Monday, May 20, 2013

Keystone's Morning Wake-Up and Midday Market Action 5/20/13

Happy Victoria Day for all Canadian friends. The bulls keep beating the bears day after day. Last week the Tepper Rally, lower volatility, lower TRIN, accomodative Fed, MS raising S&P 500 price target to 1750, and upbeat Consumer Sentiment, all created strong market upside. Markets are up four weeks in a row; the SPX moving up at a pace of 30 handles per week, about six handles per day, a phenomenal pace. The economic data this week is not in play until the back half of the week. Next Monday markets are closed for Memorial Day so pre-holiday bullishness may appear on Thursday and Friday this week.

Volatility is the major market influence right now as identified by Keybot the Quant. Watch VIX 13.18. Bulls will continue to drive higher with the VIX under 13.18. Bears will growl with VIX above 13.18. The dollar/yen drops from over 103 on Friday to 102.55 this morning (stronger yen). This places pressure on equities but the futures are flat for the most part. For the SPX today starting at 1667, the bulls only need to see a smidge of green in the futures and that will send the SPX into the 1670's after the opening bell. The bears need to push the SPX under 1652.50 to regain their mojo. A move through 1653-1667 is sideways action today. Watch VIX 13.18 since even if markets sell off, if volatility does not rise, the bears got nothing. Watch the TRIN since the uber low readings day after day, under one, which creates daily bullishness, should subside. Despite weaker manufacturing and other data and weak top line revenue numbers, traders believe the underlying economy is fine, so this helps maintain the market buoyancy. Retail sector earnings are key this week with numerous companies reporting including heavy-hitters such as HD and TGT.


Note Added 10:09 AM:  Interesting start to the day. Volatility launches at the opening bell. The level to watch now is VIX 13.10-13.11. VIX is now printing 13.20 so the market bears are happy by one dime's worth.  The SPX is a hair positive but the higher VIX should send the broad indexes lower, unless of course, the bulls save the day again by jamming volatility lower and allowing markets to recover. TRIN is low again today printing a 0.51 LOD but is moving up to 0.82. Thus, TRIN remains bullish under one. The SPX squeezes out new highs, a HOD at 1668.60using the remaining oomph highlighted in the indicators in the 30-minute chart this morning. This action sets up negative divergence for this few-candle time period (1 to 2 hours). The 2-hour, 1-hour, 30-minute, 15-minute charts are all negatively diverged wanting to see weaker prices moving forward today, however, the bulls keep finding a way.  Dollar/yen is 102.56 and it is surprising that the stronger yen is not creating more market weakness. Chalk it up to good news is good news and bad news is good news. Keybot the Quant is in position to flip to the short side but has to satisfy several programming rules before it can trigger short and one of those is for the SPX to drop under 1653-ish today. So, the beat goes on. Watch VIX 13.10 as the rudder for the markets today.

Note Added 10:29 AM:  VIX 13.10. Bears must decide here, bounce volatility, or die. TRIN at 0.75 keeps the bulls happy.

Note Added 11:04 AM:  VIX 12.94... 12.90... 12.89.  TRIN 0.74. Say no more. SPX printing new all-time highs again. Watch VIX 13.12 as the bull-bear line in the sand moving forward. Bulls are cruising again with the morning POMO pump.

Note Added 12:21 PM:   Market antics continue. VIX 12.94. TRIN 0.73, unbelievable how the TRIN is bullish day after day. Say no more. SPX prints a new all-time high at 1672.84. Keystone took profits on NEM and SLV, one day trades; they both look good moving forward. Will look to reenter. Also added more SPXU, the dangerous and speculative triple X inverse ETF. If VIX stays under 13, the bulls will ride high all day long. VIX 13.12 remains as the bull-bear line in the sand.

