Keystone's Morning Wake-Up 7/11/13; Chairman Bernanke Pumps Global Markets Higher

The dice roll to a lucky seven and eleven on 7/11 favoring the bulls. S&P futures are +16 and Dow +140 this morning. The FOMC Minutes were a non-event, rehashing what was known for the most part. Equities finished flat in the Wednesday session.  After the closing bell last evening, however, the world changes.  Chairman Bernanke said "the Fed will remain accomodative for the foreseeable future."  These are the words heard round the world. The dollar immediately plummeted lower. The euro popped higher and dollar/yen lower. Gold, silver, copper and commodities sky rocket higher; gold up almost 50 bucks. The S&P and Dow futures catapulted higher. Obviously the Fed mandates of stable rates and low unemployment are replaced with Chairman Bernanke's number one mandate of pumping the stock market higher.  One-half of the 19 FOMC members want tapering to begin before the end of the year but the only opinion that matters is the Chairman. The term 'fee markets' is a complete joke at this point since the Fed and central bankers control the markets.

The radical reaction to the Fed blows a whole in the thesis that markets are viewing good economic news as good news for the stock market and bad news as bad news. With the Fed pumping the markets again, traders will now be viewing positive data as a sign that tapering is on the way while weak data means that Chairman Bernanke will keep pumping QE and send the stock market higher. It is a mystery why the Chairman chose to take the dovish stance last evening. Some of the froth was taken out of the markets over the last couple months and with the tame Minutes, markets appeared to be content moving sideways.  This helps keep the new asset bubbles, that the central bankers create, remain in check. The Chairman threw this market return-to-normalcy out the window last evening.  The Fed wants to see a higher stock market since it is at the root of the 'wealth effect' thesis where Bernanke hangs his hat.  Perhaps there is worse economic data on tap ahead and the Fed is front-running the bad news? Perhaps the Fed has no confidence in the politicians meeting the fiscal and monetary deadlines in September, now only ten weeks away? The politico's are distracted by the ongoing Whitehouse drama's instead of meeting to begin discussions for the pending deadlines ahead. Another interesting side story is the magnitude of the S&P jump of about 1% this morning, about 16 handles.  The prior Fed pumps were all from 20 to 30 handles, even the Jon Hilsenrath news article pumps are typically over 20 S&P handles. And these prior pumps are at lower SPX levels which makes their percentage moves even greater.  Thus, for all the euphoric hype over the last few hours, the Fed appears to have only squeezed 16 points from all their effort. At the same time the Fed has laid all the cards on the table exposing their entire hand. Today and tomorrow will make for interesting trading.

On the technical side, charts will need a couple days to absorb this latest erratic action. Watch VIX 14.27 and JJC 39.20 today, volatility and copper, respectively.  The market bears need to push the VIX back above 14.27 or they will be beaten every day forward. The market bulls need to push JJC above 39.20 to gain further upside market fuel. The broad indexes are set to bounce at the open, but once that bounce occurs, markets may move flat and the next move is decided by VIX 14.27 and JJC 39.20.  For the SPX today starting at 1653, the strong 1652-1653 support, it appears that the strong resistance levels at 1666 and 1669 will be targeted. The 1669.16 is the all-time closing high for the SPX (5/21/13).  The 1687.18 is the all-time intraday high (5/22/13). SPX resistance above is 1659, 1661, 1666, 1669, 1673, 1674, 1675 and 1687. Scroll back to the SPX 2-hour chart from yesterday and the pop to 1666-ish will satisfy the bull flag pattern highlighted. The Dow Industrials all-time closing high is 15409.39 (5/28/13). The Dow all-time intraday high is 15542.40 (5/22/13). The bulls are set to run higher and attack the all-time closing highs. The RUT has been leading higher and is already printing new highs above 1K. In a nutshell, watch SPX 1666 and 1669 resistance and VIX 14.27 and JJC 39.20 for the market direction forward.

Note Added 9:00 AM:  Jobless Claims jump higher. The futures immediately spike higher on the weaker data and remain elevated in keeping with the idea that traders now view bad news as good news again. VIX 14.27 and JJC 39.20 are key. For any traders that are thinking of shorting the market bounce today, usually markets remain elevated on a day where a big up opening occurs. Then the following day, tomorrow, markets tend to move flat to absorb the move. So it may take until early next week for the smoke to clear. Watch JJC 39.20 since if copper stays under this price, the door is open to shorting the broad indexes. If JJC moves above 39.20 going higher, the SPX will be on the way to new all-time highs and 1700. Keystone's 80/20 rule says 8's typically lead to 2's so if the SPX closes above 1680, that would open the door to the 1720's, thus, if price stays under 1680, that would be another hint that the short side is in play. Strike up the calliope, time for another day under the Big Top.

