Tuesday, May 21, 2013

Keystone's Morning Wake-Up and Midday Market Action 5/21/13

Volatility, copper and commodities are the key market drivers today. Watch VIX 13.12, JJC 41.76 and GTX 4800. Volatility is now helping the bulls while copper and commodities are in the bear camp. To keep things straight forward and simple, if the VIX stays under 13.12 and the JJC moves above 41.76, the bulls will rule the day and new all-time highs are on the way once again. If JJC stays under 41.76 and VIX moves above 13.12, the bears will have their turn. Copper was down a few hours ago but has strongly rebounded and is now running higher so that will send the JJC higher giving the bulls the nod. All Tuesday's are up days as well so the good news keeps on coming for market bulls. There is no economic data today so the HD earnings are key for setting the market tone and they hit the ball out of the park. This creates market lift especially since HD is a Dow component. As a rule of thumb, multiply any Dow component move by 8 and that is the contribution that stock makes to the Dow overall.  For example, HD closed at 76.76 so say it moves up 4 today to 80.76. Thus, 4 times 8 is 32 so HD will create 32 positive Dow points today just on its own.

The 8 MA remains above the 34 MA on the SPX 30-minute chart signaling continued bullishness for the hours ahead but the 8 MA is curled over to the downside moving toward the 34 MA for a potential negative cross. The bulls need a strong upside open to curl the 8 MA upwards again and keep the drunken bullish party going. The 8 MA is 1668 so bulls win above 1668 and higher, bears win below 1668 and moving lower. SPX S/R is 1673, 1667-1668, 1661, 1649-1650 and 1633-1634. For the SPX today starting at 1666, creating a new all-time high at 1672.84 yesterday, but not a new all-time closing high, the bulls need to touch the 1673 handle and it is off to the races higher once again with the SPX setting sites on 1680.  The bears need to push under 1664 to accelerate the downside immediately to 1661 support and likely lower. A move through 1665-1672 is sideways action today.

The bulls will sing a happy tune with JJC moving above 41.76 and SPX above 1673. The bears will sing a happy tune if the VIX moves above 13.12 and the SPX drops under 1664, which also would be in concert with Keybot the Quant flipping to the short side. At this writing, the futures are up a smidge and copper is moving higher, thus, looks like the bulls will at least start the day with Dr. Copper leading the way higher. The SPX hourly and minute charts continue to set up and display negative divergence so any new price highs should lead to weakness and roll over, however, if Chairman Bernanke or any Fed head so much as coughs, and it sounds like QE, markets will run higher. Boiling it down to the bare bones parameters, bulls win with with JJC above 41.76. Bears win with VIX above 13.12 and the 8 MA stabbing down through the 34 MA on the SPX 30-minute chart. The 10-year Treasury yield is 1.97% moving up from 1.95% giving the nod to the bulls today.

Note Added 9:59 AM:  The bulls win the day so far with copper moving higher, however, JJC is dancing to and fro around the 41.77 bull-bear line so this drama will need to play out today. Ditto the VIX now at 13.01 only eleven cents under the 13.12 bull-bear line in the sand. Markets can go either way today. The 10-year yield is up a tick to 1.99% giving the bulls a thumbs up. HD is up 1.8 points so 1.8 times 8 is 14.4 so HD alone is responsible for 14 of the Dow 52 positive points today. TRIN is 0.92 helping bulls by a smidge. SPX HOD is 1671.99 one point from the 1673 that will create a stronger upside move. Markets may walk the tightrope created by JJC 41.77 and VIX 13.12 until the Fed heads provide direction today.

