Friday, May 31, 2013

Keystone's Midday Market Action 5/31/13; EOM

Today is the last day of the month so the SPX will likely print the seventh consecutive up month, a phenomenal run for the long side. The monthly charts receive new data points today. The SPX sideways triangle pattern shown on the 30-minute and hourly charts continues to resolve today hinting at a downside commitment but the bulls keep finding a way to keep the indexes buoyant. The dollar/yen was down to 100.39 a few hours ago creating the negativity in the futures but as the open approached, and into the trading day, the dollar/yen moves up to 100.65, then 100.83, then 100.95, so equities recovered. Dollar/yen is now 100.86 pulling equities lower again. Markets remain erratic with cross currents everywhere.  The 10-year Treasury yield dropped to 2.07% overnight and now has ran higher to 2.18%. With the SPX down a few handles, looks like traders do not like stocks or bonds today. The higher yields should hurt utilities but UTIL remains above the critical 480.65 bull-bear danger line that will create substantial market downside. At the same time, the bears are keeping copper (JJC 41.54) and volatility (VIX 13.17) in the bear camp. Markets float sideways until a change occurs in one of these three parameters.

The Chicago PMI data beat expectations, a large 58.7 number compared to last months sub 50 number at 49.  The University of Michigan Consumer Sentiment number shows a happy attitude with a blow-out 84.5 number, the highest since July 2007. Folks are throwing confetti in the streets, except for the 25 million underemployed and unemployed. Folks may be happy but it is not reflected in their spending except for the wealthy, benefiting the most from the Fed, that are helping to support the overall economy with their huge stock market gains. Traders may be worried that the crack cocaine QE will taper due to this mornings happy data. There is an MSCI rebalancing today so the volume will increase dramatically during the last half hour of trading with about one-third of the stocks affected.  Usually when a month is up, like May, there is weakness at the end of the month. 'Sell in May and go away' did not work this year. Perhaps the move forward will be 'Sell in June to avoid the doom'.

The bulls need to push the SPX above 1654 to receive an upside acceleration. Bears need to push under 1649 for a downside acceleration. The bears push lower at the opening bell teasing 1649 but the happy data creates the recovery. Pay attention to UTIL 480.65, SPX 1649 and the 8/34 MA cross on the SPX 30-minute chart.

Note Added 10:29 AM:  The SPX is testing the 1649 support again, well, bears, what do you got? VIX 14.96.  JJC 40.72.  UTIL 485.10.  Dollar/yen 100.91. The 10-year yield is 2.16%. WTIC crude oil is under 93. Copper, gold and silver are all weak. Europe is red. SPX bounces off 1649 again. TRIN is 0.76. Say no more. The low TRIN's continue to help the bulls each day. Looks like markets may meander sideways all day long as thoughts of barbecue and weekend frolic fill trader's heads.

Note Added 10:48 AM:  The SPX explores today's downside support at 1648-1649 but will not fail, and, the upside resistance at 1654-1655, but will not punch up through. VIX, JJC and UTIL are stubborn with none willing to change sides. Thus, the bulls hang their hats on a buoyant dollar/yen (weaker yen) and low TRIN and the markets float sideways on a paint-drying day so far.

Note Added 11:12 AM:  Dollar/yen 101.05 above the 101 level. Say no more. Equity bulls need to send a thank you note to the BOJ as they weaken the yen and cause the broad indexes to turn positive. The SPX punches up through 1654-1655 so a several handle run higher would be in order targeting a breakout of the sideways triangle on the hourly charts at 1660-1661 with resistance above at 1666 and 1669. TRIN 0.76. Dollar/yen now 101.10. Banzai!! SPX now above 1658. JJC and VIX remain in the bear camp. The 8 MA remains above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead. The 8 and 34 MA's are at 1654-1656 so watch this area in reference to price, now at 1658.07 with a HOD at 1658.99.

Note Added 2:37 PM:  The heat is sweltering in good ole Pennsylvania today; dog days of August type weather in May. It is so hot a dog was chasing a cat and they both were walking.  SPX held the HOD and is now testing the lower boundary again at 1648-1649, whoopsies, there she goes right down through. SPX 1645 handle. The 8 MA sliced down through the 34 MA on the 30-minute chart at 1 PM EST signaling bearish markets for the hours ahead. The dollar/yen drops down to 100.85. Say no more. See how equities move up as dollar/yen moves up from 100.39 this morning to 101.10 when SPX 1659 printed, and now the air comes out of equities as the yen strengthens and the dollar/yen drops to 100.85 and SPX to 1645. VIX is over 15 signaling lots of wild market swings are ahead. TRIN 0.92 and believe it or not, actually printed 1.00 a few minutes ago.

Note Added 2:49 PM:  TRIN 1.01. The bears may have some oomph.  UTIL is 485.50 well above the bull-bear danger line at 480.65.

Note Added 3:10 PM:  SPX 1644.76.  VIX 15.49 big up move. JJC 40.65, commodities getting hammered today. TRIN 1.04. UTIL 486.10. Dollar/yen 100.70.

Note Added 3:28 PM:  Volume is below average today running at about 70% of a days average expected volume but the MSCI rebalancing should spice up the close. SPX 1645.07.  VIX 15.44. TRIN 0.83. UTIL 485.93.  Dollar/yen 100.54, wow, air pocket.

Note Added 3:32 PM:  Dollar/yen air pocket drop gives SPX an immediate 1642 handle.

Note Added 3:34 PM:  Hit the flush handle. SPX 1640. The 1634 level is strong support and 1647-1649 is resistance.

Note Added 3:49 PM:  SPX 1638, slip-sliding away. VIX 15.73.  TRIN 1.03. UTIL 484.21. Dollar/yen 100.48.

Note Added 4:02 PM:  Markets puked into the closing bell. SPX finishes with a 1630 handle falling through the strong 1634 support like it was not even there. Dow is down over 200 points. VIX 16.28 now over 16 up a big 12% today. TRIN 1.49. UTIL 482.18 so the bulls can breathe a small sigh of relief for not losing 480.65. Next week the UTIL 480.65 and 477.91 levels are key, a double whammy. If UTIL 480.65 fails the markets will be in serious trouble with strong selling taking place.  If the 478 fails, that will likely act as a trap-door for equity markets and an intense whoosh lower would likely occur for the broad indexes with the  S&P's losing from 10 to 30 handles in an hour or two.  If UTIL remains above 481, the bulls will be sipping champagne and donning party hats by mid-week. Dollar/yen 100.40. Note that the SPX stopped exactly on top of the 200 EMA on the 60-minute chart at 1630.15, one of Keystone's turn signals. Big trouble is ahead for markets under 1630.15 but the bulls held the line, at least through the weekend.  The dollar/yen clearly indicates market direction yelling Banzai! today for the run up to 101.10, then committing hari-kari down to 100.40, pulling equities each way in sync. Thus, watch the yen Sunday evening and overnight into Monday to determine broad market direction.

USD US Dollar Daily Chart Bull Flag Sideways Channels

The dollar has been on the rise for the last couple years despite the Fed's QE. Now that about 50 nations are involved in the race to debase their currencies, the dollar moves up since it is the least dirty shirt in the hamper. The blue bull flag pattern is ongoing and targets 76 but as mentioned in the previous dollar chart/s the indicators are not enthusiastic for further upside. The 86 must remain on the table, however to complete the pattern.  Note the negative divergence over the last three months that creates the drop in the dollar over the last few days.

The blue channel at 79-84 carries clout since it has been in place for almost two years now. The surprising move for currencies such as the euro, dollar, and Treasury yields is that they may move more sideways over the next couple years than up or down. Since the ECB will likely cut rates again the euro will weaken and dollar will receive a boost. This, along with the dollar buoyancy due to everybody and his bro debasing, may provide the boost to fulfill the 86 target for the bull flag. In addition, this may create a more elevated sideways range through 81-86 for months perhaps years ahead.