Note Added 12:43 PM:  Perhaps the negative divergence on the hourly and minute charts is appearing. VIX is 12.90 and TRIN is 0.77 both firmly bullish so it remains a struggle for bears today. Market pivots have been occurring around 2 PM so watch the 1:50 PM to 2:05 PM area, about one hour from now, for a pivot down if moving up, or, a pivot up if moving down. The 8 MA remains above the 34 MA on the SPX 30-minute chart signaling continued bullishness, however, the 8 MA is 1669, so if the SPX starts to fall under 1669 it will curl the 8 MA to the downside for a potential negative cross in the hours ahead. Time for a slice of apple pie.

Note Added 2:39 PM:  The SPX ventures lower for a LOD at 1663.52 at 2:04 PM. Price now printing the infamous 1666. There is a sneaky pivot area occurring these days between 1:50 PM and 2:05 PM. This is the start of the fifth 65-minute trading segment each day; perhaps it is algo-related. Today markets dropped, then popped, for this 2 PM pivot. Bears do not have a chance with VIX 12.95 and TRIN 0.77. If the bulls keep their foot on volatility's neck, the markets remain elevated. It is interesting to see how the VIX came up to print 13.12-13.13, the exact level identified by Keybot, at 1:46 PM, and then fell on its sword again.

Note Added 2:52 PM:  The SPX, Dow and RUT are all flat. Ditto tech as shown by COMPQ (Nasdaq) and XLK. SOX is negative so chips and tech do not show the continued leadership that surfaced over the last couple weeks as the SPX printed new highs. Note how XLB is outperforming to the upside today and also XLI continues its upside orgy. This tells you that traders continue to chase the materials and industrial sector themes and this helps create overall market buoyancy. The music continues to play and everyone is dancing having a good old time.

Note Added 3:12 PM:  The 10-year yield is 1.96% up a couple ticks from the 1.94% printed early this morning. The 8 MA on the SPX 30-minute chart is 1668.32 so as long as price stays under 1668 the bears can continue to curl the 8 MA down towards the rising 34 MA. If the SPX starts to print above 1668, the broad indexes will rally into the close. VIX 12.98. TRIN 0.70. Bears should be able to push lower into the close into tomorrow with the negative divergence on the hourly and minute charts on their side but volatility will have to get back above VIX 13.12 and the TRIN needs to move up towards one.

Note Added 3:48 PM:  VIX 13.07; bears need five more pennies. TRIN 0.80.  SPX moving sideways at 1666. Copper is very important again and will be tomorrow.

27 comments:

  1. Where do you get this insane VIX level from? Your not close the volatility stabilizing and the market moving higher does not even equate into the same ball park with your 13.10 -20 scenario. Dangerous way to derive

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    1. Keybot the Quant trading algorithm identifies not only the current market trend but also what sector, or sectors, are most in control of the direction of the broad markets at any point in time. Volatility is the key element right now affecting markets, next week it may be utilities, or semi's, or copper, or a myriad of others, or combination of several. Right now it is volatility and volatility alone. The algo is tracking all this and also calculates the bull-bear levels for each continuously, this is why the VIX level was jumping around today. Thus, volatility is the key nowadays, and VIX 13.12 is the line in the sand. So the answer is that it is simply a cog in a big wheel of formulas running in the background. Sit back and relax. If long, you are okay, bulls will remain on easy street, simply watch Keybot. If VIX moves back above 13.12 the algo will start to prepare to flip short.

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  2. after spx 500 hts 1675-1679 and Evans speaks , there are some chances of reversal to 1645-1650 until tomorrow at noon (EST time).
    it's only a possibility, not something certain.
    V.

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  3. Every morning the VIX pops up and the trading bots hesitate, seeking a trend. VIX retreats and the bots start buying.

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  4. A daily killer for bears is the Fed's POMO pumps. Interestingly, the stronger yen does not weaken markets. A weak yen will boost markets, a strong yen does not create weakness. Markets continue to pull the good news tidbits from all the drama and use them as bull fuel ignoring any weak data or news. Another thing that may be happening is that the yen has lost much of its influence now, its affect as a market driver petering out. The way to watch that is if the dollar/yen moves higher again, back up over 103 and more, see if the broad indexes are moving up as well. If not, the yen affects are disappointing, if so then the scenario about traders only following good news applies. These are markets no one has ever seen.

