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.


  1. I'm out on all longs, heading 100% in cash and with the peace in my mind into the week-end :) ...
    That triangle looks dubious. 30 minutes ago crossed the resistance and then retraced inside.
    And that's not a good sign at all.
    I'm watching the market, for now.


  2. ks or v., are the charts for lqd positively diverged given the recent selling? Is it in a bullish falling wedge? Or is there more downside ahead for corporate bonds? I'm retired and need the dividend income but the recent drop in price is concerning. Thanks guys for your input.

    1. Don't have a clear opinion, maybe KS can help you.

      p.s. don't take it personally, when I don't know something I don't improvise i simply say : i don't know.

    2. LQD:

      As always you have to make all decisions yourself. LQD has committed hari-kari in May. Keystone has posted this series of charts, corporate's, junk, muni's, etc.., LQD, MUB, HYG, LQD so type those into the search box at the right for further study. The tops have been forming in these for the last half year or more. LQD weekly chart clearly shows the negative divergence that identified the top at 122 and change. Interestingly, the 80/20 rule says 8's lead to 2's so the breach of 118 eventually did provide 122 where it fell on its sword.

      Staying on the weekly, note the RSI with a lower low and dropping but stochastics and histogram would be agreeable to a bounce. However, the money flow is no where near oversold, or the RSI. LQD may form a right shoulder for an H&S pattern, with the neck line in this area at 117-118, where a bounce would occur to say 120-ish then roll over down through the 117-ish to 112.

      The alternate is simply a collapse downward like utilities collapsed. LQD simply does not look attractive. The theme would likely be to exit or short it on the bounces. If not in it, probably best to stay away. The 20-wk MA and 200-day MA is 119-120 so that may have potential for an exit but she may just keep dropping. So if a long term investor and willing to tolerate a drop to say a multi-month move thru 108-112, perhaps to 102-104, then the ride can be taken for a couple years. But if a move to 112, 108, 104 or 102 would not be acceptable and there would be no patience for a drop like that and no patience to hold, then an exit at this level, 117-120 would be considered as well as an exit on any bounce.

  3. 1622-1625 is the target for this down move - to be reached today or on Monday (asian or european session)

    after that 1690-1720.


    1. V, the 200 EMA on the 1-hour chart is 1630.29 in that neighborhood. The 1634 is strong support on the cash, so a break of 1647-1649, which may be occurring now, would want to test 1634, perhaps by then the 200 EMA comes up more so a confluence at 1632-1634 occurs for support, then that would send price to the strong 1626-1627 support if it fails. The downside depends on if UTIL can hold 480.65, or not.

  4. KS,

    This question is presumptuous, gtiven all that you offer freely (and for free) to the public, but would it be possible to have a separate tab or link where your short-term trades are listed as they occur?

    Needless the say, I very grateful for all that you do.


    1. They are. The Positions and Picks page is regularly updated but you have to look at the time and date stamp in yellow to see the last update. All trades are posted as they occur in the morning wake up or midday market action missives, so even if the Positions and Picks page is not updated, you have to read the missives to see if any change occurred in the near term, over the last couple days, between the two it is easy to ascertain all the current status of all picks at all times. For example, SLV and PAAS was exited, but the Positions and Picks page is not yet updated, but if you read the daily commentary you will see that those trades were exited. Usually the weekends serve as times to play catch-up.

  5. Damn it!
    I'm gonna sink in beer in this week-end if my target 1662-1625 is reached in the US session , NOW!

    Anyway it will be reached on ES (SPX futures) , but it depends if the americans, asians or europeans will mark the G point! :)


    1. Are you sure you didn't drink the beer already? I can't figure out what you're saying.

    2. Lollll!!!!!
      I'll go now and prepare my pool full of beer ... swimming, drinking, swimming, drinking :))))))))))))))

      Am I good or what the hack?


    3. @ Anon:
      oh, I figured it out!
      that was 1622-1625, not 1662-1625 ...typo, sorry!
      I was close to the target, anyway the downside is not finished :D!
      Anyway, it was a great day! :)


  6. That was so awesome...who would have's summer time and the market sold off after 5 months of bullishness...start your bear engines we are going to 13000...well maybe for your mind...Next week markets will go back up

  7. The downside all depends on UTIL 480.65 and 477.91. If 481 fails, big problems for markets ahead, if 478 fails, markets will drop through a trap door. So, if bullish, you are fine at UTIL above 481, not so much under here.

