Wednesday, May 22, 2013

Keystone's Morning Wake-Up 5/22/13; Chairman Bernanke; FOMC Minutes

Chairman Bernanke testifies this morning at 10 AM EST. Existing Home Sales are at 10 AM so markets will pivot at this time. The FOMC Minutes are at 2 PM so that will create another market pivot. Oil Inventories are at 10:30 AM.  TOL earnings beat so that encourages the housing sector just as HD earnings did yesterday. However, LOW earnings are lackluster, Mortgage Applications are the weakest in months and lumber prices have been collapsing for the last two months. TGT earnings miss and guidance is lowered. HPQ earnings hit after the closing bell so this will affect the tech sector. Copper is up strongly this morning which will help bulls. The BOJ is full steam ahead with QE and a weaker yen so the dollar/yen moves up towards 103 and takes the U.S. futures higher.

Keybot the Quant is in position to flip short and needs to see SPX 1663 and lower today to complete the move, however, the jump in copper will likely ruin the bear's chances. Watch JJC 41.77, VIX 13.11 and GTX 4795, copper, volatility and commodities, respectively. All three are causing market negativity to start the day but that may quickly change at the bell. For the SPX today starting at 1669, the bulls need to touch 1675 and the 1680's will print quickly. The bears need to push under 1663 to accelerate the downside and begin more extended downside action. A move through 1664-1674 is sideways today.  The Fed's Bullard saved the markets yesterday morning. Bernanke and the FOMC Minutes today, if they both continue to pump the virtues of QE, which is very likely, keeps the bid under the market and prevents the downside from occurring. Watch the 8/34 MA cross on the SPX 30-minute chart as highlighted in a previous post. SPX S/R is 1675, 1667-1669, 1661, 1649-1650, 1633-1634 and 1626-1627. The 20-day MA is at 1623.24, and rising, and needs back kissed, identifying the 1624-1627 area as very important support.

Note Added 9:53 AM:  Dollar/yen hits 103 creating equity buoyancy on the cheaper yen. JJC is 42.12 above the 41.79 bull-bear line creating equity lift. VIX is 13.32 remaining bearish above the 13.12 bull-bear line. TRIN is 0.70, another uber low TRIN day which keeps the bulls moving higher. It is remarkable to see the low TRIN numbers day after day with no, or very little, reversion to the plus one side. SPX HOD is 1674.17 heading towards the touch of 1675 that would ignite the upside.

Note Added 10:05 AM:  Chairman Bernanke's remarks remain dovish so SPX hits 1675 and boiinnng, over 1679 in a heartbeat. The Fed is the marketsOddly, VIX remains elevated, the 10-year yield drops to 1.90% and dollar/yen is 102.82. JJC is now up to 42.24 and TRIN is at 0.70 providing the bull fuel. The 10 AM pivot was a launch move for bulls.

Note Added 11:05 AM:  Nutty start to the day, markets are all over the map. Equities retreat when Bernanke mentions a decision on QE may be in weeks (not months) and he would not rule out before Labor Day. Dollar/yen explodes above 103. The 10-year yield falls to 1.90% then jumps to 2.00%.  VIX remains elevated. JJC dropping now at 41.97. TRIN 0.73. It will probably be a wild ride all the way through the FOMC minutes this afternoon. Lois Lerner, at the center of the IRS scandal, pleads the Fifth Amendment refusing to testify so that drama grows.

Note Added 8:28 PM:  The bears finally get a chance.  The mixed signals from the Fed encourages the selling. VIX 13.12 and JJC 41.77 are key. Volatility spiked as highlighted this morning so that provided a hint of today's action. The drop in copper sealed the deal for bears but in the final minutes JJC recovered. Copper is key overnight. Bulls need to see green and bears need to see red since copper will likely dictate market direction at the open.  Today was an outside reversal printing a higher high and ending at a lower low than yesterday. Typically this indicates a trend reversal but more often than not price will sneak higher again.  Volume was robust for this sell day; the strongest volumes since the April top and sell off.  Typically, if a large down day occurs on Wednesday's, markets do not bottom on a Wednesday, and Thursday shows further weakness even if a bounce occurs in the morning. Over the last few months the track record is mixed but a couple years and further back markets would always be weaker on the Thursday after a strong Wednesday sell off. The Fed has distorted the markets in many different ways.  On the bull side, the two days in front of a three-day holiday weekend are typically bullish, also working through the full moon (Friday) the markets are typically buoyant. In a perfect world, with markets following historic norms, the SPX would print a low tomorrow and then move up into the holiday weekend. There is lots to sort out after today's drama. The SPX bounced directly off the 1649-1650 support level. If this fails, 1633-1634 would be targeted. The dollar/yen remains above 103. The 10-year yield jumps to 2.03%. Keystone's Inflation-Deflation Indicator (CRB/10-yr price) is 286/98.375 = 2.91 which indicates ongoing disinflation on the verge of slipping into deflation under 2.90 but this will have to be monitored over the coming days. Thus, the asset relationship of lower yields and lower equities must be watched. HPQ earnings after the bell set a positive tone for tech. If copper is red overnight, the market bears may have some legs.

