Keystone's Midday Market Action 7/12/13

The JPM and WFC bank earnings are in line with WPC top line not impressive but both stocks are up in today's action helping to create market buoyancy. While the market magician was distracting you with the left hand flashing bank earnings, the big news was in the right hand with global bellwether UPS warning with lower forecasts due to a slowing U.S. industrial economy. FDX and UPS are key global economic indicators since shipping makes the world go round. Business contracts, parts and products move through the mail daily and the level of shipping shows the health of the global economy. UPS says the patient is in sick bay and needs an IV stat.

VIX 14.27 is key today. Market bears got nothing unless they push volatility higher. VIX is at 13.89, falling under 14 today. The VIX is slightly lower and the SPX is slightly lower today; one of them is wrong. The hourly and minute charts are showing topping behavior with overbot conditions, rising wedges and negative divergence so market weakness is anticipated today. If markets sell off, but the VIX stays under 14.27, the bears got nothing and markets will recover into the weekend.  If markets sell off and the VIX moves above 14.27, this will tamp down the bullish rally and initiate much stronger market selling. Watch the 8/34 MA cross on the SPX 30-minute chart currently bullish. The bulls only need to touch the 1677 handle and that should open the door to test the all-time high at 1687. SPX HOD is 1675.99. Note how in the uncharted territory the last couple days, the price action is ratcheting up in whole numbers; 1673, 1674, 1675, 1676. TRIN is 0.94 helping the bulls by a hair. Consumer Sentiment is 83.9 and markets continue sideways. S&P downgrades Portugal's banks and the 10-year yield jumps to 7.56% and rising. Looks like Europe has another problem.

Note Added 10:22 AM:  VIX 13.97 so the bears do not yet have the oomph to move above 14.27. SPX HOD is 1676.13 so the bulls do not yet have the oomph to move above 1677. Thus, the markets stagger sideways. TRIN 0.93. UPS is -5.3% a huge move lower for a blue chip company. The central bankers have turned the stock market into a twisted casino.  Bad news means good news since more QE will be pumped to keep equities higher. Looks like sideways action to begin the day. Watch to see if the negative divergence on the 2-hour and 30-minute charts start to send the SPX lower. Time for a slice of apple pie.

Note Added 2:31 PM:  VIX 13.94 so the bears got nothing today. The SPX teased 1677 this morning with a HOD at 1677.41 (pay attention to this number moving forward) but did not have any energy either. So markets stumble sideways. TRIN 1.11 moving into the bear camp.  Markets are following a typical pattern after a large up day, or large down day, where there is sideways action to absorb the energy of the move. The SPX 2-hour, 1-hour and 30-minute charts (reference this morning's charts) are now universally negatively diverged so a smack down in price would be expected. The central banker happy QE talk in recent days keeps the bulls in a happy mood in front of the weekend. Perhaps the mood will change in the time ahead. BA is puking due to a fire on board a 787 Dreamliner so traders are selling first and asking questions later. Use an 8 factor as a rule of thumb for Dow stocks to assess their performance on the Dow Industrials Index. BA is down -4.83 points, -4.5%. So 4.8 times 8 is about 40 points so the news in BA is creating 40 negative Dow points today. The sneaky little OSUR long trade is feeling some love today but with these speculative trades you never know.

Note Added 2:49 PM:  VIX 13.95. SPX 1674.61. TRIN 1.10. Status quo. Keystone took profits on the OSUR long trade exiting the position. Will look to reenter. OSUR should have plenty more upside moving forward. Also bot more MZZ adding to this ongoing long position which is short mid-caps.

Note Added 2:58 PM:  The 8 MA remains above the 34 MA on the SPX 30-minute chart signaling bullishness for the hours ahead, however, the 8 and 34 are slowly converging again. The 8 MA is 1674.03 so if the SPX prints under 1674 and lower it will curl the 8 MA to the downside to set up a negative 8/34 MA cross. The 30-minute chart is negatively diverged as mentioned above. It looks like all you need to do is breathe on the SPX and that would be enough to roll it over to the downside into the closing bell.  The bulls will attempt to string things out for the last hour and try to stumble sideways into the weekend. Watch volatility. VIX 13.90.

Note Added 3:50 PM:  Bulls receive a late-day pump which will lead to another all-time closing high. SPX is approaching 1679. VIX drops to 13.76 providing the bull fuel. TRIN 1.08 dropping towards neutral one.

Note Added 4:02 PM:  The SPX prints a new all-time closing high again at 1680.19, still settling out. The close above 1680 typically hints that a run to 1720's will occur, however, the print is only pennies over 1680, so a more substantive close will be needed above 1680 come Monday or Tuesday to carry out this bull path.  VIX 13.83, also still settling out, allows the bulls to have a happy day into the weekend. Fed's Bullard pumped the markets today so the Fed keeps the good times rolling. They are the third man on the field that can simply step in at any time and pump the market higher. Everything picks up Monday morning right where it leaves off here. VIX 14.27 is key. The 10-year yield is 2.58%.  Lots of folks are concerned over China's data this weekend but they will probably massage the data to be better than the bad consensus. Portugal is a more important story. Next week is Chairman Bernanke's Congressional testimony. Markets are typically bullish through this testimony. Reference the Other Market Signals page to see the past results. Thus, the bears need to push lower Monday and Tuesday since markets may want to be bullish from Tuesday into Friday. The central bankers saved the markets over the last month. The Fed's main function is to pump the stock market higher.