Monday, June 10, 2013

Keystone's Midday Market Action 6/10/13

Four parameters are key today; utilities, volatility, copper and commodities. The bears need to push UTIL under 481 to kick-in the downside mojo.  The bulls need to push the VIX below 13.40, JJC above 41.37 and/or GTX above 4765, any one would do, and the upside will kick into gear with an upside rally confirmed moving forward. Alas, the utilities remain bullish and volatility, copper and commodities remain bearish, hence, sideways markets. The VIX remains above the 200-day MA at 14.94 so the buy-the-dip approach for markets is not attractive. If VIX loses the 200-day MA, the long side will receive the all-clear signal.  Reference this morning's VIX chart.

The bulls only needed one point higher to 1644 to create an upside acceleration, and that occurred at the open, pushing the SPX to a HOD at 1648.69. Since volatility was moving up as well, the broad indexes reversed and are now flat-lining. The dollar/yen recovers from under 97 last evening to over 99 today, now at 99.10. The higher dollar/yen (weaker yen) causes the big +5% rally in the Nikkei overnight and buoyant U.S. futures this morning.  The Japan auto companies such as Honda, Toyota and Nissan are up from 6 to 8%. The euro is at the psychological 1.3200 level.  The 10-year yield moved above 2.20% and is now printing 2.19%. There is no economic data today. The action will be driven by news events. Fed's Bullard speaks today and his speech comments are released where he is pumping the QE talk so this will encourage bulls. Bullard is concerned over excessive risk-taking in the markets but says the current activity is not a problem. Bullard used to be a hawk but is now a dove, pumping the merits of QE everywhere he flies, no doubt likely seeing himself in competition with Yellen to sit in the Chairman's seat come January. The only way you can sit in that seat is if you believe in easy money.


The 8 MA remains above the 34 MA on the SPX 30-minute chart and the SPX remains above the 200 EMA at 1629.25 on the 60-minute chart signaling bullish markets for the hours ahead.  The bears need to push under 1639 to curl the 8 MA to the downside. If bulls keep the SPX above 1639, they have no fear or worries. UTIL 486.46. VIX 15.41. JJC 39.95 losing the 40 level. GTX 4716. Pay attention to the 20-day MA at 1646.86 and the 1646-1653 resistance gauntlet discussed on the weekend.


S&P rating agency raises U.S. debt rating to stable from negative which creates market lift. The change is a head-scratcher since the metrics have not improved and some are worse. The rating agencies never saw the real estate bubble coming and stamped garbage paper (instruments that took a group of low-risk mortgages bundled with a couple high-risk junk mortgages) as triple A. The rating agencies stamp of approval does not mean much although the smaller firm Egan-Jones seems to make better calls and appears more reliable. The announcement is interesting ahead of the summer political negotiations to solve the country's debt problem. The negative warning and downgrade occurred in July/August 2011 and helped precipitate the August waterfall crash.

Note Added 10:46 AM:  The 20-day MA at 1646.91 is tested from the underside with price now printing 1646.30. Today's drama begins. Either bulls punch up through the 20 to further assault the 1646-1653 resistance gauntlet, or, collapse. The bears need a spank down from here. Bounce or die. TRIN is 0.68 favoring the bulls.

Note Added 2:31 PM: Bulls and bears duke it out at the 20-day MA at 1646.76 until collapse at 12:30 PM. The drop leads to a LOD at 1639.26 and now a bounce back up to 1643.  UTIL 486. VIX 15.5. JJC 40. GTX 4716. The status is quo with none of the four key parameters wanting to change sides today so the broad indexes stumble sideways. TRIN is 0.85 helping the bulls although price did run up to 1.00 about one-hour ago. The SPX 30-minute chart is rolling price over to the downside with negative divergence. The 1-hour chart is negatively diverged across the indicators although the RSI never reached overbot territory. The 2-hour chart has negative divergence but the MACD line wants another high and if this takes one or two candlesticks, that would place the markets into the final hour of trading today or first hour of trading tomorrow. The 8 MA remains above the 34 MA on the 30-minute signaling bullishness, however, the 8 MA is now curling to the downside and will continue to move lower towards a negative 8/34 cross as long as the SPX stays under 1643 moving lower. All in all, a lackluster paint-drying day today, at least so far.

Note Added 3:31 PM:  Utilities, volatility, copper and commodities are status quo so markets stumble sideways. TRIN is 0.85. VIX remains above its 200-day MA and the SPX remains under the important 20-day MA resistance, two feathers for the bears cap, but the bulls hold the TRIN feather today. The 10-year yield is 2.22%.

Note Added 4:02 PM:  TRIN went higher into the 0.9's into the close but it was not enough oomph to change the sideways vibe. UTIL 481 is a key level signaling market danger and at 485 the bulls have no worries. In the final two minutes, Keystone took profits on DNDN exiting the position. Will look to reenter, it remains very attractive on the long side. Also bot SSG, the 2X inverse ETF which is short the semiconductors  opening a new long position.

Note Added 4:04 PM:  LULU is hit after hours on news the CEO is leaving. This may create a dark cloud over the retail sector tomorrow.

