Crude oil wildly reverses its downward course, jumping back above the 95.50 resistance, then back above 96 to 96.63 now. Brent is over 118. The up oil move helps bring equities off the lows after the opening bell. The negative divergence spanked price lower to start the day. The flat top across 1518 continues today, Frankenstein's flat head, so the potential H&S pattern may unfold moving forward with neck line at 1495. The SPX cannot move above 1518 yet so no upside acceleration occurs. The bears are unable to push under 1509 so they got nothing.
UTIL is 474 well above the two key levels mentioned in this morning's missive, so the bulls rule. Copper continues to weaken stealthily today. JJC 46.43 is a bull-bear line in the sand which will become more and more important moving forward. The 8 MA remains above the 34 MA on the SPX 30-minute chart so the bulls are already drinking at lunch time without any fear or worry. The TRIN is 0.78 so one bull asks for a double martini. The markets will move higher with a low TRIN of 0.78; the bears will need to move the TRIN back towards 1.00.
An interesting development occurs with Keybot the Quant. The algo is now at very overbot levels, the same, actually a bit higher, levels as the February-March 2012 market top, and the September 2012 top. The weakness in utilities and copper should light the way lower for bears, with a higher VIX occurring once the move lower begins. Markets appear to be placing a significant top now and with the latest reading from Keybot, the top is likely within days now, or even today. (Keybot's site has additional information). This week is going to be interesting. The SPX sits at 1517. The euro is 1.3408. The 10-year yield is 1.96%. The 30-minute, 1-hour and 2-hour charts are showing flat price movement with negative divergence. Price should start to move lower again.
Note Added 2/11/13 at 2:33 PM: UTIL is 474.31 well above danger. JJC is 46.97 above danger. Copper weakness continues. Watch to see if JJC can close back above 47 today, or not. TRIN is 0.79 firmly in favor of the bulls today. The SPX is flat at 1516. Crude is almost at 97 in wild trading action today.
Note Added 2/11/13 at 3:07 PM: TRIN is 0.82 remaining firmly bullish, if the TRIN does not move higher, the markets will float upwards into the close. Keystone shorted more LL adding to this ongoing short position. LL remains negatively diverged on both the weekly and daily charts.
Note Added 2/11/13 at 3:42 PM: TRIN is 0.75 so market buoyancy occurs. UTIL is 474.77 after teasing towards 475, the bulls can do no wrong. JJC is 46.96. Volume is very low on par with Friday's, vapor and fumes.
What is more interesting is that FED has this week the biggest $ volumes as per the whole month - February.... i.e. for 14 feb 2013 8 bln $ are ready to be pumped to the primary dealers (commercial banks) ....
ReplyDeleteVery true the fact that those markets are quite erratic ...
V.
Yep, Timothy Geithner is probably in the basement of the Eccles Building keeping the printing presses running; that is why he probably had to resign. LOL
Delete:) it's amusing, yet sad.
Deletehow come the biggest economy on Earth got it's pulse (stock, financial markets) addicted on such Zimbabwe economy type measures ?
it's outrageous!
maybe in 2007-2008 there was the time for one big Depression ... each economic cycle appear due to some conditions that cannot be treated with such interventions...
FED risks the even long-term stability of US economy with such measures!
V.
JJC appears to be more at risk than the UTIL, but that can change in nansecond (well, maybe not a nanosecond). So, the fed is poised to pump it back up again?
ReplyDeleteDUK earnings are this week which may be the butterfly that flaps its wings.
DeleteDUK earnings are on Wednesday, lots of wild stuff will occur on Wednesday. President Obama speaks tomorrow night.
DeleteActually, I'm looking at this a little different now. I think this a case for the bulls to prove and not for the bears to take. They've been unable to prove the 1518 on the S&P for three days now. If we don't close higher than Friday's close, it's a clear sign the bulls are exhausted.
DeleteKS,
ReplyDeleteHave you ever noticed how the next trade, after a huge winning Keybot trade, performs? My guess is that it could likely be a whipsaw, but was wondering if you had ever noticed any patterns, after a very large winning Keybot trade.