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    1. should be, ......if not, the yen affects are dissipating, ...

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    2. http://www.marketwatch.com/story/yen-up-as-official-says-correction-largely-done-2013-05-20

      a Japanese official talked up the yen today...
      anyway, considering that they've done their job there in Japan, I'd look forward for 105.45-107 for a resistance level and if usd/jpy keeps it's correlation with spx 500 that would signify a coming correction (~10%) in spx 500 from 1680-1710 levels the next 2-3 weeks down to 1510-1530 levels.

      V.

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    3. Yep V, that is what caused the drop in the dollar/yen overnight from 103+ to 102.50-ish. Will be interesting to see if dollar/yen continues higher to the 105+ targets, or not. Sometimes the grass always seem greener on the other side, unitl you get there, perhaps BOJ is thinking that things may have been better off left alone? It should be an interesting couple months ahead.

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    4. ''Sometimes the grass always seem greener on the other side, unitl you get there, perhaps BOJ is thinking that things may have been better off left alone?''

      They have to let the situation as it is for a while... they devalued the yen with -23 or 25% since November until now ...actually they actively devalued the yen months go, but verbally they pounded the table since october-november 2012 about a yen devaluation and the market reacted. So, BOJ executed it's plan in a somewhat cheaper way :).
      Arnie was right, a correction is needed and will be in spx 500 (from 1680-1710, that area +/- 5 points) . Now the question is if it will be the soft version (-5-6%) or the "hard" (LOL) version (-10-12%).... I, as Arnie, pick the -10% correction version (down to 1510-1535 area) , but who knows?
      :)
      V.

      p.s. I don't think BOJ will let the yen just "alone" ... it would evaluate back :) and BOJ doesn't want that for sure. But they have to take a break(2-3 months minimum), not one single mature economy (as Japan's is) can take without some negative structural side effects a depreciation of -25% in 6 months on it's own currency.

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    5. V, that comment was in reference to the BOJ debasement from November to now, and they hit the afterburners in February and then in the first week of April as well. So that is where we sit now with dollar/yen at 102.50-ish after rising from well under 100 (higher dollar/yen = weaker yen). What was meant, that even though Japan is in a deflationary funk for the last two decades, that may seem like nirvana as compared to the monster problems they may have created in their bond market as well as global markets as a result of their new actions. If the BOJ actions send global currency, equity and bond markets into disarray, they may long for the slow steady days of deflation. Japan may be the one that causes the gears to seize. When dollar/yen rises, we will have to watch to see if equities continue to rise.

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    6. ''When dollar/yen rises, we will have to watch to see if equities continue to rise.''

      very interesting, yes, indeed...

      V.

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  5. So obvious that will all sell off in August like 2 years ago. Until then sideways and up and don moves of 0-50 on the Dow.

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  6. After such a long up-trend I'll load some shorts in the 1680-1705 area to be reached in 5-15 trading days / stop loss= 1715 / profit marking points = a. 40% @ 1590-1610 / b. 60% @ 1536 - 1545/ loading 100% longs @ 1555->1536 in 3 equal volumes (of 33.33%...of 0.01% I'll take a beer ! LOL! :D)

    After that ... another boring up-trend until 1800-1815, so be prepared, ok? :D?

    Cheers,
    V.

    p.s. I thought to note those thoughts here, maybe there are persons that might feel helped by those thoughts. :)
    Learn to share! :) That's how someone's getting rich! By sharing! :)

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    1. V, a good thing to watch will be the CPC put/call. It moves higher when markets sell off; when CPC moves above 1.20+ that will be a good tool to identify a market bottom where scale-ins for longs could occur.

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    2. Thank you, KS, :)

      V.

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  7. Anyone else watching gold take off--+$34 as I type. Woah. Is this "the bottom" or short-covering....? I was expecting a test of $1320, maybe we won't get it. Any opinions/TA views would be greatly appreciated.

