Tuesday, June 11, 2013

Keystone's Morning Wake-Up and Midday Market Action 6/11/13; Wholesale Trade

The violence in Turkey casts a negative cloud on markets this morning. In addition, the German constitutional court meets to discuss the ECB bond-buying program placing traders on edge. European markets are down. At about 5 AM EST, markets deteriorate. The dollar/yen drops from over 99 to under 97 now trying to recover sitting at 97.02. The euro is 1.3239 off its highs. The S&P futures are down -16, the Dow -121 and Nasdaq -29. The 10-year yield is 2.25%. Gold, silver, copper and oil are all lower. With the SPX set to open lower and test the 1634 and 1626-1627 support levels, the utilities sector is key. If UTIL stays above 481.39, the market bulls are fine. If UTIL drops under 481.39, more downside selling and trouble is coming. If UTIL 481.03 fails, the markets will become ugly quickly and the market move lower will be sustainable and extended. If UTIL falls under 481 and the SPX is under 1639, Keybot the Quant will likely flip back to the short side today. The 50-day MA is 1608.43. Watch to see if the 8 MA drops under the 34 MA on the 30-minute chart. Watch to see if the SPX falls under the 200 EMA at 1629.93 on the 60-minute chart.

The NFIB Small Business Optimism Index was released a short time ago and is more positive than in recent months but businesses are reluctant to hire or expand since the economy remains lackluster with lower sales. The JOLTS report at 10 AM will provide further color on the job market.  Wholesale Trade numbers hit at 10 AM and should create a market pivot point. The 3-Year Note Auction is 1 PM. In a nutshell, watch UTIL 481-ish since it provides the thumbs up, or thumbs down, for markets moving forward.

Note Added 9:45 AM:  Markets drop as futures indicated. SPX falls through strong 1634 S and then tests 1626-1627. SPX is now printing 1626.86 with LOD at 1622.92. Note how the SPX heads lower after the successful back kiss (for bears) of the 20-day MA at 1646.50 yesterday. UTIL came down to 481 but bounced, so the market bulls are not worried. UTIL 481.39 and 481.03 dictate the markets fate today. The markets will set a path after the 10 AM pivot. TRIN spikes to 2.2 and then collapses to an uber low 0.51, uber bullish, so the low TRIN and UTIL above 481-ish allows the bulls to maintain overall market control with their feet up on the desk. Keystone took profits on the overnight SSG trade exiting the position, will look to reenter. Also bot SLV, long silver, opening a new long position. Also bot DNDN, long biotech, opening a new long position.

Note Added 10:14 AM:  UTIL 483.48. TRIN 0.54. SPX hanging out at 1626-1627 support undecided on which way to go until the utes firmly decide on the path. Keystone took profits on DNDN exiting the position for a one-half hour day trade, no use in passing up that spike higher, will look to reenter, DNDN remains attractive moving forward. Also added more SLV.

Note Added 10:21 AM:  The SPX has dropped under the 200 EMA at 1629.93 on the 60-minute chart signaling bearish markets for the hours and days ahead. This rupture is significant since the failure that occurred four days ago was reversed by the bulls. Watch 1629.93 like a hawk today, if the SPX finishes the day under this level, the markets are in serious trouble. The bulls must move the SPX above 1629.93 as soon as possible, otherwise, they will lose control of the markets.  UTIL 483.13. TRIN 0.58. SPX 1628.00.

Note Added 10:29 AM:  That did not take long with SPX now at 1629.37 ... 1629.67 ... she is testing the 200 EMA. The bulls know they need to move back above 1629.93. This is a very important test. Bounce or die.

Note Added 10:32 AM:  Big bounce. SPX explodes to near 1632. UTIL is at a 484 handle.  TRIN 0.59. The bulls have the juice to keep things elevated for a bit. The wrestling match should continue. The SPX is above the 200 EMA signalling bullish markets for the hours and days ahead. The drama continues. Note that the 8 MA is near crossing down through the 34 MA on the 30-minute chart. Grab the popcorn since this movie is far from over.

Note Added 11:33 AM:  UTIL refusing to move under 481-ish tells the market story so far. UTIL is 485.76. The SPX continues higher just printing a 1640 handle. The Dow has come back to flat on the day from -152 handles down after the opening bell.  TRIN 0.62.  The dollar/yen is 97.11. Equity bulls need the dollar/yen to stay here and move higher. Market bears need to see the dollar/yen drop through 97. The up in the SPX over the last hour is preventing the 8 MA from crossing down through the 34 MA on the 30-minute chart. The bulls fight back today with utilities leading the parade. Keystone bot more JO adding to this ongoing long coffee position.

Note Added 12:00 PM:  The 8 MA stabbed down through the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours ahead. The 8 MA is 1636.28 and 34 MA 1638.54 and price is 1637.66; a tight cluster. Very simply, bulls win today if they move the SPX above 1639 and higher. Bears win at 1637 and lower. UTIL 485.12. TRIN 0.64. The VIX is elevated at 16.17 above the 200-day MA at 14.95 so this hints that the market dips should not be bot.

