Tuesday, May 14, 2013

Keystone's Morning Wake-Up 5/14/13

Fed's Plosser would like to taper QE and says that lower inflation is not a concern. He is a hawk so the taper comments are no surprise but he may be running cover for Chairman Bernanke, a scholar of the Great Depression, who fears deflation. If the disinflationary and deflationary conditions continue (Keystone's Inflation-Deflation Indicator has signaled deflation in March-April and now signals disinflation in May), the Fed may be hinting to traders in advance to not expect further QE, likely realizing their policies may be doing more harm than good. Or, the statement can be simply taken on face value. The Fed just added the 'increase' word for QE so they will likely not turn immediately around and 'taper'. However, the Fed may be no longer in control and the markets will make the decision.

The dollar/yen is 101.60 moving lower (strengthening yen). German ZEW sentiment is weaker than expected. European social mood in general, as shown by a PEW study, indicates an overall gloomy mood across the pond. The Italy 10-year yield moves above 4%. Interestingly, traders are taking the Fed and BOJ easy money and tripping over themselves buying European stocks and bonds, the riskier the better, thinking they are getting in on a ground-floor opportunity.  As the folks in Brooklyn say, 'good luck wit dat'. Foreigners and outside investors that likely never even set foot on European soil, are investing while the folks living there are depressed about their future. To pile on the gloom, a second SARS case is discovered in France.

X-class solar flares and coronal mass ejections (CME) occur over the last day. The X2.8-class is the largest solar flare of the year thus far so the peak solar cycle this year may be ramping-up. If the ejections hit the earth, electronics, communications, satellites, and of course market functions, may be affected, as well as the human psyche, typically to the negative side, as evidenced by the solar flare that hit earth at the start of the August 2011 crash.

On the happy side, Tuesday's are an up day for markets in 2013 so the bulls will be ready to buy. During OpEx week, a Tuesday market low typically leads to a Wednesday high, however, markets appear very shaky currently. NYMO topped at 60 and is moving lower but the broad indexes have not yet responded negatively. The CPC put/call ratio prints 0.75 one day ago indicating market complacency. The VIX was flat yesterday. The TRIN logs straight eight days of sub one numbers, for the most part, which begs to see a counterbalance to the plus one side which would be in concert with market selling. The BPSPX is over 86 which is signaling a market top just like all prior market tops. The SPXA150R is 92.80 indicating a market top currently and a very comfortable level to short the market. Crude oil drops under 95. The 10-year Treasury yield is flat at 1.91%. Copper and volatility remain the key market drivers currently. Copper is weak this morning. The bulls need JJC 41.92 to receive upside market fuel. The bears need VIX 13.25 to receive downside market fuel.


The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullishness for the hours ahead but watch to see if the 8/34 bear cross occurs today. The market bears need the SPX to remain under the 8 MA at 1633.56 and lower to pull the 8 MA downwards towards the 34 MA. Bulls of course want the party to continue with the 8 above the 34. For the SPX today starting at 1634, bulls need to move above 1636 for an upside party to the 1640's while bears need to move below 1627 to accelerate the downside towards 1618. A move through 1628-1635 is sideways action today.  Markets remain erratic and unstable. Keybot the Quant is long but if the VIX moves above 13.25 and SPX moves under 1627, the algo will likely flip short. JJC 41.92, VIX 13.25 and SPX 1627 and 1636 tell the story today. NFIB Small Business Optimism Index is 7:30 AM. Import and Export Prices are 8:30 AM. The 'Benghazi-gate', 'IRS scandal' and 'Bloomberg Breach' drama's add to the market theatre today.


Note Added 7:51 AM:  David Tepper, Appaloosa Management, appears on business television and repeats his bullishness so the S&P futures turn positive. Tepper, a native Pittsburgh boy, told everyone to buy the market in late 2010 after QE2 was announced, and he turned out to be correct, so the rally was dubbed the 'Tepper Rally'. Tepper announced his bullishness this year as well and he turns out to be correct again.  Now he repeats the bullish talk and says to party-on bulls, so traders are listening and reacting to the positive side. Copper is takin' the pipe.

13 comments:

  1. I can't bear to watch Tepper's sales pitches anymore. Apparently he made a comment about how the economy "feels better". I'm sure that's news to the 40-some million on food stamps. He and the other Wall Street demagogues must be getting more nervous about this rally if they're parading Tepper around again.