February shows the frustration for the equity market bears this year. As the dollar started its climb, commodities are hit and continue to be hit. The weaker commodities should have sent the broad indexes lower but alas, the indexes keep making new highs. The broad indexes simply move higher on the Fed and BOJ actions, the weaker yen the main driver of the equity markets for the last three months and the sole cause of the new highs in the SPX.  The correlation of weaker commodities and weaker equities should reconnect moving forward and the elevated dollar will continue to create pressure on commodities. 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.

LUMBER Daily Chart Bear Market Potential Death Cross

Here is an update of the lumber chart we have been watching. Lumber topped in March with a textbook rising wedge, overbot and negative divergence smack down. The 50-day MA is about to stab down through the 200-day MA (black circle) which is the infamous death cross. Do not put too much emphasis on golden (50 up through 200) and death crosses since more often than not price will bounce as a death cross occurs or collapse as a golden cross occurs. And lumber is receiving a dead-cat bounce right now.  Price has collapsed through many support levels like a baby grand piano crashing down through floors of a high rise apartment building. The blue lines show the 405 top. The 365 support collapse created a -10% correction for lumber. The 325 failure sends lumber into a bear market at -20% off the top. The drop to 282 from 405 is -30%. Lumber has lost one-third of its value in only two months time.

If builders do not need stick lumber, then the housing recovery is in trouble. Since lumber is ordered ahead of time in the chronology of building, this couple month drop in lumber should create negativity in the housing sector moving forward. Hedge funds and speculators are the cash buyers in the real estate sector these days causing prices to move higher, not Jane and John starting a new life together in their first house. These love birds remain in their parent's basement trying to keep noise to a minimum. The hedgies and speculators may be in for a surprise for the weeks and months ahead as they realize the buyers are not flocking to their doorsteps as they expected. 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 30-Minute Chart 8 and 34 MA Cross Sideways Symmetrical Triangle Pattern

The markets are in decision mode the last few days. The 8/34 crosses verify the indecision and unstable behavior. Last week the SPX peaked and fell on its sword with the 8 MA stabbing down through the 34 MA to signal bearish markets ahead. Then to start the holiday-shortened week, the markets catapult higher on Tuesday morning placing the bulls back in the driver's seat. Then the bears slap back pushing the 8 back under the 34 on Wednesday. Then yesterday the bulls gore the bears and push the 8 MA above the 34 MA to signal bullish markets for the hours ahead, however, the 8 MA is curled to the downside again providing more drama and indecision ahead. Watch the 8/34 cross closely.

At the same time the blue sideways symmetrical triangle is in play and the stakes are high. The vertical side of the triangle is 40 to 50 handles. A break up and out of the triangle at 1660 would lead the way to a 1700-1710 target.  A failure out the bottom at 1653 would create a target to 1600-1610. The red lines show the negative divergence spank down with a higher high in price but the indicators are all sloping negatively showing that price ran out of gas. The green lines show a cheesy bottom five days ago. Positive divergence did not appear to bounce price. Price simply recovered on central banker money printing with the weaker yen.  Note how price never made a lower low on 5/24/13, a prerequisite for any positive divergence to develop. The indicators are all sloped positively back then but price never printed the lower low to create positive divergence. This is an important concept since it hints that the price recovery is faux.

The indicators are now verifying the sideways triangle action stretching out sideways preparing for an important up or down decision. Pay attention to the 8/34 cross and watch price since 1660+ will make the bulls rejoice while 1653- will cause the bears to throw confetti and cheer. S&P futures are -9 about two and one-half hours before the U.S. opening bell giving the bears the nod at this juncture. 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 2:42 PM:  The 8 sliced down through the 34 MA at 1 PM EST signaling bearish markets for the hours ahead.

Thursday, May 30, 2013

Keystone's Midday Market Action 5/30/13

The bulls push higher to start the day. Dollar/yen is 101.04 more in tune with a flat SPX rather than up 10 but the day is young.  VIX is 14.63 backing down from 15-ish which creates bull fuel. Overall, however, the VIX remains well above the bull-bear line at 13.15 creating market negativity.  JJC is 40.97 far from its bull-bear line at 41.55 continuing to create market negativity. UTIL jumps higher to 493, now starting to leak lower, but well above the 480.65 bull-bear line creating market positivity.  The SPX punches up through the 1656-1657 level so an upward acceleration of a few handles would be expected. Interestingly, the HOD is 1659.27 so that is only a couple handles of joy and the SPX is leaking lower now with a 1655 handle.  The 10-year yield is stuck at 2.12%. TRIN is 0.86. The housing data disappointed. JOY disappoints as well and lowers guidance moving forward citing weaker commodities.

Keystone took profits on SLV and PAAS exiting these longs. They both remain attractive for further upside moving forward. Will look to reenter.  Also bot SSG, the speculative 2x inverse semiconductor ETF, opening a new long position which is short semi's. Also bot more coffee adding to the ongoing JO long position.

Note Added 10:19 AM:  Dollar/yen 100.88.  The drop in the dollar/yen, you guessed it, creates weakness in the SPX off the top moving from 1659 to 1655. VIX 14.82.  JJC 41.05.  UTIL 489.27.  TRIN 0.80.  SPX 1655.72. The beat goes on.

Note Added 12:18 PM:  The 8 MA is about to move up through the 34 MA on the SPX 30-minute chart to signal bullishness ahead so the bears must drive the SPX lower right here right now to reverse today's bullishness. JJC and VIX remain in the bear camp. UTIL remains in the bull camp. Today can be classified as a sideways churn so far. Keystone added more SSG.

Note Added 1:22 PM:  The 8 MA moves up through the 34 MA on the 30-minute signaling bullish markets for the hours ahead, however, the 8 MA, 34 MA and price are all at 1656-1657. The bulls need to keep price above 1657 and higher to send the 8 MA higher while the bears need to drive price lower under 1657 so the 8/34 cross can be reversed. Dollar/yen 100.74 so it is surprising to see the SPX remain elevated today.  VIX 14.54 so the slight move down today in volatility helps the market buoyancy. Watch the VIX 200-day MA S/R at 14.87. JJC drops under 41. UTIL 487.92. TRIN 0.64 which encourages the bulls today. The 10-year yield is 2.10% showing money moving into bonds but that dough does not appear to be coming from the equities markets. The churn continues.

Note Added 2:56 PM:  TRIN at 0.61 says the bulls rule all day long. VIX is at the LOD at 14.29 so the SPX is at the HOD at 1661.91. Resistance above is 1666 then 1669.

Note Added 3:17 PM:  There is a foot held on the neck of volatility keeping it down with another new LOD at 14.27. Two days in a row of uber low TRIN's are interesting. The low TRIN and low VIX help keep the broad indexes elevated and pulls in the dip-buyers. The volume is fumes and vapor today dropping from about 75% of an average day's run rate down to about 65% right now; very light volume.  The markets should be very entertaining tomorrow and early next week, perhaps even into today's close. Dollar/yen is 100.70 so the low VIX and TRIN are overriding the negativity caused by the stronger yen, at least for now.

Note Added 3:54 PM:  The VIX beach ball could not be held underwater and bounced now printing 14.48. The stronger yen is then allowed to create negativity into the closing bell.

USD/JPY Dollar/Yen Intraday Chart

The weaker yen is the main driver of equities markets these days and created the new highs on the SPX. A weaker yen is a higher dollar/yen and higher equities. A stronger yen is a lower dollar/yen and lower equities.  The BOJ easing weakens the yen resulting in the obscene rally in the Nikkei and U.S. equities over the last three months especially. The red arrow shows the action overnight where the yen strengthened, dollar/yen dropped like a stone through 101 down to 100.50, creating the Nikkei sell off and weak U.S. futures. Note over the last hour or so the green arrow which shows a dramatic reversal higher for the dollar/yen (weaker yen) so the S&P futures leap higher to +7 at this writing. The central bankers control the markets. Very simply, if you are bearish equities, you want to see a stronger yen (lower dollar/yen) and if bullish, you want the weaker yen to continue. 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 Morning Wake-Up 5/30/13; GDP

Two more days remain in May. Those in the Nikkei wish they had sold and went away. Japan's Nikkei crashed -5.2% overnight to 13589.  The broader Topix fell -3.8%. The dollar/yen drops to 100.50 and lower which reflects the stronger yen and causes the sell off. Reference the yen chart from yesterday for further study (scroll back through the previous posts or type 'FXY' into the search box to the right). The overcrowded trade that is short the yen and long the Nikkei reversed in spades overnight. The weakness in Asia, however, did not cascade to Europe. Over the last half hour the dollar/yen recovers back above 101, hence a weaker yen, and yes, the U.S. equity futures go from negative to positive. The BOJ and Fed are the markets.

