Thursday, May 23, 2013

Keystone's Morning Wake-Up 5/23/13

Global cascading events occur after yesterday's sell off in the States. Japan's JGB 10-year bond yield jumps to 1% before pulling back to 0.86%. Nikkei Index crashes -7.3% and the Topix is down -6.9%, the worst falls since the tragic earthquake and tsunami in March 2011. The dollar/yen hit 103.74 and collapsed to under 101 overnight now at 101.74. Piling on more negativity, China manufacturing contracts, dropping under the 50% level. European manufacturing data remains weak as well. European auto stocks are slapped -5%. European stocks are down from -1 to -2%. Copper is taking the pipe this morning and this should sustain overall market weakness. S&P futures are down about -16 and Dow futures off about -120.

For today, watch JJC 41.77 where price should easily print far below judging by the overnight move. Watch VIX 13.12. Bears will continue to growl above 13.12.  For the SPX starting at 1655, the bears need to push under the strong 1649-1650 support, if so, a test at 1633-1634 should be on tap. SPX S/R is 1687, 1680, 1675, 1667-1669, 1661, 1649-1650, 1633-1634 and 1626-1627. The 8 MA is below the 34 MA on the 30-minute chart signaling bearishness ahead but the SPX is above the 200 EMA at 1618.81 on the 60-minute chart signaling continued bullishness ahead. Play these two off each other. Market bears will drive markets far lower if the 200 EMA fails while the bulls will return to easy street if they push the 8 back above the 34 MA on the 30-minute chart. Pay attention to the 20-day MA at 1627.07 and rising.

New Home Sales are at 10 AM so a market pivot may occur. Also watch the ongoing daily pivots at the 2 PM EST time. Natty Gas Inventories are 10:30 AM. Kansas City Mfg Index is 11 AM. A 10-Year TIPS auction goes off at 1 PM. Markets typically print lower lows on a Thursday after a strong Wednesday sell off which appears to be the scenario this morning. Markets are bullish in front of the two-day holiday weekend which is today and tomorrow. Markets also tend to be bullish through the full moon which is tomorrow. These seasonality-type indicators, however, take a back seat to this ongoing market drama. In addition, many traders will likely run in to buy the initial low this morning anticipating a happier recovery into the Memorial Day weekend so that may not be the time to bite for a quickie long trade. Perhaps a better near-term low ahead of the weekend will be placed as the day plays out.

Note Added 9:35 AM: Utilities are having a mini-crash event, UTIL down -14% to 446. Something is going on there.  Traders must anticipate higher yields ahead which will hurt utes, REIT's and telecom. Financials down -2%. SPX is dropping to test the 1633-1634 support. VIX 14.96.  JJC 40.58. TRIN 1.23. The TRIN finally prints above one on the bear side. Interestingly, a 1.23 number is tame and not reflective of a panic (2, 3, 4 and higher) which encourages steady-eddy selling moving forward rather than a quick wash-out.

Note Added 9:43 AM:  AEP and NEE utilities are halted due to order imbalances. The utilities sector is experiencing a mini flash crash. The robots and algorithms are acting up.  Here's the recovery, UTIL now -1.3%.

Note Added 9:53 AM:  AEP resumes trading. UTIL is -1.5% with things returning to normal. The mini flash crash events continue to occur with frequency. SPX LOD is 1635.53 thus far.  VIX is above 15. TRIN 1.05 almost neutral. SPX is 1638.26 bouncing off the initial low. Keystone bot JO, a long coffee ETF, opening a new long position.

Note Added 10:07 AM:  SPX continues to recover off the LOD now at 1641.40.  Keystone took profits on TLL, the short telecom ETF, exiting the position. Will look to reenter. Also bot SLV, a long silver ETF, opening a new long position. Also added more XLV shorts to this ongoing short health care trade.