Note Added 12:24 PM: UTIL 484.38 but drifting lower over the last hour from the 486 top. Dollar/yen drops under 97. Keystone bot SSG, the 2x inverse ETF for shorting semiconductors, opening a new long position. SSG is very thinly-traded (larger bid-ask spread) so that must be considered; all the trading today in this issue is Keystone's.

Note Added 1:57 PM:  Dollar/yen fails through 97 then 96 now printing 95.86, thus, markets move lower.  Lower dollar/yen = stronger yen = lower equities. The 10-year yield drops to 2.17% (reference the TNX daily chart provided this morning for further study). Lots of drama at the 200 EMA on the 60-minute at 1630.13. The SPX is 1629.98. This is very important and a major decider on the extended path forward for markets. Bulls win and run with the ball above 1630. Bears win and will create sustainable market downside under 1630. UTIL 482.90 now only about one point from the 481.39 bull-bear danger line. TRIN 0.83, bullish, but moving far higher off the 0.5-ish low this morning. Today may become exciting into the close. All Hades will break loose to the downside if UTIL 481-ish fails.

Note Added 2:52 PM:  Dollar/yen is back above 96, and TRIN drops down to 0.68, hence the markets slightly recover. The fight continues at the 200 EMA at 1630.13 with the SPX at 1630.27.  Flip a coin. Note the wild action in utilities with UTIL coming down to near failure with a 482 handle and then catapulting higher to 485, now falling again to 483, all this occurring in only the last 45 minutes. The story will be written today based on SPX 1630 and UTIL 481. The 8 MA remains under the 34 MA on the 30-minute chart.

Note Added 3:01 PM:  SPX jumps higher to now test the strong 1634 S/R. The theatrics continue. UTIL 484.23.

Note Added 3:34 PM:  Bring up the UTIL 15-minute or 30-minute SPX chart to watch the descending triangle pattern. The base line is at 482.50-ish, right near price now at 482.77.  If UTIL fails this area, the lower target for the descending triangle is 477.00. The SPX just dropped under the 200 EMA on the 60-minute at 1630.13 but this drama will not be decided until the closing bell rings to identify the winner. SPX is now printing 1629.20.

Note Added 3:42 PM:  UTIL 482.42 ... 482.38 .... place seats in upright position, attach helmet and harness, she may be going in for a look. .... 482.13 ..... remember, 481.39 is the number.  Buckle up and hold on......

Note Added 3:46 PM:  UTIL 481.43 .... 481.86 ..... 481.84 ... dancing with the devil.

Note Added 3:52 PM:  UTIL bounces above 482.  The tension continues.  Keybot took profits on SSG using it as a day trade, will look to reenter, it remains attractive moving forward. Also bot DNDN opening a new long position.

Note Added 4:01 PM:  What a soap opera. UTIL did not fail 481.39 so bulls scoff at the bear's hopes for lower markets. UTIL closes at 482.15 breathing 76 pennies of relief. The SPX closes exactly on top of the strong and key 1626-1627 support deciding to think about things overnight.  Two important Keystone short-term signal failures occur today. The 8 MA is under the 34 MA on the SPX 30-minute chart and the SPX is under the 200 EMA on the 60-minute chart at 1630.10 signaling bearish markets for the hours and days ahead. This 200 EMA failure is significant and an important win for bears. Bad things will happen to markets with a close under the 200 EMA. Watch for one day of follow through tomorrow to see if the SPX can remain under 1630, if so, the broad indexes are likely headed far lower and for an extended and sustainable period of time. The UTIL 481.39 and 481.03 failures would send the SPX towards 1600. TRIN closed at 0.85 helping the bulls all day long so perhaps tomorrow the TRIN can print above one to help the bears. The VIX closes at 17.11 well above the 200-day MA which continues to signal that the market dips should not be bot. The excitement will continue tomorrow with SPX 1630 (200 EMA) and UTIL 481.39 the two key focal points.

18 comments:

  1. Classic drop to fill the gap around 1623 in the SPX. Thanks KS for identifying what to look at here, UTIL 481. When that held, it wrote the story from here....

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    1. Yep Charles, lots going on today, hard to keep up, it appears though that UTIL may roll over as the day moves along. 2-hour, 1-hour and 30-minute chart appear agreeable to seeing the utes drift lower. It will be an interesting day. UTIL staying above 481 also prohibits Keybot from flipping short. The 10 AM pivot may cause markets to react.

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  2. Hi KS! :)

    Pop goes the weasel at technical levels ... a pretty inverted head and shoulders :)!
    Like that ! :)

    V.

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  3. Either b-wave top is in (preferred scenario) and c-wave down has started targeting IMHO mid-1500s. Or, we've just had a wave 1 up, and this mornings drop was a wave 2 down. But not liking the (lack of) response of that low...

