Tuesday, July 16, 2013

Keystone's Midday Market Action 7/16/13

GS and JNJ earnings are happy time while KO earnings receive a KO (knockout). CTAS is taking the pipe, -4%, and is a key economic indicator due to the need, or lack thereof, for uniforms. CTAS says business is slow which means there is no hiring occurring and the 25 million unemployed and underemployed continue to suffer as the structural employment problem grows in America. Add this with UPS's dire guidance, and KO this morning that comments on a slower global economy, and the economic situation on the planet is far from joyous. However, the Fed drug-pushers pump the crack cocaine easy money into the market veins and all is fine for another day.

The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours and days ahead, however, the SPX is under the 8 MA curling it to the downside for a potential negative 8/34 cross today. The VIX is 13.86.  Bears got nothing unless they push VIX above 14.20. So, despite the early market weakness, the bears need to push far harder to reverse the ongoing bull rally. The bulls need to push the SPX above 1684.50 and an acceleration will occur to test the all-time intraday high at 1687.18 in quick order. If JJC (copper) moves above 39.35, now at 39.15, the bulls will be on their way to SPX 1700. The SPX HOD is 1683.73 about 75 cents short of today's bull goal to create an upside breakout. The bears need to push under 1678 to accelerate the downside to test support at 1677, 1672, 1669, 1666 and perhaps 1652. The donuts are getting stale at KKD, down about -3% today. GS slips on a banana peel and is now negative on the day.

Note Added 10:42 AM:  VIX 13.87. TRIN 0.88.  Say no more. The markets remain buoyant with lower volatility and TRIN. Watch VIX 14.20 and the 8/34 cross highlighted above and in this morning's chart as the day plays out. Bears got nothing without the VIX moving higher. SPX LOD is 1679.52 so the bears needed another couple points to start a downside acceleration under 1678. For now the markets dance along sideways.

Note Added 12:38 PM:  The 8 MA just stabbed down through the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours and days ahead, however, the bulls will likely fight back and try to send the SPX up right now to reverse the negative cross. VIX is 14.29, well look at that, above 14.20 so it is all systems go for bears. TRIN is 1.21 above one and favoring bears today. The SPX dropped under 1678 so a downside acceleration occurs to the LOD at 1673.15 a point shy of 1672 support.  There is support at both 1673 and 1672 and if that fails, the strong 1669 support will be tested. Watch the 8/34 MA cross described above and VIX 14.20 to determine if the bears can maintain today's selling pressure, or notKeystone took profits on GDXJ exiting this long position, only enough to buy pizza's for this evening. Will look to reenter on a pull back.  Also bot SSG opening a new long position which is short semi's.

Note Added 1:18 PM:  Here's the test of SPX 1672 support so its bounce or die time. If this fails, the strong 1669 and equally strong 1666 support levels are next. A very short recovery move would drift price back up to 1675-1676. The bears are flexing their muscles and volatility is their fuel. VIX 14.34. TRIN 1.21.

Note Added 2:48 PM:  The SPX bounces off 1672 S to the 1675-1677 area. VIX is 14.26 above the 14.20 bull-bear line, identified by Keystone's algo, Keybot the Quant, which creates market bearishness, but the bears are only six pennies from folding like a cheap suit. TRIN is 0.86 so that is where the bulls receive the energy for the move higher over the last hour. The 8 MA remains under the 34 MA on the 30-minute signaling bearishness ahead, however, the 8 MA is 1675 and with price now printing at 1676 it will curl the 8 MA to the upside and the bulls will try to redeem themselves and reassume control with a positive 8/34 cross. Bears are fine as long as the 8/34 cross remains negative and the VIX stays above 14.20. The SPX 1 and 2-hour charts hint that lower prices should occur moving forward and the bounce over the last hour or two should be short-lived. Chairman Bernanke's comments are released at 8:30 AM EST tomorrow morning, instead of the typical release when his testimony begins at 10 AM, so traders must position now for what they think the notes will reveal before the opening bell. Then all traders, long or short, will receive a do-over and have another bite at the apple when the Q&A begins at 10 AM. Housing Starts, a critical monthly number, hits at 8:30 AM as well as more earnings, and reactions to this evening's earnings, so the markets will graduate from a small-town carnival into a full-fledged big-city circus as the week plays out.

Note Added 3:03 PM:  VIX 14.43 printing a HOD and TRIN back up to neutral 0.98 so the bears are smiling again and the SPX loses a couple handles.

Note Added 3:21 PM:  VIX 14.54.  TRIN 1.21.  The 8/34 MA cross on the 30-minute remains bearish. The 8 MA is 1674.76 so the bears need to keep price under this number. SPX is 1673.40 potentially headed for a test of the LOD at 1671.84, the important 1672 support.

Note Added 3:32 PM:  The bulls attack the TRIN dropping it from over 1.25 to 0.91 in ten minutes time to create lift in the SPX. VIX is 14.51 remaining thirty-one cents in the bear camp.


  1. what a nice dip :)
    was bought :) and will be bought.
    according to my system it should stop in the 1672-1676 area.
    If 1672 is trespassed, 1666 is suport.

    I guess the market prepares itself for a mega huge ramp up tomorrow when the conference speech will be released prior to the conference.
    Use this good dip wisely!


    1. Yeah good ol' V,
      Until Thursday or Friday into OPEX we will be in the 1700's.

      George the Scrooge

    2. I agree; 1665 is as far as I can see this go down for a 4th wave, before (minor) 5th can take hold.

      ps: 80/20 rule is in place with y'days trade and close, so I expect at least 1720 (as I have since the 1560 low)

    3. Thank you Arnie, a little bit shooked up on my longs, but still holding.


  2. Hey guys, I'm wondering how you guys, KS included, can make market forecasts with such confidence, despite the distortion from the fed. QE threw everything out the window. I ask because I notice you boys have a pretty good track record despite all the interference and distortions from the fed. Do technicals still really matter that much?