Note Added 10:14 AM:  The SPX 20-day MA is now at 1630.05 so a back kiss of this key moving average is a distinct possibility today. SPX continues to recover tapping on 1646. VIX 14.64. TRIN 0.97. The drop in TRIN sending SPX higher. UTIL remains under 500 today and is now below the 50-day MA playing out the bear flag highlighted the other day. Type 'UTIL' into the search box at the right to bring up that chart for further study.

Note Added 11:09 AM:  VIX 14.21 leaking lower but continuing to cause market negativity above 13.12. JJC is 40.69 far below the 41.77 bull-bear line causing negativity. Watch UTIL 481 as a bull-bear line in the sand. UTIL is at 497 on the bull side but a drop under 481 will increase market negativity. TRIN is 0.89 which helps the bulls recover after the initial drop. Bears need the TRIN back above one, if so, the markets will leak lower again. The lower numbers on Thursday after a strong Wednesday sell off print as forecasted. This is a handy tool to know since yesterday it was a calculated guess to hold shorts into today rather than exiting on yesterday's Wednesday sell off. Markets never bottom on a Wednesday. SPX continues to climb setting its sights on back kissing the strong 1649-1650 S/R from the underside. The 10-year yield is up to 2.05% now pressuring interest-rate sensitive sectors such as utilities.

Note Added 12:35 PM:  VIX 14.09. Watch the VIX 200-day MA at 14.90 which serves as resistance today for volatility. JJC 40.94 remaining under 41. TRIN 0.77. Say no more. Bulls will not allow a TRIN above one which keeps the bears at bay. The 10-year yield is 2.03%.  SPX plays around with 1649-1650 resistance for an hour, and punches up through. Now price is dropping down to this key S/R to back kiss from a support perspective. The 1649-1650 S/R carries clout and serves as a bull-bear indicator, happy bulls above 1650, happy bears under 1649. The beat goes on.

Note Added 1:49 PM:  TRIN up to 1.11 so SPX drops under the critical S/R at 1649-1650 now printing a 1646 handle. The 10-year yield is 2.02%.

Note Added 2:33 PM:  VIX 14.28. JJC 41.12 inching higher. TRIN 1.00 dead neutral unwilling to give the nod to bulls or bears today. SPX is 1649.42 continuing to play with the 1649-1650 magnet level. The LOD at 1635.53 continues to hold for today thus far. Volume is at an average run rate perhaps a touch below average. Dollar/yen 101.77. Euro 1.2933. 10-year yield 2.02%. Crude oil 94.13. Gold and silver inch higher today.

Note Added 2:42 PM:  Quick change occurs. TRIN collapses to 0.74. VIX drops to 14.19. Hence, SPX leaps to 1652, 1653, 1654.... Dow and Nasdaq turn positive.

Note Added 3:08 PM:  VIX 14.11 well above the 13.12 bull-bear line. JJC 41.12 well below the 41.77 bull-bear line. Hence, the market recovery today does not mean a whole lot. With higher volatility and lower copper, market weakness should linger. TRIN is 0.90. TRIN moves up a touch so note how the SPX moves down a couple handles, now at 1652.

Note Added 3:55 PM:  Markets meander out on the flat side. Keystone bot PAAS opening a new long position.


  1. hy.
    after the China PMI and the FED new stance my opinion is that the big 3rd wave since Nov'12 has already finished and now (since yesterday) we have seen wave 1 of big 4th wave.
    My arguments:
    -it's impulsive, not corrective form of presumtive w1 of big 4th (wouldn't be like that if that thing would be 4th of 5th of 3rd!!!!)

    It should find support soon (1630-1620) and will bounce in sub wave 2 up to 1655-1670.
    Use the 1650-1670 to dump all the longs in sub-wave 2 of big wave 4th.
    IF IT DOESN'T GO MORE THAN 1670 (IF!...ok?) than load shorts in the 1660-1670 area (today or maximum tomorrow). If it goes more than 1670 this post now is wrong and the previous vision exposed in the previous messages was right.