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    1. Gold and silver COT charts are pointing to some continued upside ahead. Miners are beaten down and most positively diverged. Everyone is chasing markets higher, especially dividend stocks. Poking around with metals, miners, and say, shippers, may be a possible path for the weeks and months forward.

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  8. At one point earlier today, the SPX was over 100 points higher from when Keybot last went long. Congratulations, KS. I remember there was quite a lot of abuse earlier in the year because of the frequent whipsaws. But that's quite a return for those who've used Keybot as one of their guides.

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    1. Keybot is always the smart one, Keystone the dumb one. LOL Too bad Keybot was not in a 2x ETF for this move; it was not due to the whipsaws which is required to reduce risk but when the flip to the downside occurs anytime forward, Keybot will flip into SDS. VIX and JJC will be important tomorrow as the two key gauges for market direction; VIX 13.12 and JJC 41.76 are the bull-bear levels. Volatility is creating market bullishness at 13.03 and JJC is creating bearishness at 41.68. Tomorrow may be a key market day and volatility and copper will tell the story. All Tuesday's have been up; is everyone banking on that and perhaps tomorrow the law of averages returns?

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    2. you're not dumb under no circumstances and you (and all) know that.
      look at that: http://www.marketwatch.com/story/moodys-could-downgrade-us-debt-in-2013-report-2013-05-20?link=MW_home_latest_news

      that's due for the period ending July to ending August 2013....
      :)
      V.

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  9. biggest mistakes today were the miner, I have no idea what I was waiting for, maybe not enough coffee, the second leg down after the opening drop and rise was the signal. I fell asleep and missed it. Sometimes psychological abuse is more powerful than anything and the miners have screwed with the brain as of late no doubt.

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    1. There will be plenty of fits and starts so plenty of opportunities in the miner area moving forward. Gold and silver retreating again today which may create opportunities today (Tuesday).

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  10. http://caldaro.wordpress.com/2013/05/20/the-feds-monetary-base-update/

    an interesting view of Tony Caldaro regarding the use of elliot waves and fibo projections related to the expansion of FED's monetary base.
    I have to note that Keystone, Caldaro and Pretzel are my tier top 3 info sources all around the web - Pretzel for his techniques and for the intuitional sense of market on short, medium and long term, Caldaro for his masterful use of elliot and fibo techniques and KS for his great comprehensive, integrated, organic-relational, use of relations between specific technical indicators, commodities and stocks indexes. 3 great masterful teachers! :)

    In this case (the link posted here) it's clear that the idea is a speculation and should not be taken and considered "ad litteram" - as it is, doubtless. But it's still a very interesting projective view.

    Cheers!

    V.

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  11. oopsie daisy! ...M1 class solar explosion during 20 May - will hit the Earth the next day (21 May)
    http://www.spaceweather.com/

    from the link : "A new sunspot is approaching. For the past two days it has been crackling with flares and hurling material over the sun's northeast limb. NASA's Solar Dynamics Observatory photographed these glowing magnetic loops marking the spot of an M1-class explosion during the early hours of May 20th. The sunspot is on the sun's farside now, but solar rotation is carrying it in our direction. It a day or so it will emerge into view over the sun's eastern limb. Then, forecasters can evaluate its magnetic field and potential for additional flares. Stay tuned."

    Lol, I've told you last week KS that God listen to my prays :).
    :)
    The best fact is that the point that generated that solar explosion (flare generator) is for the moment on the other side of the Sun, but as Sun also rotates around it's own center in a 27 Earth-days cycle, the scientists will evaluate it's potential only when the Sun "will turn it's face" toward us :).
    So, for now, there are signs of a M-type explosion, but surprises are not excluded.


    V.


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    1. Interesting stuff. The spot on the sun most active is turning this towards the earth as you mention and Marlowe had mentioned previously. So the next few days will be interesting. The X flares are the big ones, M's are not as strong and typically will not do much. The X's are key.

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