Note Added 9:44 AM:  The circus begins with the Ringmaster signaling a big up in equities. The SPX and Dow overtake their all-time closing highs at 1669 and 15409, respectively. Watch to see if they close above these levels, or not. SPX S/R is 1666, 1669, and then 1673 so leave the door open to a test of 1673 today.  HOD thus far is 1671.00.  JJC jumps above 39.20 but now is back below. Keystone's trading algorithm, Keybot the Quant, continuously adjusts numbers so now watch VIX 14.27 and JJC 39.47 (not 39.20). VIX is 14.04 under the 14.27 providing bull fuel.  JJC is 39.17 under the 39.47 providing bear fuel. One of these two key parameters will flinch and send markets in that direction.  A short play on the markets is in play if JJC stays under 39.47. The 10-year yield is 2.57%. Keystone took profits on NEM exiting this long trade and will look to reenter. NEM likely has lots of upside ahead receiving the positive divergence bounce.

Note Added 9:59 AM:  VIX is 14.08 moving higher only 19 pennies from the bull-bear line in the sand at 14.27 that would create broad market selling. JJC 39.12. TRIN 1.22 actually favoring the bears today. SPX 1668.87. HOD remains at 1671.00.

Note Added 10:42 AM: VIX 14.18. JJC 39.23. TRIN 1.15.  SPX 1667.38. Well bears, can you muster-up another 9 cents of volatility?

Note Added 11:22 AM:  VIX 14.09 after printing a HOD at 14.20 thus far today. JJC 38.90 running out of gas now under 39. TRIN 0.97 a touch on the bull side now but call it neutral. SPX 1670.01. The HOD at 1671.00 continues to hold. Price bounced at the open and moves sideways through the strong 1666-1669 S/R zone. The door is open to 1673 R. VIX 14.27 is the key element affecting market direction today. The circus band plays on but a few of the instruments are out of key. Time for a visit to the refreshment stand for a slice of blueberry pie.

Note Added 2:09 PM:  VIX 13.81 so the bears made a run to 14.27 but do not have the juice to push higher, so far. At the same time, JJC is 39.04 so the bulls are unable to push above 39.47 as yet. Thus, a standoff and the SPX floats sideways at the all-time closing high at 1669.16. Bulls print a new HOD at 1671.03, albeit by only 3 pennies from this morning. TRIN is 0.85 firmly bullish so this will help keep the broad indexes elevated today. The SPX 2-hour, 1-hour, 30-minute and 15-minute charts are all negatively diverged across all indicators so the expectation would be for the SPX to roll over to the downside.

Note Added 2:21 PM:  SPX takes out the HOD and runs to 1672. The 1673 is the next resistance so it looks like the bulls want to take a look. The door is open to 1673 since the 1669 gave way. Keystone bot MZZ, an inverse ETF against the mid-caps, opening a new long position.

Note Added 2:28 PM:  VIX 13.61 at the lows for today. JJC 39.05. TRIN 0.84. SPX 1672.95 testing the 1673 R.  HOD 1673.63. The resistance above is 1673, 1674, 1675 and 1687.

Note Added 2:33 PM:  There's the test of 1674 R. Look at it go, now attacking 1675 R. Above 1675 and the 1687 is in play.

Note Added 3:05 PM: VIX 13.84.  JJC 39.03. TRIN 0.82. SPX 1673.55 with HOD at 1675.08. The 1675 resistance, the last chance stand before a move to 1687, held, so far. The SPX and Dow are on track to print a new closing high today.

Note Added 8:27 PM:  VIX 14.01.  JJC 39.07. The SPX closes exactly on top of 1675 resistance deciding if it wants to move to 1687, or not. The SPX prints a new all-time closing high at 1675.02 but not a new all-time high. The Dow prints a new all-time closing high at 15460.92 but not a new all-time high. The RUT prints a new all-time closing high at 1033.18 and new all-time intraday high at 1033.34. VIX 14.27 provides the bull-bear answer tomorrow.