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    1. yes Arnie, good ol' Caldaro and Cygnet Noir ...

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    2. in part; I also follow Pretzel and Avi as well.
      I don't follow CN

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  4. KS, if you buy anymore JO you're going to qualify for a Brazilian pension... Meantime, was this morning's failure of the 1626 neckline enough to make you expect that 1565 target? (That's also near where Caldaro and others think we'll land. As Arnie is fond of saying, it's great when TA and EW agree.)

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    1. watcj out Weaver cause EW wise it might be also the 9th up wave what we're seeing now.
      some corrective structures might extend up to 9 waves and from the lows (1598) this might be the last up wave ... that's also a possibility.

      if you're taking a look at a chart spx 500 at the advance from 15 nov 2012 you can count 8 alternante up/down waves and the ninth now rolling up.
      this might be also a possibility.

      don't bet my house on that but it's always good to keep it in mind (after all, the support from NOv'12 wasn't braked, but just touched!)

      V.

      p.s. don't follow only one possibility only because a big analyst is following it. It's not good for own analysis capacities.

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    2. It will be interesting to see if JO charts the same path as natty gas did over the last year, or, if the carafe has a leak and coffee spills over the heirloom table cloth. The SPX 1626-1627 is very strong S/R and a pivot point. A close is needed below here to chart the way lower. A move under the 200 EMA on the 60-minute chart at 1630 would be good enough since losing the 200 EMA means trouble ahead. Ditto UTIL 481-ish, if that fails that is another signal that the markets will sell off moving forward. So the market bulls are obviously fighting to close the SPX above 1630 today and the UTIL above 481.

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  5. and I am still having the 80/20 rule in the back of my mind, which in this case is the 20/80 rule: market traded and closed below 1620, strongly suggesting 1580s are on tap. Hasn't happened yet...

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    1. Well Arnie, the SPX closed at 1609 four days ago so that did pierce the sub 1620 area and crack the door open to the 1580's. The 200 EMA on the 60-minute is uber important. Now at 1630.15 and the SPX is dancing above and below right now. If the bears can close the SPX under 1630 today they will growl strongly moving forward. The SPX is now printing 1630.23 only pennies away from 1630.15. One side will laugh today, and one side will cry.

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    2. can we say an EXACT (little) bounce of the 200 EMA on the 60min??? WOW, somebody is watching that line like a hawk... major significance indeed. Me not sure if it will hold though... as I can clearly count 3 waves up from the 1623 LOD to the 1640 HOD and now 5 waves down to the 1627 low...

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  6. I see a nice wedge forming today with the apex at 1629-30. Will it break up or down today, or await resolution tomorrow? Put another way--where is the maximum pain?

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    1. Yep, it has a sideways symmetrical triangle feel from yesterday afternoon to now, looks like a break under the 1629, where price is, will be the break lower. It likely all depends on UTIL 481; utes only a point from failure with less than twenty minutes remaining.

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  7. does anyone observe the beautiful positive divergences on price versus RSI 30 min, 60 min, 5 h SPX charts?

    V.

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    1. V, nope, SPX 30-minute shows price now starting to leak under the price from the open this morning but indicators are only slightly pos. div. and MACD line continues downward. The 1-hour shows weaker histogram, stochastics and ROC indicators, RSI flat perhaps turning negative. So it is a mixed bag. The 200 EMA at 1630 is key, also the 1626-1627 strong S/R and UTIL 481.39.

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  8. to day was 3 waves up from the 1623 low to the 1640 high and 5 waves down to 1627; then 3 waves up to 1634 and 5 down to the close... either an 5-3-5 (abc) correction or simply the market showing that the direction is down (5 waves show the way). Note the MACD on the daily is NOT confirming last week's end of week ramp up for a wave 1 and now 2 down, and also note that on the daily the 8sma is about to cross the 34sma. Last time this happened was late oct. '12; and the SPX lost 90 points after that.

    I am more and more favoring that the B-wave up is in and that the C-wave down has started. If we assume A down was 89 points (nice Fib nmbr btw: 1687-1598) and often A=C, then we can expect C to end at 1649-89=1560. Of course C can be any Fib extension of A, but 1560 is a level the SPX has been grinding all along half of March and April before finally breaking out late april. Hence a back test may be appropriate for the market before it can decide if it wants to take the next leg higher!

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  9. I see plenty of reasons for a downdraft here but my analysis of maximum pain suggests a rally from this area is distinctly possible: for example, there are 159K $163 June puts on the SPY and 75K calls at that strike. Going out to the July $163 strike, there are 129K puts and 36K calls. That is extremely bearish. That suggests to me retail options buyers are bearish, and this suggests sentiment is bearish. Although occasionally Mr. Market rewards the majority of options holders, usually he takes their money. When I see this kind of imbalance, and I'm with everyone else on one side of the boat, I exit because I've seen too many "sure things" reflected in options sentiment blow up....

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