53 comments:

  1. The Head of FED speaks live in about 15 minutes
    link: http://www.bloomberg.com/live-stream/

    V.

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    1. Bernanke is cleaning the jelly donut stains from his necktie as he prepares to testify.

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  2. How many days do we see the SPX up 15 in the first 40 minutes of trading AND gold up $34 in a parallel rocketshot? Well, this hits V's target zone for the SPX.... there is something very parabolic/bubbly about these huge moves. At this rate, SPX will hit 1700 in a few days--the rubber band just keeps stretching.

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    1. don't chase this up-move - this blow-off move presents the appearence of the end of 3rd of the 5th of the 3rd.

      next is an a-b-c corrective move (4th of the 5th of the 3rd)
      i'm almost 100% sure about that.
      in the asian session HSBC will provide manufacturing PMI for China - that might be the reason for 4th of the 5th of the 3rd.
      have patience and don't get long here - if you're a fast trader, just wait for the corrective move (target 1640's-1650's) for the final 5th of the 5th of the 3rd (1690-1720).
      don't short this 4th of 5th of 3rd - might hurt ! ;)

      if 1640's is not reached than just let it go, keep your eyes on the 5th of the 5th of the 3rd for some shorts for the next big down wave. (in the area 1690-1720 - only after topping pattern appears!!! so don't be tight with only the numeric targets, look also for topping patterns).

      V.

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    2. I am with ya V. (is that V for Vendetta!? ;-) ) Big intra day reversal so far; largest point drop since 5 of 3 started. Now 4 of 5 of 3, then 5 of 5 of 3. May very well be truncated. I have been adding SDS slowly this 5th wave (which surprised me in it's strength). But once 5 of 5 of 3 is done; and thus this whole 3rd wave I expect a 100+ point drop down to mid 1500s. (June gloom); so then my SDS' will be nicely green. I am also selling more long positions now (sold DAL, MWW, F, SBUX)

      ps: note that on the weekly scale, price (SPX) has traded completely outside the upper BB... this has NOT happened in many, many years. Although it shows (great) strength, it also means that price has to move back into the BBs and mostly likely back to the center-line (20w-ma; now at 1557 and rising ) or even lower BB... (now at 1450 and rising)

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    3. :)
      My expectances for the next big wave - 4th - are in 1536-1543 area.
      :)
      V is for 'Valeriu', my name :), but in certain situations for sure V is for Vendetta :D.

      Now we experienced the first wave A of a-b-c (4th of 5th of big 3rd), overnight the asians might hold or lift a little the market (maybe even the US markets might retrace a little in the end for the B wave) . I'm just wondering what will produce the'c' ?
      the chinese PMI ?
      tomorrow's Draghi's speech?
      US data from tomorrow?
      We'll find out! :D

      V.
      p.s. once KS have said that the markets are more interesting than a James Bond (i guess...) movie .. very very true :D

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    4. hey Valeriu! Nice EW-ing! Looks like we're on the same page count wise!

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    5. :) looks like that.
      too bad for those guys that think now to get short in this market now at 1655-1650 on spx = they will be burned tomorrow ....

      target for the 5th of 5th of 3rd = 1690-1720.

      V.

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  3. Elephant, meet door.

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    1. :))))))))))))))))

      V.

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  4. Wild ride thus far today. Volatility remains elevated for the first day in so long it cannot be remembered. JJC pulling back down now at 41.95. These are crazy erratic unstable markets.

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  5. i just love it when the journalists get so hot commenting the reactions of Ben at the question related to QE tappering ...

    http://www.marketwatch.com/story/how-bernanke-blew-it-2013-05-22?link=MW_home_latest_news

    :)

    V.

    p.s. Ben has started this parabola move, this bubble in stocks, Ben should stop it ! If not no0w, later with costs 10x or 100x bigger...