Watch VIX 13.15, JJC 41.55 and UTIL 480.65. The bulls need VIX 13.15 and/or JJC 41.55. The bears need UTIL 480.65.  The utilities did fail yesterday but only for two minutes before recovering. Usually about seven to ten minutes are needed to lock-in a support failure. The broad indexes will noticeably sell off if UTIL 480.65 is lost.  The 8 MA remains under the 34 MA on the SPX 30-minute chart signaling bearish markets ahead but watch this closely in early trading. The bears must keep the SPX under 1649 and lower to keep the 8 MA heading lower.  For the SPX starting the day at 1648, the bulls need to move above 1656 to touch the 1657 handle and accelerate higher, likely with either the JJC or VIX on the bull train.  If markets move higher but JJC and VIX will not join in, the markets will reverse and head lower again. The bears need to push price under 1640 to accelerate the downside which will likely be in concert with UTIL failing 480.65 creating a potential whoosh downwards. A move through SPX 1641-1656 is sideways action today. Keybot the Quant is short but if the JJC or VIX attain the levels listed, and the SPX moves above 1657, Keybot will likely flip to the long side.

A higher VIX will create larger price swings in the broad indexes. The NYMO drops to -62 consistent where near-term bottoms should occur. If the market bears are going to push lower, the window is open for today and tomorrow, otherwise, they will fold like a cheap suit. The month of May started at 1598-ish so a move down for a potential negative month is not out of the question. This morning's TRIN chart shows behavior consistent with a market sell off ahead. If the markets meander out sideways to end the week, the window remains open for market weakness through next week. When the TRIN prints at 2 or 3 or higher, that will correlate to the low NYMO and both will signal a near-term bottom. Some end of month window dressing may create buoyancy today and tomorrow but considering the erratic and unstable nature of markets right now, this will likely not have much affect. Window dressing will be more important at the end of June since it will be the end of Q2, and H1, which aligns with the quarterly financial statements.

The majority of folks are jumping on the higher yields band wagon. The 10-year Treasury note hit 2.23% yesterday and is now at 2.14%.  Looking at Keystone's Inflation-Deflation Indicator, CRB/10-yr price, 285.91/96.531 = 2.96. This reflects continuing disinflation (between 2.9 and 3.0) although the indicator is moving higher with the higher yields. The 3-4 range is neutral territory and inflation is not signaled until the indicator moves above 4.  Reference yesterday's TNX chart. Those expecting a break upwards in yields may be disappointed. The 2.30% level is very important resistance. At this juncture, the 10-year should remain below that level for the foreseeable future, but, you never know. The utilities, telecom, REIT's and other interest rate sensitive stocks sold off on the higher yields while banks were viewed favorably since the carry trade yield curve steepens. The interesting aspect is that the yields may remain in this 1.6%-2.3% range for a couple more years or more.  The weakness may have staying power in the interest rate sensitive stocks since the future move up in yields will be on everyone's mind. However, as yields pull back down, the 10-year probably coming down to drop under 2% again, this should take the wind out of the financials sails moving forward along with the negatively diverged charts.

Jobless Claims and GDP are released at 8:30 AM about one and one-half hour from now. Pending Home Sales data hits at 10 AM. Natty Gas Inventories at 10:30 AM. Oil Inventories at 11 AM, delayed one day due to the holiday. The 7-Year Note Auction is 1 PM.  COST earnings beat but top line is less than expected. JOY earnings are very important since it is a key global economic bellwether.

Note Added 7:14 AM:  The dollar/yen runs higher now at 101.50 one point off the lows only a few hours ago so the S&P futures gallop higher on the weaker yen. S&P's +7. Watch the direction of the dollar/yen since equities move the same way; the BOJ dictates market direction. The pop in futures is interesting going into the GDP number.

Note Added 9:01 AM:  GDP comes in as expected at 2.4%. Jobless Claims are higher than expected. Dollar/yen pulls back to 101.35, thus, futures should pull back a couple handles, and, voila, the S&P's are +3. The 10-year yield is 2.12%. Gold and silver are higher, copper flat, and oil down so the mining and metals sector may feel some love today.

TRIN Arms Index Versus SPX Daily Charts

The TRIN and TICK are vital tools for day trading. Overdone buying is shown by a +1000 TICK and higher while overdone selling is shown by a -1000 TICK and lower. To receive more bang for the buck on any given trade, if it is a long trade, try to enter on the low -1000 TICK and conversely, if entering a short trade, try to enter on the +1000 TICK. For the TRIN, the 1.00 level is neutral. A TRIN above one shows that the markets are favoring the sellers that day while a move under one favors the buy side. A very high TRIN at 2, 3, 4, and higher show that the selling is overdone and a market bounce will be needed. An uber low TRIN under 0.60 signals that the buying is way overdone and a market pull back is needed to relieve all this bullish energy. The markets appear to live in the sub one camp for the month of May giving the bulls the nod day after day.

The red rectangles show three previous fractals now in play. Note how for each prior sell off, in December, February and April, all were identified ahead of time with the uber low TRIN showing that the wine was flowing like water and the bulls had no cares or worries, like now.  These uber bullish reading gave way to wild spikes higher in the TRIN to relieve the bullish pressure and, of course, each spike in the TRIN corresponds to the broad indexes selling off.  For the three prior fractals, each resulted in a 50 to 75-handle drop in the SPX, however, these sell offs were small and only provided a limited window for the dip-buyers to come running in waving the Fed and BOJ flag of quantitative easing. Therefore, a greater sell off is long overdue. The last substantive sell off was May 2012 one year ago. From the 1675 top this week, using the three prior fractals, a lower target of 1600-1625 is projected for the anticipated sell off. The 1625-1627 is a key support area ditto the 1597-1600 area. The month of May began at 1598-ish so would not that be interesting to see if the bears can drive the SPX 50 handles lower to print a negative month come Friday at 4 PM EST? The possibility is definitely on the table and even if the month ends positively, the low targets may be achieved early to mid next week.

Based on the prior fractals for the behavior in the TRIN, the market selling and beating should continue until moral improves. If the strong market selling occurs, watch for a TRIN above 3 that will tell you a near-term bottom is in and create the potential for a long trade. 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, May 29, 2013

Keystone's Midday Market Action 5/29/13

The SPX loses the 1653 support out of the gate so the test of 1649 support came quickly, then that failed. The dollar/yen just dropped under 101 so the stronger yen creates lower equities. TRIN is collapsing, surprisingly, to 0.45, which is typically uber bullish. This low TRIN number matches the action during the April and February market sell offs. Within one to two days later the TRIN spiked to 3 or higher and signaled a market bottom so hold on to your hats for the remainder of the week, it may be a bumpy and intense ride.

The 8 MA fell under the 34 MA signaling bearish markets for the hours ahead. VIX is 15.55 near the highs of the day. The elevated volatility will create wilder price moves up and down. Copper and oil are weak not indicating a robust economy. The IMF and OECD downgraded Europe's prospects moving forward. China is lowering expectations. Gold and silver are higher. UTIL is printing 482.40 less than two points from the UTIL 480.67 that will create a whoosh lower. The algo's should kick in with sell programs at UTIL 480-481 so the bulls are starting to lose their grip. The bears are pushing hard today. If UTIL 481 fails, the push lower will become much easier with the broad indexes moving far lower. SPX support below is 1639.28 (20-day MA), 1636 (last week's low 1635.53) and 1634. The 20-day MA is finally receiving the respect it deserves so the action in this 1639-1640 area is important. The LOD thus far is 1640.05 bouncing from the 20-day MA on the first attempt.