    Note the finish on SPX at 1630.74 exactly stopping at Keystone's 60-Minute 200 EMA Cross Indicator where the 200 EMA is 1630.15. Big problems for markets a few pennies lower than today's close. Bulls have to bounce markets on Monday or they got problems.

  8. Can anybody let me know how I can monitor $/yen price on TOS platform or otherwise? Thx.

  9. Just remember next month is a big POMO month--only two days next month are not POMO days -
    It will be interesting to see if the markets continue to sell of or not .

    1. Robert,

      Friday was a 5 bln $ POMO day and you've seen the market action.
      I think this kind or argument doesn't always work.
      It is a 50/50% probability that int.iii from NOv.12 is over.

      A. if this wave iv develops as an A-B-C, we are now in 'C' with a target of 1622.25 .
      B. if this wave iv developed, on Friday presented it's internal wave 3 (in a structure of 5 down impulsive waves) the target for wave 3 of int iv is 1580 with a final target for int iv at 1560 - 1536. (that's a low credit option for me, I don't believe in it).

      A.2 as an option for the first assumtion: it might not be int iv, but only (still!) wave 4 of int iii - in that case target is 1622.26 and after that it's wave 5 of int iii with a target of 1690-1720.

      I pendulate between A and A.2, the option B. (not credited too much by me now) will gain traction if FED cuts QE on it's 18-19 June '13 meeting.

      next week there will be more downside action to 1620's how the market reacts in the 1620-1628 area ...if it plummets at and then bellow 1621 (pivot 1614 + 7 points / pivot 1628 - 7 points) 1580 is the next target and after that 1560 and/or 1523.

      You won't see this market below 1523 until next spring!

      In fact I credit the market below 1591 with less than 10-20% credibility.

      So the 1591-1622 area it's the "war zone" with the information know in the market now.

      Aside from new information (related to FED june decisions , for exemple) I don't think market will get below 1591-1622 area. Maybe the FED's obtained what they wanted: a parabolic market that needed a little downside action to gain support - and they obtained that only with ...words ("we will taper, we will taper")....

      How on Earth they will taper with inflation strongly below the 2% target and with such a bad employment number , I don't know.

      My opinion is that they "speaked-down" the market to prevent something bad "a la 1987" to happen if 1700's or 1800's would have been reached without any down movement support-gainer. A little healthy support.

      As price-time, it would be a surprise for me to see this market below 1620's next week.
      The FED decision will be strongly influenced by the next Friday's employment figures.
      Good/very good employment figures = less QE = down market
      Bad / Very bad employment figures = QE maintained/with perspectives of more QE = up market.
      Neutral employment figures = QE kept at the same levels until better levels achieved = slightly to strongly up market.

      My opinion is that on Monday-Thuesday a lot of bears still alive will put their money in the market on the short side = thus providing short-squeez-fuel for the final wave 5 of int iii (up to 1690-1720 - a cluster of strong multiannual fibo-projected resistances).

      Watch out what you're doing with your money! This market is not free, so watch out what you're doing!


  10. KS et al,

    B. Cowan forecast that a 13 years cycle top (from 2000's top) to be formed around the 20-28 May 13 period. So far, it seemed to be so, as the market has made a double top formation recently. Cowan also forecast that the market should then see a 3 years decline into the 2016-17 time frame.

    Just sharing for awareness.

    1. Timer,

      I know Cowan's work.
      He has provided 5 or 6 period between March an July 2013 for this cyclic top.
      From an astrological point of view, the 21 May "beast cycle top" (the conection between the trine Venus-Earth-Mars and the opposition Uranus-Pluto) should mark a very big TOP (alike the 3 september 1929 top that happened previously to october 1929 market action).

      But you know what?
      It won't happen now!
      We will speak again at 1850-2100 levels during fall/winter 2013!