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  2. Of course personal narratives do not equate to empirical data, but I'm rather suspicious of the "improved economic data". Over the weekend, I counted 14 foreclosed properties within a quarter mile radius of my home, more than I counted during the "height of the crisis". I also know more people unemployed now than at any point previous. Their educated hard-working people, who simply got kicked in the gut by "the economy". Yes, stocks keeps going up, but I count more shopping centers "going dark" than at any point in the past. The next down town over there's even a street that resembles a ghost town. Everything's closed and all the lots are empty. I'll be the first to admit that perhaps I simply live in the most depressing part of the country. So, it's quite possible that things are getting better elsewhere, just not here. But I tend to remain skeptical when I hear all this talk of new jobs when so many I know personally are unemployed or underemployed.

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  3. Hi Shane, no you are right, which Is whu I do not understand this rally, lots of people struggling to find a job, barely making it to buy food etc.
    So I am confused at this rally, its certainly not helping, I think the job numbers etc are not true.

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  4. KS, You keep telling the spx is overbot tc, but it stilling going up how come?
    We are going to be passing the 100% mark on overbot shortly.

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  5. Yep, markets continue higher on the Fed and BOJ. The dollar/yen is over 102 again, thus weaker yen which boost equities, and also boosted the European market into the close. Markets remain in melt-up mode due to QE. Tepper sure did kick things into gear today. This area should be an inflection right now, next few days will tell a lot. This is a 50-handle melt-up from the 1597-1598 S/R level, it is a big surprise, but that is what the markets are doing. Note the higher volatility.

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    Replies
    1. on S&P 500 1645-1652 is an inflection area... I really doubt that the market will just go straight to 1700 being severely overbought... but who know what are the wonders of low-volume markets?

      V.

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  6. Shane, here in the S.F. Bay Area, there are new tech and housing bubbles: rents are skyrocketing, S.F. is experiencing a massive housing building boom, expensive restaurants are jam-packed, no reservations available, tax receipts are up, it's amazing. My explanation: the top 5% of the US economy are doing very, very well, and where the top 5% and their capital congregate, it's Bubble Economy Redux. Maybe the stock market reflects the euphoria of the top 1% and 5%.

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  7. Yep, the wealthier are wealthier, not so much for middle-class and under. Lots of retail sales earnings are on Thursday so watch JWN to see if the wealthy are continuing to spend, or if it is fading. The wealthy have money in the stock market and see their portfolio's grow as the SPX climbs day after day so they are feeling the wealth effect but average Joe is not, and 25 million remain unemployed or underemployed. Like previous recessions, these folks will be forgotten about over time, however, since this time the levels are huge, 25 million, it is likely a structural problem that will continue and lead to further headaches for the economy and markets.

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  8. Hi V

    I have a number of ftse positions underwater, so I have hedged so stay afloat. I am not sure how much longer to hold on though. Can you recommmend if I should just remain hedged and if so to what level so I can have a plan to dump these shorts. I really don't know what to do atm. My email address is :indrennaicker@yahoo.co.uk

    Kind Regards

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    Replies
    1. I'm sorry but I don't work on FTSE and I don't know this index.
      I don't even know the elliot waves mapping on FTSE at the moment.
      If someone from here can help it might work eith you.
      I simply don't know.
      I'm sorry.
      V.

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  9. Ok thanks V, can you give me for S $ P then please.

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    Replies
    1. Potential turning points are :
      1645-1668 - in this area there is a cluster of fibo projections from lower levels = those should act as multiple resistences.
      or:
      1666 - 1.236 fibo projection wave 5 of 105 points wave 1 started in Nov.12
      or:
      1678-1683 (commonly considered 1680 area) as 1.382 fibo projection wave 5 of 105 points of wave 1 started in Nov.12.

      I really don't understand why someone could short without a downtrend started.... it's not efficient as earnings.

      I prefer to let go some 10-20% of the potential earnings but to have the security of a confirmed uptrend or downtrend. In other words I am a little bit more conservative, I never short an upmovement and I never get long during a downmovement (until it gives signs of bottoming AND(!) reversing)

      ....In elliot waves term I'm a 2nd wave guy :) ... I expect confirmation and never (or almost never) allow myself to frontrun ....

      V.

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    2. According to 80/20 rule, if spx make it to 1680's, it will most likely go to 1720-1728.
      Thank you V for sharing your thoughts!

      Delete

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