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    1. But, Mr. Bernanke just testified (under oath?) that he sees no bubbles and he believes asset prices are supported by good fundamentals.

      LOL.

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    2. this idea of "good fundamentals" was used and so much used .... even at the most peaks of heights of bubbles ...it's such a large concept...

      at the peaks of heights everybody claws to this idea of "fundamentals" but when a bad news is coming the market still rallies due to QE ...
      not working for eternity that way, honey!

      at a certain moment it just explodes :) ...BANG!

      V.
      p.s. anyway FED is not so good at timing markets - the real estate bubble proved it!

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    3. Mr. Bernanke was specifically questioned about his old wiffed call on the real estate bubble right after he denied the current bubbles. I think the politician replied "these things are difficult to see and predict" or something to that effect.

      LOL.

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    4. politicians' ONLY job is to instill PERCEIVED confidence to the public. There's nothing else to their job. They don't care that the people that vote for them will eventually be the (usual) bag-holders. Because they themselves are the insiders and will know when to exit (right around now...)

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  6. The market is starting to read between the lines of Bernanke's notes, the difference between what he said and what he meant. The days of QE are numbered.

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  7. one more call, let's see if I'm that good again :D
    this presumtive a-b-c metamorphoses in a straight 5 waves down on 15 min chart.
    and calculating the final target of 4th of 5th of 3rd I obtain 1646-1640 on spx 500 (that's aprox. 1642-1636 on ES)
    can't evaluate time - maybe during asian or european markets (today/tomorrow).

    V.

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    1. targets readjusted after the US market close:
      worst case: down to 1640-1646
      best case: down to 1618-1620 (if what we have seen today waves 1-5 forms only 'A', but there's also a 'B' 61.8 retracement and after that a 'C' ='A').

      anyway, medium target: 1620-1640.

      Cheers,
      V.

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  8. Thank you, V, for sharing your estimates. KS and Arnie, do you have any targets you'd be willing to share? My own sense is a retest of the break above 1600 is a good starting place, though I am aware the SPX might bounce off V's target of 1640 first. It would be negative if VIX triggers a buy signal by closing above the bollinger and then back inside tomorrow.

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    1. Charles. I believe -like V.- that we'll bounce of ~1640 (4th wave; hence weird; likely an abc-pattern) and then either up to 1720 (given 80/20 rule and today's trade >1680), OR since that be a 5th of a 5th of a 3rd; it's likely an exhausted wave after an almost 7-month bull, and may very well truncate... Given that this 5th of a 3rd has been (Very) extended; I think a larger draw down then only 4-6% (which is kinda standard otherwise) for the bigger 4th wave is in order (thinking ~10%). This would target mid 1500s. Then a 5th wave up to new highs. At the very least the 1600 level needs to be retested IMHO since the market simply broke through it and never looked back...

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    2. @ Arnie:
      ''At the very least the 1600 level needs to be retested IMHO since the market simply broke through it and never looked back... ''

      Yes, minimum target for the big 4 = 1590-1610 / maximum target for the big 4 = 1536-1543.

      V.

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  9. So Thursday could be another down day, then will pick up in the afternoon to give Friday a bullish day toward Memorial Weekend...what do you think?

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    1. no.
      second half of Thursday bullish (after 11.30 EST - US time, maybe even sooner)
      a 3 days week-end for US is next and market is bullish in front of an extended week-end.

      also I remember KS's rule "80/20's" -> we've seen 1680's today, so 1720 will be checked for sure (if final 5th of 5th of 3rd wave doesn't truncate!).

      V.

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    2. Anon has a point since markets are typically buoyant in front of a holiday weekend as well as the full moon. However, these are wild markets.

      On the 80/20 typically the closing print needs to be in the 80's so the trek from 1680 to 1720 would not yet be on the table.

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  10. I can only assume that Keybot has flipped short, since we have met the previously-stated criteria for flipping short. There's the proverbial whipsaw to lookout for. Cash is king.

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  11. Replies
    1. guess he's busy making money , no?
      V.

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    2. Keystone was out and about playing guitar. Life has priorities. (smile)

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    3. :)
      this is another thing I should learn...a good balance between personal and professional life.
      now I work between 10 and 16 hours/day and in weekends about 5-6 hours/day.
      and this is not so good as it appears.
      always the balanced approaches are better than the extreme approaches.

      thanks KS

      V.