    2. The 18-year cycle is the most significant cycle to follow. Bear from 1960's into August 1982 when the secular bull launched, and then ran to March 2000. We are still in the secular bear until 2018 then the new secular bull occurs from 2018-2036.

  11. V, dont drink too much beer this weekend, make sure you dont get drunk...stay alert! Get ready for Big Monday!
    Okay, I need to do some homework to catch up!

    Hope everyone have a nice weekend. GL!

    1. :)
      Lol, yesterday I had 2 beers and it was enough!
      Equilibrium in all = that's a good idea!

      Next week will be the bears' moment!
      Useless to reiterate here that ALL THE BEARS that will enter the market next week will be short-squeeze fuel for the final up-thrust wave to 1690-1720.

      Observing the previous years topping action I've seen that every interim. top (so not the Final TOP) has a first top, after that some downside action of 50-100 points, and only after that the interim. top!
      Now we are in the middle of the downside action after the first little top.

      p.s. Do you think that all those banksters will "invite" retailers to make some money by shorting? No.
      They will invite small and medium money holders to short and so the big money to squeeze them! - the "invitation" to The Big Squeeze Party was sent on Friday during the last market hour.
      Of course all the bears will jump on Monday and Thuesday to short.
      And that having ahead the Friday's employement number and FED's decision.
      Wouldn't that be stupid?
      :) LOL!

      p.p.s. I will LOVE shorts when we will be in a bear market! I will glorify short when we will be in a 3rd wave of a bear market!
      That's just not the case now!
      We all should make the difference between what the markets offers to us and what we are seeing it offers to us!


    2. Position disclosure:
      I'm 100% in cash.
      I want to load longs in the 1622 ... 1536 area in 3 or 4 % equal steps.


  12. arnie, what is your wave count after friday's selloff? int. iv underway or minute iv with minute v up to 1700+. v., is today's down move impulsive in wave structure? are you still expecting 1550s or is that too steep a correction? v., do you have a wave count for the emerging markets (eem)? is it in a wave 3 downtrend? ks, can we expect a big bounce on Monday with NYMO below -80 and CPC around 1.2? disclosure: went long at the close (dia).

    1. @ Anon:
      I don't have a count on EEM.

      On SPX, the more softer targets for bears are:1622-1625.
      The medium target for bears: 1580-1590.
      The hardcore targets for bears: 1536-1543.

      Only the soft target (1622-1625) disclose itself as wave 4 of int iii, thus expecting a wave 5 of int iii to 1690-1720 (after that int.iv)

      The medium and hardcore bear targets clearly define int iv underway (with targets at 1580 or 1536-1543), with int iii finished at 1687.

      My option now is for the soft target - I don't think that market will go lower than 1622 without any material action of FED taken.
      Int iv needs 3-5 weeks to develop- thus I don't think we are handling now with a int iv, but with the last pieces of int iii.
      It's my opinion and I might be wrong. On Monday/Tuesday the market will tell me if it's wave 4 of int iii (if 1622-1625 resists) or if it's already int iv started from 1687.

      2 options, 2 paths.... will 1622-1625 resist or not?
      To be or not to be ? That is the question.
      Alternatively: 2 beers or not 2 beers? :D?

      Have a great week-end!

    2. sorry, error detected, being in a rush:
      ''Only the soft target (1622-1625) disclose itself as wave 4 of int iii, thus expecting a wave 5 of int iii to 1690-1720 (after that int.iv)''

      read without ''(after that int.iv)''


  13. Sure, a bounce may occur Monday but it may be more of a dead-cat variety with lower lows to follow after that in the days ahead. Key SPX support/resistance is 1634, then 1626-1627 then 1618, then 1614, then the 1597-1600 level. The interesting thing late Friday is that there were simply no buyers available. Considering the big gains the bulls have enjoyed it is hard to not understand folks running for the exits to lock in the gains that can serve as the entire years profits, taking the year off from here on. Thus, the absence of buyers may create ongoing market weakness.

    Utilities are key. Bulls are fine above UTIL 481. Bears will be happy with more selling occurring if UTIL 481 fails. If UTIL 478 fails, the trap-door opens and the SPX will be headed below 1600.


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