Keystone's Morning Wake-Up 7/17/13; Chairman Bernanke House Testimony

The futures were flat to down but as soon as Chairman Bernanke's comments hit the wire, the markets jump higher, the S&P's are pointing to a +6 opening. Housing Starts were weaker than expected so that may be encouraging bulls as well since bad news is good news in these twisted markets. BAC earnings beat on EPS with a slight miss on the top line but it is trading up pre-market, along with BK, and encouraging the bulls. Mortgage Applications continue the downward trend with less refi's although mortgages are flat to slightly higher. Bernanke's Q&A session begins at 10 AM EST so that will nudge markets to and fro. Oil Inventories are 10:30 AM. Beige Book is 2 PM which should create a market pivot. Heavy-weight tech hitters EBAY, INTC and IBM are at bat after the closing bell so tech may stumble sideways awaiting the results. Traders give the YHOO results last evening the benefit of the doubt as it trades higher this morning. CSX earnings beat and it trades up so this will encourage the coal sector.

The 8 MA is below the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours and days ahead, however, an upside thrust at the opening bell may chart the course for the bulls to reverse the 8/34 cross back to the bull side. VIX 14.20 remains key. Very simply, bears win above 14.20, bulls win below 14.20. For the SPX starting at 1676, the bulls need to touch the 1684 handle and the all-time high at 1687 will be quickly tested and likely give way to the 1690's. A +6 move in the SPX would set up the 1682-1684 test. Bears need to push under 1672 to accelerate the downside to the strong 1669 and 1666 support levels. A move through 1673-1683 is sideways action today. Watch the 8/34 MA cross on the 30-minute, VIX 14.20, SPX 1684 and SPX 1672 to determine market direction.

Note Added 9:05 AM:  S&P's +7.

Note Added 9:47 AM:  Here is the test of VIX 14.19-14.20 that determines who wins today. Bounce or die.

Note Added 10:29 AM:  Bernanke is set to speak but they are having trouble with the audio microphone so the Q&A is delayed....here we go...... VIX 14.22 bearish by a hair. TRIN 0.91 slightly bullish.

Note Added 10:31 AM:  VIX 14.17 now testing the critical 14.19-14.20 again. TRIN 0.91.  SPX 1682.75.

Note Added 10:37 AM:  VIX tumbles to 14.10 so SPX jumps to touch 1684 and HOD at 1684.75. TRIN 0.95. Bernanke has the magic touch; looks like the all-clear signal for bulls is given as the testimony begins.

Note Added 10:46 AM:  The bears are tenacious. The SPX could not hold 1684 now printing with a 1681 handle. VIX 14.20. TRIN 1.08. Use VIX 14.19 as the line in the sand today that will dictate market direction.

Note Added 11:16 AM:  It is a circus today. VIX now back below 14.19 at the lows at 14.06 which makes for happy bulls. TRIN 0.96. Jumpy markets continue as Bernanke continues to take Q&A. The euro is leaking lower sending dollar higher and gold lower. Donuts (KKD) are weak and coffee (JO) is strong.

Note Added 11:45 AM:  SPX 1680.71. HOD remains at 1684.75 rupturing today's upside bull target at 1684, however, it could only hold a couple minutes before failing. VIX 14.08. TRIN 0.87 becoming more bullish. Bernanke testimony continues. Interestingly, he has mentioned  that increased purchases are possible due to weak economic data, however, he just said "the Fed may increase purchases 'for a time'." For a time is a whole new ball game. Bernanke is admitting that QE Infinity is not inifinity and that he cannot continue on the current path indefinitely. This takes bluster out of the euphoric dovishness but will anyone in the the main stream media notice this faux pas?  An increase in purchases could only occur for a time. The comment will likely go unnoticed.

Note Added 12:09 PM: SPX 1680.18. Price is playing around with a descending triangle on the 1, 2, 3 and 5-minute charts with triangle base line at 1679.50-ish. A drop under 1679 should pave the way to a test of the 1672-1674 support area. VIX is 14.05 so it does not want to see the SPX drop any further. Ditto the bullish TRIN 0.88.  Markets are stumbling sideways. Volatility says the bulls are winning so far today.

Note Added 12:20 PM:  SPX rises over 1682 so that negates the descending triangle pattern mentioned. The price move today is lots of sideways through the 1679-1684 range, so bulls win above 1684, bears win below 1679. VIX drops under 14 to 13.95 so volatility wants the bulls to win today, so far, however, the minute charts shows a potential falling wedge developing (so VIX may simply be building a new base for price and move higher as the next minutes or hour or two plays out).