Note Added 3:09 PM:  Volatility and copper rule the day today with lots of drama around VIX 13.12 and JJC 41.77. Keybot the Quant was a hair away from flipping short this morning but remains long. Keybot is in position to go short right now but the internal programming rules are not lining up properly to trigger the short side. VIX is above 13.12 and JJC is under 41.77 so both are in the bear camp causing market negativity. Keybot will flip short if the SPX drops under 1663 and holds it for five minutes, otherwise, Keybot will remain long through the closing bell. TRIN is 0.95 favoring bulls by a smidge. The 10-year yield drops to 1.94% so the slight move lower in yield is equity bear friendly. The SPX touched the 1673 handle which popped price to a new all-time high at 1674.93 before retreating. An upside acceleration should occur once 1673 was touched but has not, as yet, so this hints that the upside may be running out of gas. Watch VIX 13.12. Bears need to move under 1663 or they will fall short again after having the markets delivered on a silver platter today. The Fed saved the day again; Bullard in the morning when the markets were tanking, and Dudley in the afternoon to add the gusto for the SPX to print above 1673 since both are pumping the virtues of QE. The 8 MA remains above the 34 MA on the SPX 30-minute chart continuing to give the bulls the thumbs up for the hours ahead.

Note Added 3:23 PM:  JJC 41.42. VIX 13.27.  GTX 4729. TRIN 0.96. SPX 1671.47. The bears are set, all they need is the SPX to drop under 1663 to change the market trend.

Note Added 3:50 PM:  JJC 41.38. VIX 13.33 showing upside spunk. GTX 4730. TRIN 1.05. SPX 1669.14. The 10-year yield is 1.93%. Bears are not pushing hard enough. Tuesday's remain bull-friendly again.

25 comments:

  1. KS,

    Do you have any thoughts on MCP? re-entry short, or long-term buy, knowing that all trading decisions remain my responsibility!

    thanks,

    TW

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    1. That's funny TW, you already knew the schpeal Keystone would preface things with. April was the time to speculate in MCP with the positive divergence setting up. Weekly chart is long and strong so it remains attractive on the weekly basis but the daily chart is negatively diverged with today's price high. There's a large gap left behind at 6 also a small one at 5.10. The 8 level would be a big breakout move targeting 11+. MCP may be a potential long entry at 6, if it pulls back that far. The initial dough off the April bottom was already made. It is attractive longer term so if anyone has a multi-week and multi-month outlook, a scale-in on the long side may be a possibility.

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    2. thanks, KS!

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    3. KS, I am trading MCP, and today threw a wrench in my EW count; given the pop and drop today... However, the big 30+% up day, followed by a higher high the next day and then drop may have been wave 3, 4, and 5 of bigger 1. Then a 2nd wave down to 6.36 to finish bigger 2 (~50% retrace), but can have been A of 2, today end of B of 2 or wave 1 of bigger 3... Hard to say. Yesterday's 10% up did look very impulsive to the upside though with today's high as a 5th wave. Today's decline looks also like a decent abc, where a is down from HOD to 7.27, the (flattish) b to 7.52 and then c down into the close.

      so imho the jury is still out there, but longer term (weeks - months) this is looking good IMHO

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  2. At this rate (100 pts/month), the SP500 will be 2400 by the end of this year.

    LOL.

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    1. Yep. GS says this morning that 1750 is on tap this year, 1900 next year and 2100 in 2015. This helps the bulls along with the Fed today. On Friday, MS pumped the 1750 target which created upside. Bears have it on a silver platter today but cannot convert. Bears need SPX 1663 and lower today to start doing downside damage.

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    2. it's just the fifth wave of the 3'rd (the one from novemebr 2012) still extending.
      this fifth wave for the moment is extending. for the internal 4th of the 4th of the big 3rd it should revisit 1640's-1650 and than the final 5 th of 5th of 3rd (end the end of the november'12 up move) ending God knows where .... probably in the 1690-1720 area (due to present extension of the 3rd of the 5th of the 3rd).

      so simplifing: maybe up some more... than down (1640's-1650's) than up near 1700 (or around 1700 +/- 10 points, something like that).

      Cheers,
      V.
      p.s. the next down wave (if the one from nov'12 is 3rd, this one will be corrective down 4th) was 2 targets: 1590-1600 (primary target) and/or 1536-1543 (secondary target). You won't see the 4th below 1536.

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    3. typo error:
      ''for the internal 4th of the 4th of the big 3rd it should revisit 1640's-1650 ''

      for the internal 4th of the 5th of the big 3rd it should revisit 1460's-1650's"

      so...don't get long here!
      generally, getting long in the second part of any 5th wave includes a lot of risks.
      use the last part (the 5th of the 5th of the 3rd wave the one from 1650's to max. 1720) to load some shorts if you really want to... better in the 1690-1720 area...it's the most safe area for getting short.

