. The 50% Fibonacci retracement resistance level highlighted on the weekend held at 1409, at least so far today.  The 200 EMA on the 60-minute chart is 1402.34 and if the market bears cannot get under this level, they got nothing. The 100-day MA is 1407.28.   Tech is not leading the broad markets lower today so this hints that the bears do not have much oomph. If VIX continues higher another 20 or 30 cents to the 15.90's the bears will growl strongly today.

Note Added 11/26/12 at 11:11 AM:  The five parameters on watch today remain status quo although VIX and XLF are starting to tease towards the bear camp. The SPX fell under the psychological 1400, a key victory for bears.  More importantly, the bears pushed the SPX under the 200 EMA on the 60-minute chart which signals bearishness for the hours, days, perhaps a week or three ahead. Watch this closely since the bears will need a close under the 200 EMA today.  If VIX or XLF turns bearish, both are only pennies away from flipping sides, this would supply street cred for the down move and guarantee a test of the strong support at SPX 1391.

Note Added 11/26/12 at 1:58 PM:  The status is quo, neither SOX, JJC, GTX, VIX or XLF want to make a move to the other side. The bears are trying to bring the VIX up higher with all their might. Similarly, the bulls are trying to bring the JJC higher, and, are succeeding in some respects, since copper is up causing the market bouyancy over the last two hours.  The Nasdaq had gone positive today but is now in the red again. Tech leads and since it did not lead lower today that hints the bears do not have oomph to the downside.  Most importantly, however, is the 200 EMA  on the 60-minute today, now at 1402.29. The SPX is printing 1401.60 so the bears are favored by a single hair. The SPX 30-minute chart shows the 8 MA remaining above the 34 MA but the two moving averages are converging. HPQ is feeling some love today, three white soldier candles are marching up off the bottom on the daily chart. The trading day is lazy and uneventful so far, traders are sleepy from the excessive eating over the weekend. The office lunchroom smells like turkey casserole as employees line up to use the microwave.

Note Added 11/26/12 at 2:59 PM:  The SPX jumps higher but the five parameters remain status quo. The bulls and bears are fighting over that critical 200 EMA on the 60-minute chart. Tech is bull friendly all day and it leads. AAPL is up 3% today now printing 589. Apple pushes the Nasdaq into positive territory again. See if AAPL closes above 580 as highlighted in this morning's chart, or not, if so, the door is open to 620, and shorts could be increased, if the short side is being played, at 610 and up. Would not be surprising to see Apple roll over at any time. As Apple goes, so goes the markets.

Note Added 11/26/12 at 3:15 PM:  The SPX is back above the 200 EMA on the 60-minute chart so the bulls are in control for the hours, days and few weeks ahead. Bears are fighting back and need to close the SPX under the 1402.34 level, otherwise, the SPX will likely move back to 1409 and onward to 1412-1413. The SPX is printing 1403.36. The minute charts, 30-minute, 1-hour, 2-hour, all hint at sideways action ahead with a sideways down bias, reinforcing the continuing theme thru 1391-1413, or more specifically today 1398-1409.

Note Added 11/26/12 at 3:33 PM:  AAPL dumps three bucks in five minutes so the markets drop as well. The SPX is dancing along the 200 EMA, one side will be happy in less than one-half hour the other side will not. The 200 EMA is 1402.33, price is now at 1403.39, twenty-five mintues remaining on the clock. The five parameters of import today are status quo not choosing a side. The 200 EMA must serve as the arbiter and decision maker today.

Note Added 11/26/12 at 4:24 PM:  No great shakes today, things ended just as they started, no change in the five parameters of interest, and the SPX remains above the 200 EMA. Tech kept the markets buoyant and Apple kept tech buoyant. The action tomorrow will pick up at the same place with the Egypt and Greece drama's intensifying the mood. Consumer Confidence at 10 AM will create a market pivot point. The 200 EMA is uber important tomorrow, bears will have to move the SPX below 1402.33, otherwise, the bulls will begin marching markets higher again.  The SPX closed at the very strong 1406 support/resistance.

Note Added 11/26/12 at 7:31 AM: The pro-Morsi demonstration for tomorrow is now postphoned as Morsi and the key Egyptian judges reach an agreement.  The only problem is that the anti-Morsi demonstrations will continue in force and all these folks with pent up aggression will now need to seek a new target to release their frustration. The anti-Morsi protestors have already started a new revolution and can no longer trust Morsi. The euro moves above 1.30.