Note Added 11:43 AM:  The UTIL firm bull-bear line in the sand (identified by Keybot) is 480.64. Price is now 480.65. This test is huge for markets. Bulls have to bounce UTIL immediately or they will lose control of the markets. If this level fails, the day will likely become very ugly. Bounce or die.

Note Added 11:47 AM:  Bounce. UTIL 481.10. Bulls pull a handkerchief from a pants pocket to dab the beads of sweat on the forehead. A low was printed at 480.23 for UTIL so failure occurred but resulted in an immediate bounce. Watch for further tests of this critical level today. Dollar/yen 100.94.

Note Added 1:46 PM:  Dollar/yen 101.07 up from the sub 101 numbers so the weaker yen moves equities higher in these central banker-controlled markets. The SPX recovers and is now testing the all-important 1649-1650 resistance again. VIX is 14.84 dropping from the 15+ numbers so this allows equities to receive buoyancy.  TRIN remains uber low in the bull camp for today at 0.50 also helping the broad indexes recover. UTIL is higher, up to 485.61, well off the lows and away from the 480.64 market failure level. The bears need to keep the SPX under the 1649-1650 support. Also, copper, commodities and volatility remain in the bear camp. The bulls stopped the downward slide with the defense of UTIL 480.64 and now will try to move the SPX above 1649-1650 and also try to bring copper, commodities or volatility back into their camp. The 8 MA remains under the 34 MA on the 30-minute chart signaling bearishness ahead, however, the bulls are curling the 8 MA back to the upside. Bears need to keep the SPX under 1646 to keep the 8 MA moving lower. Traders interpret Rosengren's (Fed) comments as QE-friendly helping the afternoon market recovery.

Note Added 1:58 PM:  SPX 1652.62. So after all of today's excitement thus far, the fight through the 1649-1653 area, described before the opening bell, resumes. The recovery move can be considered a back kiss of the 1649-1653 failure this morning so price should bounce or die from this 1653 level. Bulls win above 1653, bears win below 1653.

Note Added 3:32 PM:  Dollar/yen 101.18. TRIN 0.49. VIX 14.70. UTIL 486.11. SPX stumbles through 1649-1653.

Note Added 3:56 PM:  Dollar/yen 101.21. TRIN 0.49. VIX 14.86. UTIL 485.01. SPX 1649.01 at the bottom of the 1649-1653 range in place for 2 1/2 hours. Slight weakness occurs in the SPX and UTIL into the close as the volatility moves higher.

Note Added 4:03 PM:  SPX closes on the underside of the 1649-1653 S/R gauntlet at 1648.36. Aunt Abigal and Uncle Frank remain worried about their investments. Frank pumped air into the front tire of the 1993 Cavalier and they drove back to the financial manager's office.  The lights remain off and no one answers the phone. They took their entire life savings and placed it into dividend utility stocks three weeks ago like all the pundits and analysts told them to do on television.  But buying UTIL at 538 results in a print today at 485, a drop of -10%, the level that is called a correction. All of a sudden the 4% divvy yield does not appear attractive since it will take 2 1/2 years to simply recover the loss in price over the last three weeks. Now they are confused as to what to do. Abigal and Frank decide to drive back home, hoping the Cavalier does not break down on the parkway, and eat a dinner of franks and beans.

SPX 30-Minute Chart 8 and 34 MA Cross

The 8 MA drops down through the 34 MA signaling bearish markets for the hours ahead. Price fell under the bottom trend line of the sideways triangle. The indicators are weak and bleak wanting to see lower price lows after any bounce occurs, in this 30-minute candlestick time frame. 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 Morning Wake-Up 5/29/13

Mortgage Applications are weak again for three consecutive weeks. This near real-time data carries more water than other lagging housing sector indicators. Cash buyers are supporting the housing recovery.  Hedge funds and other speculators are buying, not Jane and John starting a new life together.  This investor money is waiting for the influx of buyers so they can take a mark-up and move on. What happens if the housing recovery stalls and all these high-rollers realize that the buyers are still a few years away?  There is no other economic data today. Fed's Rosengren will provide QE spin at lunch time and the 5-Year Note Auction is at 1 PM. The Treasury auctions will gain interest with the up in yields occurring. Dollar/yen dropped under 102 overnight (stronger yen) down towards 101.20-ish creating the weakness in the S&P futures.

Copper, commodities and volatility remain important. Watch JJC 41.58, GTX 4785 and VIX 13.15. All three are bearish. The bulls need to bring at least one of these back into their camp so they can send equities higher again.  The bears will try to push the utilities, UTIL, under 481 to bring on more downside energy. UTIL is 492. For the SPX today starting at 1660, the bulls need to move above yesterday's high at 1674 to regain upside mojo. The bears need to push under 1653 to accelerate the downside. A move through 1654-1673 is sideways action today.  The S&P futures are off -9 a few minutes in front of the opening bell so it looks like the bears will receive the nod at least to begin the day. The 1649-1650 support is important. Simply lump these ideas together into a confluence at 1649-1653 for today. Bulls are okay staying above 1653. Bears will start to do more serious damage under 1649. A bull-bear fight will occur if price dances through the 1649-1653 area. The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead but watch this closely during the first couple hours to see if a negative 8/34 cross occurs (reference this morning's chart). If the markets sell off but the 8 MA does not cross under the 34 MA, then the bears got nothing.

Note Added 9:32 AM:  SPX loses 1653 so price accelerates lower to test the 1649 support. Bounce or die from this critical level. VIX is up to 15.26 so watch for larger and larger intraday and day to day points swings in the broad indexes.

Note Added 9:37 AM:  Bounce.  TRIN plummets to 0.66 (bullish under one) so the SPX pops to 1652.

Note Added 9:43 AM:  Second test of 1649 on tap. There's failure. SPX 1646 handle now. TRIN up to 0.90. Bears need to stay sub 1649 and move the TRIN above one. Dollar/yen is down to 101.14 so yen is stronger creating the market selling. JGB 10-year yield is 0.942%.

Note Added 10:03 AM:  Dollar/yen up to 101.23. TRIN uber low at 0.57. Say no more. The slight weakening in the yen from the 101.14 dollar/yen results in a few up SPX points. The SPX may now settle in for the fight through 1649-1653 today. The 10-year yield is 2.14%. 

UTIL Utilities Daily Chart Textbook Bear Flag

Here is an update of the utility two-leg bear flag pattern we have been watching for the last couple weeks. Unfortunately, Keystone sold the SDP (thinly-traded inverse utility ETF) too early. This chart is great to look at from a TA (technical analysis) perspective especially for all of you budding chartists. The red rising wedge, overbot conditions and negative divergence (red lines) are a textbook top forecasting a spank down, which occurred. This is where the SDP trade was entered. Note how price dropped and then danced along the 50-day MA as it decided on direction.  The initial drop from 538 to 510 is 28 points difference. The consolidation flag move, where price moves sideways with some upward buoyancy then occurs, then the second leg begins down from 518. This targets 490 (518-28 = 490). Price bounced directly off the 490 target completing a textbook bear flag pattern.