18 comments:

  1. WLT followed your 80/20 rule, hit 15.22 last week and dipped down to 14.87 today. I nibbled on some shares at 15.50, that caused the immediate drop to 15.22... now bouncing to 15.50, I hope this is the bottom and not another head-fake. Some positive divergence in the MACD noted....

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    1. The coal sector was downgraded on Friday and that is what caused the drop in the coal stocks. Usually the analysts upgrade at and through the tops and then announce downgrades when stocks are already washed out. Time will tell. WLT charts will be posted. Coal remains of interest. The bad China data also is slapping all commodities across the board, JJC lost the 40 level. Another thing to watch for the coal trade is natty gas. The lower natty prices one year and more ago killed coal, since you use the cleaner cheaper fuel, however, natty gas is in a long upswing so the higher natty price moves the better off coal is. Also, the steam (electricity generation) and met (steel production) coals must be distinguished and considered separately. Whoa, as this is typed, WLT takes a jump, up 2% now. Maybe folks realize the downgrade came after coal was already laying in the alley and beat up for 2 years and the hooligans have left to beat up someone else.

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    2. Thanks KS, I look forward to the charts. If I sold my stake in WLT, price would immediately jump $2 to $17. If I add, it will plummet to $15....

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    3. ha, ha, that is funny. LOD today is 14.80 and high 15.69 so it is a wild one covering about 5 to 7% of territory each day. If 14.7-14.9 does not hold then it may want to look at 14.2. China data on the weekend is doing today's damage. There are three days of capitulatory selling over the last five weeks.

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  2. 1656 is the name of the game today at the close of market, or tomorrow.
    ;)
    straight on the edge between bulls and bears' territory

    V.

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    1. anyway we will see 1700+ sooner rather than later this summer , it's a matter of patience...

      V.

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    2. V, do you think spx will break through 1653 R?
      VIX up, Copper still weak...that 20d MA did not hold yet.

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    3. yes, there are some chances.
      now it's going sideways to burn the negative divergences not by price (falling prices) but by time (sideways evolution).
      VIX looks like making a higher low after that big spike a few days ago.

      For the MA to be conquered it has to gain some internal tension, some energy, and that's what the market is doing now.

      If it would have been a case of falling stocks, the market would have fallen from the start.

      That's why I'm making my bet on a end of the day at / above 1653. it's negative divergence burnt through time not price.

      That doesn't mean you as retailer should buy here. Let the big boys give the signal today or tomorrow, your small money are powerless in front of them.

      V.

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    4. typo error : sorry
      ''VIX looks like making a higher low after that big spike a few days ago. ''
      looks like making a lower high, of course, on a descending trend . :)
      sorry

      V.


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  3. The TRIN is always a good daily gauge to watch, also the TICK, both are necessities for day trading. TRIN today is staying under the neutral 1.00 line, now at 0.82, so that gives the market bulls the nod. Over the last hour or so, note how the TRIN dropped from 1.00 down to 0.82, which favors bulls the lower it goes, and the SPX moves higher from 1640-ish now up to 1644 in the same time frame. That's why you watch the TRIN, at 0.82 it tells you the bulls are going to try to run higher. The bulls are fine today if they keep the TRIN under one while bears will growl into the closing bell if they start pushing the TRIN higher and get it up over 1.00. The broad indexes turn positive with the TRIN down in the 0.8's.

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    1. KS, euro is up, your comments on euo. Thanks!

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    2. The interplay of yen, dollar and euro will be key moving forward. The asset relationships across the board are mixed and trying to sort themselves out with the taper and no taper talk. The dollar/yen dropped from over 99 today which helped create market weakness. This reflects a stronger yen and weaker dollar. The dollar moved sideways today but drifts lower in the afternoon. The euro is elevated. Draghi was somewhat hands off last Thursday so traders did not punish the euro and instead it floats higher. So the higher euro is in concert with lower dollar. Commodities recovered slightly today as the dollar weakened. For the longest time the markets move with the euro but the dollar/yen forces over the last three months appear more important. Perhaps the euro/stocks relationship will return where up euro is up equities. The relationships are all mixed right now so time is needed for markets to sort things out. The Fed, ECB, BOJ and all the other central banker intervention has all asset classes tied up in knots.

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    3. Thanks KS! If euro continue up, may be a good time to short it, check out euo.

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  4. one more leg up needed from the lows.

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  5. KS or Charles, just curious...nugt vs. dust, which is the inverse of gold miners index, both are green today, is this possible? Shouldn't one of them be in red?
    or do you think it wasn't tracked properly? Thank you.

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    1. They lag the underlying so unless you get like a 10-15 point move in Gold that holds your going to get goosed... Try the weeklys on GLD for trades or monthly if your looking for a move that's 20+ or more points.

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    2. Yep, the triple X's are psycho, many times they will move in the opposite direction you would expect. DUST is the bear on gold miners and NUGT the bull. DUST continues lower from the May top. NUGT trying to build continued upside with the inverted H&S under development.

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  6. Welcome back MCAP. Has been a while.

    BK

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