Also, do you pay any attention to stocks making new 52-Week highs or lows?
thanks,
tw
TW, not sure what you mean, since Keybot is a long-short algo, so if it is not long, it's short, and visa versa, there is no middle ground. But each trade, that moves long or short, doesn't matter which way, yields from one to five or eight percent profit, sometimes lots more, then the move in the opposite direction same thing. If a whipsaw does occur, Keybot gives back a percent sometimes two, maybe a bit more in erratic markets, this illustrates the way Keybot moves in general terms. Also, typically after a large one direction change, a top, or a bottom typically occurs due to the long move, so Keybot actually motors along for a nice winning trade in the next trade after the large one. Thus, right now, a top is probably in, so Keybot may flip short this week, and it can run for a while on the downside which should turn out to be a nice trade as well. It currently all depends on utes and copper.
DeleteYes, the new highs are important, but the pundits and analysts pump this far too often. New highs typically will create some further new highs but what happens, as many charts here show, is negative divergence shows up on both the weekly and daily charts to say the party is over, but you will hear pundits telling you to buy, buy, buy, because of the new highs, but, the negative divergence will always win, since it shows price exhaustion, all good things come to an end.
So study the new highs in conjunction with the charts, if higher highs in price occur, and the indicators (RSI, MACD, stochastics, etc...) are long and strong, or at least indicating further highs coming, you are good to go, but if there is negative divergence on weekly and daily, a new high is of no consequence, the stock will sell off, and would be more attractive on the short side despite the new high.
KS,
DeleteMany thanks for your informative response!
I notice how the SPX made a new high on 2/8/13, but the RSI did not, and is also below the 70 level, which suggests a bearish divergence.
KS, I have been following you for a year now. Love your insights. I have noticed how S&P indicators seem to trump those of sectors and countries. Ala XLF recently. I got in FAZ a little too early. S&P forced XLF higher. I am learning a lot though. RUSL & RUSS are my favorite vehicles to play with. Thank you. C.
ReplyDeleteYep, trading is never easy sometimes, there are many facets to it, like any career, or occupation, one thing is determining market direction, but also price levels, timing on the trade, news events and on and on. Keystone is in the many inverse ETF's currently and holding them. Try wider scale-ins in future trades, especially in falling knife catches which is what the positive divergence trades are. The negative divergence trades are in essence top-calling, so both are more speculative and dangerous trading. Following the trend is what most traders try to do, and that is a smart approach. Following the trend can easily result in losses but from a risk perspective there is less risk, the losses would be smaller. As always larger gains come with larger risks, and smaller gains with smaller risk. It is a matter of choosing your poison.
DeleteKS, I noticed $SOX continues to head higher, SSG got beaten badly. If only Nasdaq gap down, will SOX follow or SPX has to gap down along with Nasdaq? Thx! A
ReplyDeleteThat is really something how chips have ran. Some of this may be traders front-running the belief in a strong recovery. That is why housing, gypsum, flooring, lumber, ran higher, and semi's, since a chip is in most everything nowadays, and copper, which is key for housing and auto industry, the two largest users of copper. There is about forty to fifty pounds of copper in a car. Typically these leaders lead a broad market to a long rally higher, but, in these markets, ruined by Fed and political intervention, price discovery is a mystery, no one really knows what anything is truly worth, and traders may simply be chasing into semi's and copper since they believe in the recovery, in other words, it is not natural.
DeleteSOX daily chart is negative divergence on daily looking ready to roll over, weekly has some momo and may want a couple-week jog move before dropping. SSG is very nice and good to go on daily chart, weekly may want another down, no surprise since it is inverse to SOX, but moving forward the nod would be for SSG as the weeks play out and the SOX would be expected to roll over and pull back over the coming weeks or more.
Hey KS, remember my comment a few days ago at one of your week end posts? I've told you that until 10 of feb 2013 north koreea will conduct a nuclear test.
ReplyDeletehttp://www.marketwatch.com/story/north-korea-conducts-nuclear-weapon-test-reports-2013-02-11
they barely have what to eat and they do such things ...
V.
Yep V, it is interesting timing, during the New Year celebrations ongoing in the neighborhood. The Kospi (S. Korea) dropped on the news. Markets only want good news so the U.S. markets will likely not pay attention.
DeleteWhat means P.S.U. and M.I.T in your description?
DeleteMIT has something to do with massachusetts institute of technology ? So are you a Ph.D. ?
V.