The 485-490 is important support.  The indicators are weak and bleak (red lines) but the histogram and stochastics want to see a bounce. The stochastics are oversold. So a bounce may be on tap but the RSI, MACD line and money flow want to see further weakness resume after any bounce occurs.  Keystone's trading algo, Keybot the Quant, identifies 481 as a key level currently. The broad indexes will dramatically weaken if/when 481 fails. Note the confluence of Keystone's number and the 200-day MA at 480. There will likely be a showdown at 480-ish that determines the fate of the overall markets moving forward. Many old-timers use the utes as a key forecasting tool for markets. The higher yields are causing much of the weakness in utilities, telecom, REIT's and other interest rate sensitive stocks and indexes. When utilities lead the broad market lower it typically signals that the move down will be more substantial than many expect. The 20-day MA is about to fall through the 50-day MA which is bearish. Watch 480-481 moving forward; bulls are fine if they maintain this support, however, if 480-481 fails, there is big trouble ahead for equities. If 470 fails, markets will be moving strongly lower. 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.

FXY Japanese Yen Weekly and Daily Charts Oversold Falling Wedges Positive Divergence

The BOJ easing causing the dramatic weakening in the yen is the sole cause for the SPX printing new all-time highs. The power of the central bankers is strong. The BOJ and Fed are the markets now. The crack cocaine is in the veins of every long trader and they cannot wean off the drugs without serious withdrawal affects.  Since the weaker yen (higher dollar/yen) has created the lofty U.S. stock market over the last three months especially, the most important questions are will the weaker yen continue or, if not, when does it end?

The weekly and daily yen charts are universal in agreement, the answer is the yen move is done.  It is mind-boggling to think what will happen since everyone and his brother is short the yen and long the Nikkei and U.S. stocks. The charts clearly show positive divergence across all indicators on both charts. This is an awesome set up that is not wise to fade. Even if price bounces around at these levels for a while, the charts say up is the next direction, a stronger yen not weaker yen. The daily chart is already showing long and strong behavior with the indicators making new highs as the yen prints a new high a couple days ago. Note how price tested the 20-day MA at 97.17 so pay close attention to this metric. A move above the 20-day MA tells you the bottom is in.

The weekly chart tells the same story for a stronger yen moving forward. The volume last week jumps as many covered shorts trying to get out the door ahead of everyone else. Perhaps this morning's machinations in markets (wild moves in Treasury yields, lower equity futures, a pop in the euro, drop in dollar, stronger yen, etc..) is reflecting the fact that the main driver of the markets for the last three months, the weaker yen, is reversing. 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.

TNX 10-Year Treasury Note Yield Weekly and Daily Charts

The inflationists are waving flags today pronouncing the end of the multi-decade bond rally (up prices and down yields). Yield jumps to 2.21% at this writing (lower prices). The question to ponder is if the rise in yields reflects a more robust economy moving forward, or not. The move over the last few days is very much technical in nature. The move above 2.06% resistance lit the fuse for the algo's to kick-in and the 2.08% resistance launches a jump to 2.2%+. The weekly chart shows how these yields are not seen since April 2012. Note the juicy gap back then that needs filled, and it is now filled by the action over the last 24 hours.

Staying on the weekly to look at the longer term, the brown lines show the inverted H&S developing with head at 1.4% and neck line at 2.3%. A move up through 2.3% immediately places 3.2% on the table as the target for the pattern. As often is the case for patterns, the target levels coincide with previous S/R, in this case the 3.2% vital S/R from 2011.  The red upward-sloping channel does provide the inflationists with fuel for their upside yield arguments. Yield is now at the top rail of the channel, a logical place to pull back down or at the least, digest the upward spike by moving sideways. The indicators are negatively diverged on the weekly, sans RSI, so a pull back is needed but the RSI likely points towards some action around this 2.2-2.3% area for a few days or couple weeks. The ADX is above 20 for many months showing a strong downtrend in place but note the drop off in the ADX since last Fall. This hints that the strong downtrend has faded, however, the upward channel move is not verified as a strong uptrend, yet. Keystone continues to lean on the deflationary side moving forward and yields may remain flat using 2.3% as a ceiling for another couple years or more.

The daily chart shows the wild spike higher in yield, from 1.63% to 2.21% in 18 days, +36%! The move higher is 3.2 bips per day (3.2 basis points; 0.032% per day). This is a phenomenal move. The majority of folks have been looking for inflation ever since late 2009, for over three years, and are quick to say that the day has arrived. The daily chart is negatively diverged except for the MACD line and the RSI. The RSI poked into overbot territory and that small move higher is key indicating that another high in yield is likely coming after a pull back. This would target a test of the critical 2.3% level. The daily chart plays out a bull flag with first leg from 1.63% to 1.96% (33 bips), and then leg two from 1.86% to a 2.19% target, now achieved satisfying the pattern.

Higher yields hurt the utility, telecom and REIT sectors, interest-rate sensitive areas. There may be some worry developing as monthly mortgage payments climb higher. The jury is out on the spike higher in yields.  Projection is for a dance around this 2.1-2.3% area but the neckline of the inverted H&S at 2.3% should hold as resistance. Keystone continues to project a flat move in yields for months forward and the move above 2.3% may be a long ways away still yet. The housing recovery should stall and a global economic slowdown should develop. In addition, the 18-year cycle must be respected and stocks remain in a secular bear until 2018. This cycle should create a lid on yields for a few more years and then in the 2016-2018 area and beyond is when the inflation and hyperinflation should hit in full force. At least we will not have to wait long to find out if the 2.3% holds, or not. The answer will be provided over the next couple weeks. 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 7:49 AM:  Wild action today. The yield moved from 2.15% up to 2.23%, then fell on its sword down to 2.15% now back up to 2.18%. Keystone needs the Dramamine. Also may as well look for the heart pills as the day's action ramps up.

SPX 30-Minute Chart 8 and 34 MA Cross Potential Sideways Symmetrical Triangle

The bulls move the 8 MA above the 34 MA at yesterday's open to signal bullish markets for the hours ahead, however, note the reversal on the 8 MA to the downside. The bears need a weak day to move the 8 downwards for a negative 8/34 cross. If the SPX stays under 1660 and lower, the 8 MA will be pulled lower. It is odd to see the shoe on the other foot since the pink circles show how the bulls have beaten back the bears every time a negative cross is attempted, and then even when the bear cross occurs, like last Wednesday, it is short-lived. Perhaps the bears will be the ones that frustrate the bulls moving forward?

Note the sideways triangle vibe that may be developing (thin black lines) where the apex will be coming within the next couple days. The indicators also hint at a squeeze into a sideways move which will likely result in a violent leap higher, or violent collapse lower. The side of the triangle is about 40 handles. The 1666 (for happy bulls) and 1649-1650 level (for happy bears) are key and will indicate which side is winning. A drop under 1650 would target 1610-ish while a move up through 1666 will set sights on 1706. Key S/R is 1687, 1669, 1666, 1649-1650 and 1634. Watch to see if the bears can manage a negative 8/34 cross today. If the broad indexes sell off but the 8 MA does not stab down through the 34 MA, the bears got nothing. 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 Daily Chart Channels

Yesterday's candlestick shows how price ran higher early in the day only to retreat with the close below the halfway point of the candle, typically a bearish indication like the outside reversal day last Wednesday. On the bull side, the Thursday and Friday candlesticks show how price finished higher after spending much of the day lower creating inverted hammers. The thin blue circle did turn out to be a tweezer bottom and the CPC above 1.2 and NYMO at -40 both helped to create the bounce. The erratic action indicates that markets are at an inflection trying to make a firm directional decision but is torn between which way to go.

The stronger volume days remain in place on the sell days while weaker volume occurs on the up days. Distribution is in play again after taking a short hiatus in late April and early May. A proper test of the 20-day MA at 1637.03 has not yet occurred and should be expected moving forward. Watch to see if the stochastics lose the 50% level to indicate price weakness ahead. The 1634-1650 area may see a lot of price action over the next couple days. The brown channels at 1540-1598 and 1634-1669 encompass nearly all the price moves over the last three months. The 1649-1650 level is key and will indicate which side is winning.  Key S/R is 1687, 1669, 1666, 1649-1650 and 1634. 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.