    Final revised target of big w4 : 1550-1565 (that area).

    You know how to discerne between if it is a big w3 or a brand new big 4 ?
    Watch if the (assumed) 2nd of 4th can get over 1670 or over 1687.
    If it's still big 3rd it will.
    If it's new big 4rd it won't.


    1. The 1630-1630 support lines up with other metrics identifying 1624-1627. Maybe the 1620's is where a market bounce will occur from (if markets weaken again after the initial bounce this morning). SPX now at 1644.


      GET OUT AT 1650-1670, THIS IS WAVE 2 OF THE BIG WAVE 4TH = TARGET FOR BIG 4TH = 1530-1560...

      I assumed yesterday that the the down wave will have a corrective structure (a-b-c) but it presents an impulsive structure (1-2-3-4-5) = a wave 4th of 5th of 3rd being corrective on an up trend can't have impulsive structure!
      Get the f*(please excuse my french) out! Next is wave 3rd of 4th - the main down wave of big 4th!


      p.s. if i'm wrong I accept throwing rotten tomatoes at me! But technically there are signs I'm not wrong!

    3. @ Anon:

      that's the 0.382 retracement of the down wave.
      what's with that number?


    4. V. no need for us to throw rotten tomatoes. I was convinced at some point that the market would top at 1640. it didn't. in the end we're all students of the markets since the market is always right; we're just trying to interpret it.

    5. :)
      anyway all retailers should know that if i'm wrong and there is a final 5th of 5th of 3rd, the good money aren't made at the final of the trend!

      the 3'rd waves are the best for money , both up and down!


  2. Nikkei has a nice correction plunges 7.3% last night. Wish we can have that. My gut feeling tells me that up Friday and continue the down trend when we come back on Tuesday.

    1. Consumer Confidence is a key monthly indicator and that will be released on Tuesday. GDP Thursday and Consumer Sentiment on Friday as well as EOM. The month of May began at 1597-1598-ish. Five trading days remain in the month of May and a 5-handle drop would be needed in the SPX to print a negative month, otherwise the happy monthly prints continue.

    2. This 7.3% plunge in the currently most QE driven market shows that corrections can occur any time, and that one always has to stay vigilent and attentive in ANY market environment. Because as much as we want to believe that things are different now, NOTHING has really changed... because in the end it's human nature that drives the market: greed and fear! And when everybody's long; then there's really only one way to go: down hard! Simple. These rules will ALWAYS apply; regardless how much money the CBers will throw at it. Laws of nature cannot be broken, only bend for so long.

  3. v., i think your count is incorrect. according to caldaro, minute iv finished and we are now in minute v up to 1700+. what is your argument against this count?

    1. anon,
      my count might be incorrect.
      a. the strong up move from yesterday was a reversed blow-off move - the kind of move that finishes a trend
      b. i expected a corrective minute iv come it has 5 internal waves and it's impulsive if it's so corrective ???
      c. if you take a look at the up move from 18 april (last 5th wave of the november'12 uptrend) 5 waves can be counted there - it's true, the assumed iv minute was somewhat weak and linear , flat but it's there!

      I might be wrong, i'm a junk, i'm not even dreaming to compare to Caldaro, but this is my position!


    2. i wonder what is arnie's take on this? is he with caldaro or has int. iv gotten underway?

    3. to soon to tell; it did reverse right in the suggested target zone of ~1640 (bounced of 1635, which is Caldaro's 1628 +/-7 OEW level). Pretzel is also not entirely convinced this was IT so to say. And even "IT" will mean that LT we're still going to mid/high 1700s...

      I have a hard time counting the first move down from y'days HOD to 1673 as 5-waves though; suggesting that was an a-wave (of A)!?!.

      Also, remember that 4th waves are very tricky...
      Honestly; a break below 1600 is required to all but confirm the uptrend is over.