      V.

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    4. Hi V, I'm a bit confused and trying to clarify.
      So the 5th of 3rd still extending, then the internal 4th of 5th may revisit 1650's, then final 5th will end some where ~ mid 1700's.
      Basically we are assuming the above will happen sometimes within this week or next before an actual correction to 1590's or about 5% correction. We then look at the CPC put/call above 1.20+ to scale-in longs according to KS. Am I right?

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    5. @ A:
      Basically, yes.
      the final 5th of 3rd might not reach mid-1700's.
      I think it's target might be in the 1690-1720 area (a cluster of 4 multiannual resistance pivot given by various fibo projections from previous peaks).

      also, I did's noted that the 4th of 5th 'should' reach 1640's-1650's but you have to remember that 4'th are the most weird and unpredictable waves ...

      And the most important thing: ALL targets are subject for change (because they are a product of different fibo projections). If 3rd of 5th really extend awfully then you have to know that all other targets (4th of 5th and 5th of 5th WILL CHANGE!!!).
      4th of 5th and 5th of 5th are derived of the projection of a 3rd of 5th in the 1675-1679 area (1.618 fibo projection of wave 1). If 3rd of 5th really tursn crazi and shoots to, let's say, 2.618 fibo projection than , logicallym 4th of 5th and 5th of 5th will be positivelly affected!!!
      So take what I've wrote in the previous messages with a big grain of salt!
      The target is not to try to short the 4th of 5th or an even worse idea, try to go long in the final part of this uptrend from Nov'12 - going long in the 5th of 5th - that might truncate or extend for exemple -. The target is to follow the final upthrust of 5th of 5th for some shorts (now projected in the 1690-1720 area, but subject to change).

      I know that what I've wrote in this message might seem SOOOOOO relative but it is what it is. Instead of telling you :" ok, go long here, or go short here" I'm telling you all the possibilities to be aware in real time trading of all the possibilities.

      During 5th of 5th follow the signs of a topping pattern: general negative divergences on RSI (5 and 14, mostly on 14), MACD, slow/fast Stochastics, follow the daily volumes, follow CPC, follow NYMO (above +40-50), follow Nysi (above 1225-1250-1275 maybe 1300 if those bulls turns crazy), and of course folow topping patterns : double tops , head and shoulders and/or ending diagonales with an exhaustion pattern(on 60 min and 5 hours charts).
      Also follow closely the volumes of longs versus shorts (using $cpce )..usually at the end of the big 3rd waves )like this one from Nov'12 shorts usually throw massively the towel - thus offering final upthrust for 5th of 5th of 3rd.

      My road map for the future big 4th is an ABC (i might be dead wrong , but this is my projection now) where A should go down to 1590-1610 (from aprox. 1680-1699-maybe 1720), than B should correctively go up (target undetermined) than C will finally go down to 1536-1545 area).

      After that there will be the "retailers" up wave : the big 5th up to 1800-1850.

      Cheers,
      take care,
      V.

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    6. @ A:

      Also, regarding time: yes, I've said 2 weeks.
      But as always the price targets prevail to time targets. Only in financial astrology time prevails to price targets and I don't recommend financial astrology as the main instrument.

      It might be 1 week, or 2, or 3 or 4.... the main idea is that this very strong uptrend from Nov'12 is very close to an end.

      Watch the FED's minutes today as well as the "Great Beard" Bennie speech today. Might produce some turnings!

      V.

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    7. @ A:
      also take a look on that :
      https://www.elliottwavetrader.net/marketupdate/Market-Has-Not-Topped-Yet-20130507569843.html
      it's Avi Gilburt's view, close to my view.
      on his chart you may ignore the time targets (not too right), but you may pay attention to price targets.
      He defines the end of 3rd of 5th by the break of 1660ES and 1653ES (ES stand for E-mini-a product that follows futures on spx 500) - to those targets add 3-5 points to obtain the cash price - the SPX 500 levels. So, on SPX those supports would be 1663-1665 to 1656-1658.