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  12. Hey V, where does this 36 point down move leave us? I thought Bs usually retraced half of As and Cs usually were greater than or equal to As (although I'm basing that off of my rememberance of a few messages Arnie wrote months ago so I could be way off). It doesn't look like a B has occurred yet today, so would/could this 4 bring us considerably lower than the initial 1640 target? Is it possible the 4 of 5 of 3 would end today and not last a full day?

    Thanks as always (KS, Arnie, and V), BK

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    1. I've heard the 10% per cent number brandied about, which would take us considerable lower. I've never been an ET guy though.

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    2. ''Is it possible the 4 of 5 of 3 would end today and not last a full day?''

      Yes, it is possible, on 15 min chart I've observed 3 waves already and a 4th under construction right now.
      So a final down 5th wave is up next (during asian or european session) IF that was the correction (5 waves and that's all). in this case we won't see market much below 1640 (maybe 1638).

      Second opinion: we still have an a-b-c and today we have seen only the 'A' (internally composed of 5 waves). 'B' might be in the asian/european session (61.8% retracement of A) and 'C' in the european/american session (where A=C). In this case "C" might reach 1618-1620 but I think there are less chances for this version to be true.

      I will follow the first version (although the second version might be true)...anyway, it's a 10 points difference, not such a big deal.

      V.

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  13. whoa, all the regulars are back and happy as market turns red. Whow like teenagers waiting to getting laid, after watching Bull porn for weeks. Glad everyone is happy and short, finally you can point to the charts and make excuse why the market sold off today.

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    1. The bulls have a right to some braggadocio and still may not be finished. The move over the last month was really something.

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  14. HPQ up 10% AH on better than expected earnings... was already in the charts! I am long since mid-20s. New Highs here we come!

    ps: HPQ is major component of INDU; this could be our b-wave for tomorrow!?

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    1. HPQ is a tricky one, that is a surprising pop AH's.

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  15. What would be the expected retracement for the 4 (of 4 of 5 of 3)? Sorry, I'm trying to learn EWT in real-time. (Hopefully, in the intermediate term, I'll read a book and learn it in a less fragmented way).

    BK

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    1. 1640 area, but 1649 today may well have been it... hard to tell since 4th waves are often unpredictable.

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    2. I've replied at your previous comment, BK at "AnonymousMay 22, 2013 at 4:03 PM''

      V.

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  16. Hi V

    I have a long from 1629 and a short from 1517.
    Not sure what to do , as the short is underwater.
    Was thinking of leaving the long to run and just cutting the short, but not sure what level to cut the short at?

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    1. @ Anon / 4:46 PM:
      first I have some advices:
      1. the most important thing for a trader is the preservation of his capital.
      you can write this on a 'post-it' and stick it to the monitor of your PC!
      2. From Oscar Carboni (a trader) I've learned a very smart thing: "STOPS ARE IN, EMOTIONS ARE OUT!" :)
      What does this mean?
      Always have a strategy don't buy/sell under the pressure of market.

      Regarding your situation, Arnie is right.
      Don't sell your shorts now, keep them (and use tight stops , strategically and technically thought next time with minimum capital expenditure!).
      This down move will finish in the area 1620-1640 during Thursday, first half of US session, or even since the european session (watch Bullard's speech at 10.00 GMT- that's 5.00 am EST).
      Use this bottom to add some more cheap longs, if you still have cash.
      If you don't, just leave the things as they are, don't sell at a loss your shorts.
      Dump the longs in the 1670-1690-if extended : 1720 area, when topping signs appear (Head and shoulders, double top, ending diagonale, things like that - on the 60 min chart). The money obtained from the selling of longs keep them as cash (I hope that the shorts in your portfolio are not more than 50% of total portfolio).

      To continue the advice I need to know the %structure of your portfolio.
      So: what's the % of longs, the % of shorts and the % of cash now? To think at a strategy you need at least 2 scales interconnected : volume (or concentration) and cost (market level where you have bought).
      You've told me the cost levels, what are the volume-concentration level in your portfolio now?

      I expect your answer,
      V.

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    2. @ Anon:

      ok, Anon, something appeared and I have to take a trip with my wife in another city and there I don't know if I will have internet access - so don't post your % levels anymore.