Tuesday, May 28, 2013

Keystone's Midday Market Action 5/28/13

The broad indexes reopen after the holiday weekend and explode higher on the weaker yen. Today would be the 20th consecutive up Tuesday. The dollar/yen is up near 102.50 bouncing from 101.00 last evening, hence, up markets. Consumer Confidence prints a 76 handle not seen since early 2008 adding further upside fuel. Interestingly, the copper and volatility moves are muted. Watch VIX 13.13 and JJC 41.60 today. Both remain in the bear camp despite the big rally on tap. The Dow Industrials are up over 200 points above 15.5K.

Watch to see if the SPX can print a new closing high above 1669.18 today, or not. The 8 MA is above the 34 MA again signaling bullish markets for the hours ahead.  Keybot the Quant remains short, for now, and is looking for the bulls to regain VIX 13.13 or JJC 41.60 before flipping back to the long side. The 10-year yield jumps to 2.10%, the highest levels in one yearfilling the gap from April 2012. The Japan 10-year JGB is up in the 0.90's now moving towards 1.00%. The low TRIN at 0.76 provides the nod to the bulls today. Despite the strong open, the markets remain mixed and erratic.

Note Added 11:03 AM:  Wild action today. The 10-year is now 2.13%. SPX drops under the all-time closing high at 1669.18. VIX 13.77.  JJC 41.15. TRIN 0.75. The RUT prints over 1K again. The utilities sector, UTIL, is weak and the daily chart is continuing with the bear flag pattern discussed a week or two ago. EXC utility is beaten down -7% today. Higher yields hurt utes.  Dollar/yen 102.16 dropping from the 102.50-ish a short while ago, hence, equities leak lower. The direct relationship of the BOJ to equities is obvious. The BOJ and Fed are the markets. Up dollar/yen = weaker yen = higher equities and down dollar/yen = stronger yen = lower equities. Very simply, these are central banker-controlled markets.

Note Added 11:46 AM:  SPX now testing 1666 support. Dollar/yen leaking lower, now at 102.06, so markets leak a bit lower. VIX 13.86 at today's HOD. For such a strong up day, the VIX should have collapsed under 13, instead, it moves higher as the day moves along now flat on the day overall. JJC printing the LOD at 41.07 so volatility and copper are not yet jumping on the bull bus. TRIN 0.71. European markets finished higher. The CPC at 1.26 and NYMO at -40, highlighted on the weekend, appear to have created the near-term bottom, however, a couple days need to play out to sort out the mixed market signals.

Note Added 12:07 PM:  SPX loses 1666 support so bears will try to hold this level as resistance moving forward.

Note Added 2:02 PM:  JJC drops under 41 becoming more bearish moving away from the 41.60 bull-bear line in the sand. Ditto volatility with the VIX now above 14 moving higher to 14.38. Copper and volatility were a tell on today's action as described this morning. TRIN 0.82 remaining bull favorable but up off the lows. Dollar/yen is flat across the 102.20-ish level.  SPX is 1657 moving between the key S/R range at 1649-1650 on the underside and 1666 on the top side. The 8 MA has turned sharply downwards on the 30-minute chart setting up a potential move back to a bearish 8/34 MA cross either at the close today or tomorrow. For now, however, the 8 MA is above the 34 MA continuing to signal bullishness for the hours ahead. Volume is below average today, as usual for an up day, running at about 70% of a day's average expected volume. Some traders must have had one too many beverages on the weekend.

Note Added 5/29/13 at 4:35 AM: Dollar/yen drops under 102 to 101.65 so the U.S. futures are lower with the S&P's -6. The central bankers are the markets. Copper and oil weaker. Gold and silver higher. The 10-year yield is 2.19%; this will require further study this morning.

SPX 30-Minute Chart 8 and 34 MA Cross

The 8 MA runs up through the 34 MA signaling bullish markets for the hours ahead. The bears were only allowed to shine for three days before the bulls took the ball away again. Interestingly, the bottom price action did not occur due to positive divergence. The broad indexes are simply running higher on the weaker yen. The dollar/yen is above 102 now at 102.41. Say no more. The dollar/yen has ran from 101.00 to almost 102.50 in the last 14 hours taking equities higher. The all-time closing high is 1669.16 so this number is important today as well as the all-time high at 1687.18 printed last week. The price action has momentum so prices should remain elevated into and through the lunch hour. Key S/R is 1687, 1669, 1666, 1649-1650 and 1634. 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, May 27, 2013

Keystone's Holiday Weekend Reconnaissance 5/27/13

Happy Memorial Day everyone. Hopefully, everyone is enjoying a day of relaxation and remembrance. Thank you to all service members (and their families) that gave their lives as well as the Vets that served, and serve, in our military.  China's Xi and Li are more open to slower growth to help reduce pollution and improve the environment. Crude oil is weaker on that news. The Nikkei and broader Topix both drop -3.2% this morning on a stronger yen. The dollar/yen dropped under 101 which also directly sent S&P futures from flat to negative four in a heartbeat. The Fed and BOJ are the markets. Dollar/yen down = equities down and dollar/yen up = equities up.

The 8 MA is under the 34 MA on the SPX 30-minute chart signaling bearish markets ahead but, as highlighted previously, the 8 is poised to perform a bullish cross tomorrow morning unless the bears come to play.  The SPX begins at 1650 and the bulls only need to see a smidge of green in the futures before the opening bell and that will light the way higher and confirm a market bounce on tap. The bears need to push under 1637 after the bell to accelerate the downside. A move thorough 1638-1650 is sideways action for Tuesday. VIX 13.13 and JJC 41.73 are key levels affecting market direction negatively right now. If the markets bounce, the bulls need to regain either or both of these levels to prove they have upside juice. If markets bounce but the VIX stays above 13.13 and JJC stays under 41.77, the bulls got nothing and markets will reverse back to the downside. SPX S/R is 1687 (all-time high 1687.18), 1669 (all-time closing high 1669.16), 1666, 1649-1650, 1634, 1626-1627, 1618, 1614 and 1597-1598. May started at 1597.57. The 20-day MA is 1633.71, 200 EMA on the 60-minute is 1622.42 and 50-day MA is 1592.17. All three levels are key.

The CPC and NYMO are at levels where recent market bottoms have occurred, however, the low volume on Friday, and lower volatility, allow for a higher CPC and lower NYMO. The next few days may be epic for markets. Independent on how the markets open tomorrow, Consumer Confidence, one of the key monthly indicators, is released at 10 AM EST and will cause a market pivot, thus, allow the first half hour of trading to play out before a path is set for the day ahead. This initial trading time will also provide insight into the 8/34 MA cross as discussed above. Pay attention to the dollar/yen and the JGB yields. For now, it is time to enjoy more holiday flag-waving, barbecue hot dogs, and of course apple pie.

Note Added 5/28/13 at 5:00 AM:  The dollar/yen jumps above 102 to 102.20 one full point above the 101.20 and tease of 101 last evening. BOJ's Kuroda says 'trust me' which is a signal for a weaker yen so the S&P futures jump to +12 and Dow +103. Dollar/yen higher = yen weaker = equities higher. The BOJ and Fed are the markets. Copper and oil are higher while gold and silver are lower.

Note Added 5/28/13 at 8:02 AM:  TIF beat on earnings maintaining the bullish vibe for today. Dollar/yen remains above 102 so futures remain elevated. S&P's +12.  Dow +104. The 10-year yield is 2.04%.

Note Added 5/28/13 at 9:15 AM:  Dollar/yen 102.10. S&P's +15. Dow +124.  Nasdaq +31. All at the overnight highs. The 10-year yield is 2.05%.

NYMO NYSE McClellan Oscillator Weekly Chart

The NYMO is moving lower in recent days matching levels at where recent market bottoms have occurred. Taking a step back, hence the weekly chart, the longer term and far more significant market tops and bottoms occur at the +80 and -80 levels, respectively. The Fed and BOJ have grossly distorted the markets and price discovery and note how the NYMO has printed in a far more narrow range using +40 and -40 levels to signal near-term tops and bottoms, respectively. Thus, the big question now is that does the current trend remain in place and this area is a logical place for markets to bounce and receive more central banker juice, or, does the longer term picture come back into play, as the central bankers run out of gas, and the NYMO may want to explore far lower values more consistent with the -80 level and lower?