    1. Yes, they do.
      I use an organic combination of elliot, TA, gann, fx versus commodities versus stocks intermarket relations, and it's working about 65% (2 out of 3 shots)of the cases. But I'll get better than that, I'm sure!


  3. Technicals always matter and are the only tools you can use to trade short term. The charts always have everything known priced in so if the Fed plays games, it may take a day or three or a bit more, but the charts adjust for the latest bluster. It does appear to be a no-brainer. During OpEx week a Tuesday low leads to a Wednesday high and the Congressional testimony period, now through Friday would be expected. But, there is always a but, it sure seems too easy. Considering the SPX 2-hour and 1-hour charts it would not be surprising to see weakness for a day or two which would conflict with finding a bottom today. Use the 8/34 MA cross on the 30-minute and VIX 14.20 as the two main guides. If they stay bearish the markets are going to continue lower.

    1. I wholeheartdely agree. TA, TI and EW ALWAYS apply. The FED is NOT Almighty, it is one of many players. It are buyers AND sellers that make the market, not the FED. If the buyers THINK the FED has their backs then they buy; prices go up. However, NOTHING goes up in a straight line; human sentiment always plays (e.g. put/call ratio), etc, etc.

      To sum it all up: the market will always HAVE TO ADHERE to the LAWS OF NATURE. and so does the FED.

  4. When everyone is bullish, be careful.. too many pple putting out targets above 1700 to 1800..markets love to screw the majority

    1. true, but who is everybody? surely not us few bloggers on KS' website... I still see MANY people also count this recent upmove from 1560 as an ABC... hence also many bears still out there and bulls like nothing better than to climb that wall of worries; covered with bear fur....

  5. Thanks guys. Appreciate your input.

  6. Hello there!

    remember my yesterday comment with pivots?
    pop your eyes on this one: if lowest level of 1680 pivot is lost (and that's 1672) wave 3 ended at 1685.

    If the dip is bought (Bravo senor V.!) above 1672 wave 3 from a 5 wave up trend may extend to a 9 wave up trend in the 1699 pivot (1692-1706 area). And that assures in the first half of August 1770's !

    So: what will be the outcome ?
    Still watching!

    GS guy

  7. Hey gs and v,

    forget the crutches of the ew.

    Without saying a bunch of caveats or alternative counts, are you bullish or bearish now at SPX 1674?

    1. I'm certainly bullish after the last speech of Bernanke - what we are seeing now is an overbought dip ad nothing more.

      I can already count 5 little waves down since this negative move started.

      1700-1705 is a given until the end of this week.
      1720 and more is a gift.


    2. short terms (hours to days) bearish: 4th wave completing, IT term (days/weeks) bullish: after this 4th wave, marketing will complete a 5th of V-th wave to new all time highs (at least 1700),
      I don't want to go much further than that in time, as there are still many possibilities on the table. However, I think this puppy wants to visit mid 1700s before another 10% correction; after that... we'll have to see how much firepower the bulls have left, but it will get less and less for each correction... so yes, we're closer to the end than to the beginning (666 low)

    3. I'm neutral to bullish.
      The up-trend is not finished, that's clear.
      We will see new all times highs.
      Now, today, all that matters is 1672 to hold strong support - it's an urge if we want to see 1740-1770 in the first half of August.
      But generally I'm quite bullish.
      Tomorrow it's possible in the first half of the day one last dip to 1658-1667 (this being wave 4, an a-b-c) but after that we will have into OPEX wave 5, probably with new highs.

      It's only a matter of patience. Certainly today it's not the end-of-the-world so bears can go back to sleep a few more weeks.

      GS guy.

    4. @ Arnie, all:

      My target for this bullish market to be reached in 2014 is 1850-2100 points with a certain bias to 1965-1995 area sometime in the q1/q2/2014!
      That will be a nightmare for all bears.
      Just following the market :).


  8. Arnie,
    What do you mean by "before another 10% correction"?
    We never even had our first 10% correction before this.
    SPX 1687 --> 1560 is not 10%!

    1. Anon, you need to read more carefully and look a little further back in time than just the latest correction...

      this bull has experienced several >10% correction and several ~10% corrections. Namely:

      mid 2009: 9%
      early 2010: 9%
      mid 2010: 17%
      early 2011: 7%
      late 2011: 22%
      late 2011: 10%
      mid 2012: 10%
      late 2012: 9%
      mid 2013: 8%

      10% of MID 1700s would be 1575ish. Not unreasonably, though I think IF it corrects from ~1750 it won't pass 1600 this time (~8-9% correction).

  9. GS-

    If we hit the 1690-1705 target, we still anticipate a 20-30 handle pullback before surging up beyond 1705, correct?

    1. I had a dream! (last night, lol)

      I had a dream of mighty bears pushing spx in 1658-1667 zone only to be dirty-squeezed after into Thursday and Friday's OPEX at 1720's !

      Martin Luther King ;)

    2. Anyway, the backbone of every bear will be cut in 2 the next 72 hours.
      Shorting into Bernanke's moment and after that into OPEX ... Oh my God!
      All bears will lose their money and won't short when will be the true special moment for that ...but guess that's the gangsters scenario. Capture as much sheeps (short retailers in an uptrend) as you can and after that cut their heads off...

      I had a dream, lol! :-)!
      Martin Luther King

    3. Anon,
      Might be of course.
      All I certainly know is what a buddy form GS confirmed to me telephonically : that FED New York in their statistical models have projected for 2013 a S&P 500 target of 1750.

      Take care if shorting,

      GS guy

  10. Keystone,

    Great stuff as always. You are required nightly reading.




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