    4. anon, you know?
      Even i have my doubts.
      I'm a begginer (less than 1 year experience), Caldaro has decades of trading experience.
      We'll see. It's a matter of 1-2 sessions (today/tomorrow).

      But you know those words : "E pur si muove" (And still it's moving" - or something like that) - Galileo Galilei ... I've saw an impulsive down wave, no a-b-c there.

      I figured it out after the asian and european session that there is no a-b-c there!


    5. arnie, are you seeing an impulsive decline as v. sees it? v., looks like pretzel favors your view. he puts 65 to 35 odds that int. iv has begun. thanks for all your wisdom guys. and thanks to ks for this wonderful blog.

    6. I'll read pretzel's article when I'll get at my desktop home.
      I'm still visiting some (boring! :)...) relatives in another town with my wife :D.
      I'm just messing with my phone on the internet watching the market moves now :) ...and talking to you :D... much more interesting than some old relatives :D!


    7. one more thing v., if you are convinced that int. iv has begun, are you loading shorts at this point?

    8. now i can't load shorts - my broker has a java based web-page. And my phone doesn't support java. So until tomorrow I can't do anything.
      but technically i would load shorts in the 1650-1670 area if this dead-cat bounce continue's clearly that the move today in the US markets doesn't look like a strong up wave.
      KS can confirm that.
      I'm not so eager to short right here in this point. I wait to finish this up move and see what's developing after that.
      I'll wait until tomorrow to see how US markets close, and after that the asians before the european session (in which I can work on).


    9. arnie, are you waiting for the 1700+ area to add more sds to your ongoing hedge? also, what the latest count you have on FB? is it ready for take off (to the upside)?

    10. Anon, my latest take on FB is that either
      1) a larger degree 4th wave either bottomed today; where the 24.72 low was a, the 29.07 low was b and today's low was c

      2) the larger degree 4th ended at the 24.72 low in late march and FB has since gone through a wave 1 up to 28.10, then a abc correction down to today for wave 2...

      Don't prefer either, but looking at the charts, FB looks rather OS and ripe for some buying (which I did day before y'day... yup I am always a lill too early)

      this mornings leg up of the LOD does look very impulsive though.

      Re: market. For now I remain on the side line (not buying SSO or SDS); and the SDSs I've bought so far are now green. Days like these it's best to let the dust settle and follow Keybot the Quant. Hard to go wrong.

  4. KS, what would move KeyBot back to the bear side?

    Thanks, BK

    1. BK, you mean back to the bull side, Keybot is short now. For today, SPX would have to go back to yesterday's big high at 1687 so a whipsaw will likely not occur, but, you never know. Moving forward, JJC 41.77 and VIX 13.12 remain key, both bearish now, bulls need one of these levels to win back the markets. Otherwise, the market weakness should linger.

    2. Sorry for the typo and thanks for the response. I was running to a meeting but wanted to get the question in.


  5. Re: Anon's question yesterday what to do with his longs and shorts. As I suggested yesterday; I hope you sold your long's into today's pop? This was a given it happen! And made a nice profit. Now if you were very bold you'd then bought shorts... I would have if I were you. just my 2cents for a trading strategy.

    1. so are you suggesting that int. iv has begun versus minute iv ending with minute v up to come?

  6. When the Japanese press that panic button, we are ready to short. Nikkei had another down day. Market is weak with VIX above 14, may test 1650 again or we have a flat Friday.

  7. R U ready for a japanese-like swing in S&P 500?

    ready, steady ....,

  8. I was wrong, that was something, last 15 minute swing Nikkei ended up 0.88%
    This kind of swing is not too bad, just like a quick correction.

  9. The content is amazing, keep posting friend it will be very helpful for everyone. Market experts was told today markets will red and trade under pressure experts expect today Nifty trade between 5910-5930.this is the best time for trading so get for 24 May 2013 Calls & book the profit in
    stock market visit here Today stock market
    Nifty calls


Note: Only a member of this blog may post a comment.