Note how the NYMO prints its low typically about one week or so ahead of where the index price low occurs. The markets are far overdue for a more decent correction than the shallow pull backs this year that result in more Fed and BOJ-induced buying. The story will be written in the days forward. Projection is either a near-term dead-cat market bounce right now off the -40 print to send the NYMO higher to set up another roll over in the week or two ahead, or, the bears come to play as the new week begins tomorrow and drive the SPX back down towards 1600 and lower which would be consistent with a NYMO printing in the -60 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 Versus SPX Daily Charts

The CPC put/call ratio jumps to above 1.20+ on Friday signaling a whiff of panic and fear in the markets not seen for one-year's time. The Fed and BOJ must be losing a bit of luster. The CPC matches the areas where the May-June 2012 and October-November 2012 sell offs occurred and where the market bottoms occurred due to excessive panic and fear. Oddly, it sure did not feel like panic and fear on Friday, it was more of a pre-holiday 'let's start the weekend' vibe trading session with very low holiday volume.  Volatility would be expected to jump higher with the CPC but alas, the VIX dropped to close at 13.99, under 14, the opposite action. Also, there were a couple large put buyers that must be hedging their portfolio's that likely helped catapult the CPC.

But fear is fear and despite the holiday cheer, the CPC says there is a whiff of concern wafting through the air now, perhaps the JGB yields providing the worry. The CPC 1.20 level and higher is a time to start considering scale-ins on the long side, however, the markets are coy right now, for the next couple days, and not tipping their hand. The holiday-shortened trading week may prove quite dramatic. Will a bottom occur at this 1.2-ish level like the February and April lows, or, will the CPC keep moving higher to ratchet up the fear and panic for real, which of course would be in concert with lower equities? Note the dots that show the SPX not printing the bottom until June 2012 when the CPC topped two weeks earlier. The same behavior occurs at the November bottom. Also of interest are the pink boxes. In May 2012, when the CPC jumped above 1.20 that only signaled the half way point lower for the SPX. Price dropped about another 90 handles afte rthe 1.20+ was printed. The SPX is at the same spot now, one year later, at an inflection point where the bears drive markets lower, under 1600 perhaps to print a negative month for May, or, the bears wimp out like the February and April bottoms.

Considering that volatility does not confirm the put/call negativity, and that the pre-holiday light volume and skewed heavy put-buying may have helped create an additional push higher for the CPC, the bears should be given the benefit of the doubt at least into the first half-hour of trading tomorrow morning. The coming days may be quite dramatic for 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.

SPX 30-Minute Chart 8 and 34 MA Cross Channels Sideways Symmetrical Triangle

The bulls finally receive a downside nod when the 8 MA fell under the 34 MA last Wednesday (red circle) signaling bearish markets for the hours ahead. After only three days, however, the 8 MA is already moving higher converging on the 34 MA which is moving lower for a bullish 8/34 cross after the opening bell Tuesday morning. The bears are not allowed to shine due to the Fed and BOJ pumping the equity markets higher. But, the bears are not out of the near-term gain yet; the first couple days of trading this week are very important. The bears need to drive the SPX lower at the opening bell tomorrow to curl the 8 MA to the downside again and resume the market selling. Note the pink circles as price moved higher, each time the bears were ready to create a negative 8/34 cross, the bulls came in to spike the 8 MA higher. Perhaps this time the bears will force the 8 MA lower. The futures ahead of the opening bell are key; the bears will need to see a 3 or 4 handle negative bias, preferably more, to at least stem the tide of the rising 8 MA.

Note the thin black lines that show a sideways symmetrical triangle in play right now and Friday's action touched the top and bottom trend lines. The decision up or down come tomorrow morning is likely very important since it may create a 20 to 25 handle move for the lucky side that wins. A breakout above 1650 would target the 1666 and 1669 resistance levels and the 8 MA would cross above the 34 MA signaling bullish markets ahead. If the bears eat their Wheaties for tomorrow morning, and push under 1647, the 1622-1627 area is targeted. Watch the 8 and 34 MA's to see if the bears keep the ball and run lower, or, if the bulls take the ball back and move higher for a potential M top pattern. 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 Daily Chart Fibonacci Retracements

The four-week up move was a bear killer. The move from 1538 to 1687 is obscene, 150 handles in four weeks (6 handles of upside per trading day for one-month straight!!) courtesy of the central banker easing policies. The Fed and BOJ are the markets.  The blue Fibonacci retracements are based on the closing low and high for the rally while the red Fib's are based on the intraday low and intraday high. Note that price has not tested either 32% Fib which is typically the bare minimum retracement that would be expected. The 32% Fib's are 1629 (red) and 1620 (blue). The 1620 area jives with the 1618 horizontal support. The 1629 is near the strong 1626-1627 support forming a confluence at 1626-1629 as a target support zone. Based on the 32% Fib retracement, a price move lower to the 1618-1629 area is a reasonable expectation. 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 Daily Chart Upward-Sloping Channel Negative Divergence

The brown upward-sloping channel top rail resistance, and negative divergence, spanked price lower a few days ago. Ahead of the holiday weekend on Thursday and Friday, the bears push lower but both days show the candlesticks recovering with plenty of dip-buyers willing to buy the market. The thin small blue circle show a potential tweezer bottom and sets up a dead-cat bounce.  All indicators are weak and bleak wanting to see lower lows print for price even if a bounce occurs. The all-time closing high is 1669.16 so a price bounce to test this 1669 resistance level is not unreasonable, however, further weakness is anticipated.

May started at 1597.57 so another up month will print on Friday unless the bears come to play and drive markets south out of the gate to lose 50 handles in four days and log a negative month under 1600. SPX S/R is 1687, 1669, 1666, 1649-1650, 1634, 1626-1627, 1618, 1614, and 1597-1598. Projection is sideways to sideways lower 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.

SPX Weekly Chart Upward-Sloping Channel Overbot Rising Wedge Negative Divergence

The market bears had the stars aligned in April with price at the top rail of the red channel throwing off negative divergence.  The selling started with a high volume push lower but the Fed and BOJ easy money proves too powerful.  Markets reversed mid-April and catapulted into a parabolic 4-week upside orgy move. The action over the last month produces the rising red wedge and continued negative divergence for the MACD histogram, stochastics and money flow. In addition, the two-year negative divergence remains in place for the weekly chart. The RSI prints the same number at 75-ish as compared to the February 2011 price high, however, the SPX is 200 handles higher. In a strong upward market the RSI needs to print higher highs such as March 2012 to September 2012 to March 2013. There is momentum in the RSI and MACD line so the bulls can muster up another price move higher to perhaps form an M top for the broad indexes.