      With Avi Gilburt you have to pay attention - generally he is a good to very good elliotician but lately he had some unobjective bearish biases and missed lately 4 times his projections (during last 4-5 weeks). That doesn't makes him an idiot. He is a good technician. But take what he say (as always, not only in his case) with the classic big grain of salt.
      V.

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    8. Nice EW work V! Impressive. I have this 3rd of a 3rd of a 3rd also top at ~SPX 1690. Possibly higher. NYSE should hit the 2.0x extension at ~9715. Then bigger 4th wave then expected; since this 5th of the 3rd wave was so extended. At least 1600 as that significant breakout level needs to be retested IMHO. Maybe even as low at mid 1500s... Then 5th of 3rd up to mid 1700s IMHO. After that... dunno to far away in the future.

      I can also HIGHLY recommend tony caldaro: http://caldaro.wordpress.com/
      and pretzel: pretzelcharts.com

      Together with Avi, these are all very good EW-ers. Tony has been nailing this market since 2011 dead-on... BULL market. Once this ends will see a fast a deep decline to 800-1000 region before next bull market starts. But now we're talking 2-3yrs down the road... so let's not go that far ;-)

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    9. @ Arnie:
      ''Once this ends will see a fast a deep decline to 800-1000 region before next bull market starts. But now we're talking 2-3yrs down the road''
      Not quite ...
      I project this decline in the first half of next year (2014) sometime between March and June.

      Thank you for your kind words, I'm not that good. I'm better than 6 month ago but my whole experience is below 1 year! (9 months, something like that) So, I'm not that good... I'm somwhere between junk and rubbish! :D

      After 5 years or 10 years of intensive work I might be good, now I'm not! I have so much more to learn. All I want is to keep up the speed of learning and even learn at a faster pace!
      I've wrote here in a previous message that KS, Pretzel and Caldaro are my silent long-distance teachers. :). But I have so so so much to learn! I am trying to develop something new in trading techniques not just making money.
      Of course, making money would cover my living costs (i do trading for living, not working anymore for others, but for myself).
      But my target (for the moment) is to discover an integrated new method based of EW and Gann price-time ratio.
      But this is a medium-long term project, it might not produce anything, but I'm trying.

      V.

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    10. Thanks V and Arnie for all the explanations and suggestions.
      Also, thanks to KS for gathering all the smart professional traders on this blog to share knowledge.

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    11. @ Arnie:
      ''I project this decline in the first half of next year (2014) sometime between March and June. ''

      .. one more thing: between march and june '2014 will be the kick-off , the start, of this decline - it will be "executed" in 9 to 12 months (the duration of this next bear market).

      V.

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    12. @ A:
      :)
      Happy to help ! :)
      I'm not smart professional trader :))))))))))))))! I just assessed myself "between junk and rubbish!" :D!
      Arnie and KS are smart and professional traders. :)
      I'm just an young punk (although I'm 31 years...I'm young in my heart :D ) that has still a lot to learn ! lol! :)

      V.

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  3. Hi KS, which one is more commonly used, CPC or CPCE put/call charts, because they both have a different ratio? Thanks!

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    1. Keystone prefers CPC using the 0.7's as a top call in the market and the 1.20+ and higher as the bottom call for markets but both are equally good.

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  4. KS or MCAP, Please comment on JO, it's down 2.5% today, is this a good entry point? Thank you.

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    1. JO has some downside momo in recent days, heck of a drop. Weekly chart very favorable. JO remains attractive as a scale-in long and Keystone continues to think coffee will be the fave commodity moving forward and move up over many months forward like when natty gas washed out over one month ago.

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  5. KS, $BPSPX hits an even 90. Check out its chart. Now those are some overbought indicators!

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    1. It is remarkable to watch. The Fed is the markets right now. Maybe they lose control? Watch Japan JGB yields as another trouble area.

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  6. @ KS:
    a hint ;)
    take a look at boillinger band on VIX- daily chart- they are tighting, are narrowing = an important move might come - up or down, I don't know, but the move will be important.

    V.

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    1. That is something V. Yep, there should be a large move coming. If the technicals win, it should be up VIX down markets but with the Fed on tap today, Bernanke may create a collapse in volatility and more market upside. Looks like the next few days will tell a lot.

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