      Keep in mind a few levels:
      levels that might end this correction - 4th of 5th or 3rd(on SPX 500):
      1642-1648
      or
      1628-1635

      target levels/areas for 5th of 5th of 3rd:
      1680-1687
      1692-1706 (pivot 1699 +/- 7 points)
      if extended : 1720.

      my advice is to load (if you have cash) some cheap longs in the 1630-1645 area and keep those shorts , don't sell them.
      for longs my advice is to exit 1685-1700 area, don't get greedy for 1720. After exiting longs stay in cash, don't load shorts immediately.

      Load full shorts in the area 1690 - 1720 (or higher) ONLY IF (!!!!!!!!!!!!!!!!!!) the technical topping conditions are met , so if a double top or something else that signifies end of 5th of 5th of 3rd emerges.

      As KS multiple times said : CASH IS A POSITION 'per se'. Exiting longs doesn't request automatically loading shorts! ok?
      Load shorts at/beyond 1690-1720 only if the last wave (5th of 5th of 3rd) has 5 internal waves, a topping pattern was observed and market prepares to sell.
      Also, another advice: don't use all your cash in one single round of loading shorts. Why? Because every down wave has a second internal up-'corrective' wave that doesn't get usualy higher that the point of start of wave 1 of the down wave. From a classic point of view, one should load shorts, being secured, only at the top of this 2nd internal up-'corrective' wave.

      So, use only a part of the cash for shorts, keeping also cash for more shorts after the confirmation of this down wave, ok?

      Using all cash for shorts in a certain area (i.e. 1690-1720) exposes you to being completely underwater which is not something to experience.

      For very conservative traders, 'cash' is a form of being short also (by not being long).

      OK, take care, you have the levels to watch for although remember that levels might be relative if overextension/truncation phaenomenons appear.
      Don't get greedy, be balanced in your decisions and always let yourself a door opened!

      V.

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    3. on the other hand , if loading some cheap longs in the 1620-1640 area, don't get too greedy with that if this correction turns into something more meaningful.
      always keep some cash for action.
      V.

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    4. V, you are such a nice kind person, and funny, great to have you around in KS's blog.

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    5. @ A:

      thank you A.
      I've oberved one thing in the day-to-day life.
      everything that's alive - animal, plants, humans, insects, all - have different communicational methods.

      When it comes to humans I've observed that the quality of life of one person gets significantly higher if that person learns to overcome his negative biases, his selfishness, his sadness and his sorrow. Learns to verbally and non-verbally communicate with others. Learns to respect others as a sign of self-esteem.
      And moreover learns to help others in need because nobody is God and the wheel of fortune might turn one day - valid for all humans.

      When you can, it's good to help others without asking for not one single type of reward.
      When we were born we owned nothing, NOTHING!, when we die unfortunately we don't take anything material with us, not even our body.
      So, why not use ADEQUATELY the period between birth and death ? Overcoming the selfishness approaches, the negative approaches, and trying to be more human-like. It doesn't cost anything important!

      In a fewer words: Give and you will be rewarded, when expecting the least! If you give and you deeply expect something , you won't get anything! :D!

      If you're helped, don't reward that person, but as a reward help others in need!

      Cheers,
      V.

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  17. Anon, if I may reply. note: These are SUGGESTIONS!!!

    Keep both, but at different time frames.

    Sell your long in the next few days/week(s). There are namely several possibilities for more upside. 1) Either 4 of 5 of 3 is in, and we're getting 5 of 3; or 2) we're getting an abc for 4 first, then 5... Hard to say at this moment. Regardless some retrace (or new highs, but not necessarily) are to be expected IMHO. Tomorrow may well be a pop-day and it will likely want to revisit the 1670s IMHO. Sell into that strength.

    BUT, keep your shorts for weeks/month and add more from the sale of your longs. That way you average down (or up... ;-) ) to >1517; maybe to high 1500s? Let these then ride out the 5 of 3 wave and they'll be green or close to 0 by the time we'll hit 1600-1550s (weeks from now).

    NOT TRADING ADVICE, BUT A POSSIBLE STRATEGY

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    1. ps: this way you maximize your profit and minimize your loss, possible get a profit on both trades!

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  18. Arnie, did u add more sds this morning?

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    1. nope, will do at the next bounce or wave 5 up

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  19. Interesting day but one day does not mean a whole lot with such a bullish run and bull momo. Note the stronger volume. Also price bounced directly off the 1649-1650 support giving that level serious street cred. If it fails, 1633-1634 is next.

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    1. yup, the bulls won't just fall of the face of the earth in one day... we need to see some more negative divergence to call it a real top; not seeing any yet... especially not on a monthly or weekly time frame...

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