The month of May has four days remaining and started at the critical 1597-1598 S/R (1597.57) that has yet to be back kissed. The action on Tuesday and Wednesday is key to determine if the bears are going to make a run lower to log a negative month, or not. Obviously, the bulls remain in good shape elevated above the channel. The 1597-1598 support is also where the last large volume week occurred so it is prudent for price to return there to print a new volume candle and see if the bulls or bears are stronger. If the bulls push flat or higher into the EOM on Friday, the test of 1597-1598 should occur in June.  Projection is sideways to sideways lower as the weeks move along. 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, May 26, 2013

Keystone's Key Events and Market Movers for Trading the Week of 5/28/13

Key Dates and Times for the Week Ahead:

·         Keystone’s Comments on the Upcoming Week: Happy Memorial Day and Thank You to all the Veterans. Markets are closed Monday and reopen Tuesday morning so the action in Asia and Europe will provide an early read on the week. Consumer Confidence will pivot markets at 10 AM Tuesday. GDP is important on Thursday morning and Chicago PMI and Sentiment on Friday Morning. Manufacturing data will indicate if the malaise continues in this key sector, or not. TIF and KORS earnings will indicate if the wealthy continue to spend.  Global bellwether JOY will also move markets.  The Sequestration budget cuts create concern over a second half slowdown this year. The Debt Ceiling limit and CR (Continuing Resolution to fund the government) deadlines are pushed into September after Labor Day. Politicians must solve the U.S. fiscal mess during June, July and August, reminiscent of 2011 which did not end so well.  Traders remain complacent since the politicians will always kick the can down the road. Of course, if a stumble occurs, it would impact markets severely. Congress is on a break which is typically a positive for markets. The European debt crisis is ongoing but the BOJ easy money has flooded into European stocks and bonds causing bond yields to drop and create calm. The ECB’s OMT bond-buying program is in place and not fully accessed as yet also creating a faux stability. Merkel (Germany) does not want any nation to exit the euro before her re-election in September but will not care afterwards. The next ECB Rate Decision and Press Conference is 6/6/13.  Draghi lowers rates one-quarter point to 0.5% on 5/2/13 to help the European manufacturing, export and automobile sectors, and compete with the currency debasement ongoing around the world.  The euro should move lower which moves the dollar higher and should move commodities and U.S. equities lower, however, weak commodities are not having an effect on markets due to the Fed and BOJ money-printing.  The China hard versus soft landing saga continues. Copper and commodities have tumbled lower for two months but surprisingly have not created any equity market weakness.  Dr. Copper used to be a valuable market indicator but the Fed and BOJ central banker policies are distorting markets and masking price discovery. The BOJ (Japan) is the single most important bullish influence on markets over the last three months; weaker yen = higher dollar/yen = higher equities while stronger yen = weaker dollar/yen = weaker equities. The equity markets continue to ignore the geopolitical landscape. Syria is out of control with 100,000 dead from this bloody civil war. Israeli airstrikes, U.S. and U.K. evacuations in Libya, Egypt unrest and other trouble is destabilizing the Middle East and Northern Africa regions.  Syria refugee’s flood into Jordan and other neighboring countries unable to handle the huge influx of people. North Korea theatrics keep popping up from time to time. Geopolitical risk is not currently priced into the markets.  Q1 earnings season winds down but TIF and KORS are a key indicator for how the wealthy are spending and will impact the retail sector. Watch XRT and RTH. JOY, a global economic bellwether is the most important earnings release this week.  The theme of companies coming in light on top line revenue continues but traders are focused on the EPS beats and ignoring sales.  A strong economy should show ever increasing revenue numbers, not flat to lower sales. Companies are booking profits by squeezing every last drop of blood from existing employees rather than growing sales. Tech (COMPQ) and small caps are not showing the leadership they had a month ago. The Fed and BOJ easy money continues to create new asset bubbles in dividend stocks, healthcare, staples, utilities (now retreating like a parabolic commodity stock), telecoms, REIT’s, high-yield instruments, home builders and blue chips in general. With the slight elevation of Treasury yields last week (10-year yield over 2%), the interest rate sensitive sectors such as utilities, REIT’s and telecom are hit harder; three sectors that everyone ran into with the Fed and BOJ easy money. Volatility finally makes a move higher last week with the VIX briefly moving above 15, but leaks lower as the week finishes. Higher volatility will keep the selling pressure on equity markets. Lower volatility provides bullish rocket fuel for equities.  VIX 13.13 is key for the week ahead; bulls win with VIX under 13.13 and bears win above VIX 13.13.  Broad market topping and roll over action is anticipated moving forward for the days and weeks ahead.  Last week was the first negative week after the huge upside parabolic rise for four weeks straight. The month of May ends on Friday so a positive month will once again be recorded unless the SPX drops under 1600.  The CPC put/call and NYMO are at levels that indicate a near-term market bounce may occur.  The CPC has not been at these levels since the May 2012 sell off.  Keybot the Quant trading algorithm remains short. Keybot is tracking volatility (watch VIX 13.13) and copper (watch JJC 41.73) as the two most important influences on broad market direction. The next Bradley turn is a major turn on 6/22/13 (Bradley turns do not forecast direction only that a major trend change or melt-up, or melt-down, in markets may occur +/- 7 days around the turn date). Keystone’s Eclipse Indicator targets this period through June as having potential for a significant market selloff. The 4/10/13, and 6/10/13 dates, allowing +/- 2 weeks before and after these dates, are the key windows targeted for a major market pullback. Interestingly, the 4/10/13 date, forecasted months in advance by Keystone, identified the exact market top in April. A major market selloff can occur at anytime forward but the window between 5/27/13 and 6/24/13 is particularly important. Solar flare activity is increasing and may affect electronics, communications and markets as the year moves along. Now through August is set up as an epic period for markets and economic history.


·         Monday, 5/27/13:  U.S. Markets are Closed in Observance of Memorial Day. Earnings: NATR, OTIV, SCLN.

·         Tuesday, 5/28/13:  U.S. Markets Reopen for trading. Case-Shiller House Price Index 9 AM. Richmond Fed Mfg Index and Consumer Confidence 10 AM-market pivot point.  Dallas Fed Mfg Index 10:30 AM. 2-Year Note Auction 1 PM.  Earnings: CSIQ, SDRL, TIF.

·         Wednesday, 5/29/13: Mortgage Applications 7 AM. Fed’s Rosengren speaks 12 PM. 5-Year Note Auction 1 PM. Earnings: BWS, CHS, DSW, TFM, MAGS, KORS, TSL .

·         Thursday, 5/30/13:  Corporate Profits, Jobless Claims and GDP 8:30 AM.  Pending Home Sales 10 AM.  Natty Gas Inventories 10:30 AM. Oil Inventories 11 AM. 7-Year Note Auction 1 PM. Earnings: BIG, CHG, COST, EXPR, FRED, GLNG, GES, JOY, KKD, LGF, MOD, PLL, PANW, SAFM, YGE.

·         Friday, 5/31/13: EOM. Personal Income and Spending 8:30 AM. Fed’s Pianalto speaks 8:45 AM. Chicago PMI 9:45 AM.  Consumer Sentiment 9:55 AM-market pivot point.  Farm Prices 3 PM.  Earnings: ABIO, FRO.

·         Monday, 6/3/13: PMI Mfg Indexes. Construction Spending and ISM Mfg Index 10 AM-market pivot point. New money tends to enter the markets and create buoyancy the first couple days of the month. Earnings:.
·         Tuesday, 6/4/13: Motor Vehicle Sales. International Trade 8:30 AM. Earnings:.
·         Wednesday, 6/5/13: Mortgage Applications 7 AM. ADP Jobs Report 8:15 AM. Productivity and Costs 8:30 AM. ISM Non-Mfg Index and Factory Orders 10 AM.  Oil Inventories 10:30 AM. Beige Book 2 PM-market pivot point. Earnings:.
·         Thursday, 6/6/13: ECB Rate Decision 7:30 AM EST and Draghi Press Conference 8:30 AM. Chain Store Sales. Challenger Job Report 7:30 AM. Jobless Claims 8:30 AM.  Natty Gas Inventories 10:30 AM. Earnings:.
·         Friday, 6/7/13: Monthly Jobs Report 8:30 AM-market pivot point. Consumer Credit 3 PM.  Earnings:.


·         In September:  The Debt Ceiling Limit and CR Continuing Resolution to fund the U.S. government deadlines occur.  Politicians must develop solutions over the summer time reminiscent of 2011 which did not end well.
·         In September:  Merkel (Germany) seeks re-election and will not want Greece or other nations to exit the euro before the election, but will not care afterwards.  Perhaps Greece or other nations, and/or Germany will exit the euro in the future.
·         In Q4 2013:  European bank stress tests will occur.

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

·         On Friday, 1/31/14: Chairman Bernanke’s term ends at the Fed, unless there is news during Q4 2013 that he will stay on. Will Yellen, even more dovish and likely wanting to see QE on steroids, take the reins? Equity bulls will be happy if Yellen receives the nod but bears will be happy if Yellen is not selected.
·         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.