Friday, July 5, 2013

Keystone's Morning Wake-Up and Midday Market Action 7/5/13; Monthly Jobs Report

The quick July 4th Independence Day holiday is already in the rear-view mirror and U.S. markets are set to reopen in a couple of hours. The all-important Jobs Report is 8:30 AM EST with an expectation of 165K jobs versus 175K last month and a slight tick down in the rate to 7.5% versus 7.6% last month. The ADP Jobs Report this week was 188K but due to its erratic history, traders do not appear interested in increasing the consensus number for today. 

The BOE and ECB pumped the equity markets over the last day with talk of easy money saying that 'rates will stay low for an extended period of time'.  The central bankers control the markets so the pound and euro are smacked lower with the FTSE, European indexes and U.S. futures all running higher. The asset relationships remain skewed these days. The lower euro pushes the dollar higher, the dollar index at 84, so commodities, oil, gold, silver and copper are under pressure, which should pressure equities, but instead, the futures are remaining elevated with the S&P's +14, Dow +138 and Nasdaq +28. A couple of hours ago the numbers were even higher. The futures will adjust after the Jobs Report, either pushing back to this morning's highs, or cut in half. A projection is nearly impossible since markets may be disappointed in a low jobs number and sell off, or, view this bad news as good news since the central bankers will keep providing the heroin. Likewise, a very high number over 200K may be priced in to the futures right now, however, a high number indicates that the Fed's QE will taper sooner rather than later, which would cause market negativity. It is sickening to see so-called free markets thrown around by central banker intervention. Perhaps the number will be Goldilocks around 165-170K and simply allow some market buoyancy into the weekend. As always, pay attention to the average hours worked and wages since that tells you if businesses plan to hire. Wages are particularly important since if there is no wage inflation existing, which it has not for many months and years (deflation), than inflation will continue to not be a concern. There is no inflation until wage inflation rears its head.

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 signaling bearish markets for the hours and days ahead, however, considering the big up in futures, the bulls may reverse these signals today. Keybot the Quant is long and tracking GTX 4735, UTIL 480.75 and JJC 39.75. GTX is creating market upside and UTIL and JJC are creating market negativity. Thus, the bulls need either UTIL or JJC, or both, to print above the levels shown and that will verify further market upside ahead. Conversely, the bears need to drag GTX back under 4735 to create market selling. For the SPX starting at 1615, the bulls need to touch the 1619 handle and it will be off to the races higher. The futures currently point this way. The bears need to push under 1605 to accelerate the downside. A move through 1606-1618 is sideways action. 

The drama at the 1618-1625 resistance gauntlet continues but has morphed into two important resistance zones. The 20-day MA is 1616.96, the 200 EMA on the 60-minute is 1618.61 and the 50-day MA is 1624.68. Strong S/R is 1614, 1618, 1623, 1626-1627 and 1636. Watch the price movement through the bracket formed by the 20-day and 50-day, a range with 1625 as a ceiling, and 1617 as a floor. The move out of this range will verify the market direction forward. Grouping the above levels into clusters, the 1614-1619 level is key, and then the 1623-1627 range, then 1636. The bulls will target 1627+ since that will light the way to 1636. Bears will try to hold the 1623-1627 resistance gauntlet with all their might. It will not be surprising to see price dance around the 50-day at 1624-1625 all day long.

Note Added 7:35 AM:  Jobs Report hits within the hour.  S&P's +13.  Dow +125.  Nasdaq +26. Euro 1.2880.  Dollar/yen 100.02. The 10-year yield is 2.56%. Euro is down so dollar is up ($USD sitting at 84) and gold, silver and copper are pushed lower. However, oil is up on the Middle East unrest, WTIC crude oil at 101.92 and Brent oil at 106.68, and ag commodities are buoyant. The further beatings of silver and gold this morning may provide further attractive areas to enter long trades. Market moves may be dramatic today since thin trading is anticipated.

Note Added 8:39 AM:  Jobs number is 195K and 7.6% rate. Average hourly earnings are up a touch so that hints that new hires may be needed moving forward. The number is Goldilocks, high enough to indicate that the economy is hanging in there and perhaps showing improvement, while at the same time not over 200K so tapering of QE is not a worry. The futures jump to the overnight highs. S&P's +18. Dow +161. Nasdaq +28. The 10-year yield jumps to 2.66% which may place pressure on utilities and rate sensitive stocks today. Looks like the SPX should blow through the 1623-1627 gauntlet and set its sights on 1636 resistance. The bulls are running today.

Note Added 9:01 AM:  S&P +13.  Dow +122.  Nasdaq +20. Dollar 84.44 breaking higher. Euro 1.2809 breaking lower. Dollar/yen 100.80. Gold 1223. The 10-year yield is 2.69% breaking higher.

Note Added 9:07 AM:  Futures leaking lower. S&P +8. Dow +78.  Nasdaq +13. The 10-year yield is 2.70%. The weakness in the last few minutes indicate that that fight today will be at the 1623-1627 resistance gauntlet with the 50-day MA at 1624.68 the key focus.

Note Added 9:57 AM:  The SPX stumbles across the 50-day MA at 1625.59. TRIN 0.90. The three key parameters driving market direction, GTX 4735, UTIL 480.75 and JJC 39.75, are status quo, so SPX moves through the 20-day and 50-day bracket, 1616.88-1625.52. Price makes a big decision when it exits one side or the other. Keystone bot more PBR adding to this ongoing speculative long position.

Note Added 10:26 AM:  The broad indexes slip negative after all the one and one-half day's joyousness in the futures. One day is stranger than the next. The SPX falls under the 20-day MA at 1616.21 which is a strong negative. Utilities are selling off today as the 10-year yield moves higher. GTX remains bullish while UTIL and JJC remain bearish so status quo remains with the market indecisiveness and sideways behavior continuing. SLV is very attractive right now as a long with price at 18.14. Keystone's 80/20 rule says 2's lead to 8's so 22 leads to 18 and 18.20 leads to 17.80. The 17.82 would lead to 17.78. It would be nice to snag SLV in the 17.6-17.9 area, if it comes down further, for a potential long play. It may require patience until after lunch time for SLV to find its low.

Note Added 10:34 AM:  The SPX is up again at 1618.72 fighting with Keystone's 200 EMA on the 60-minute chart at 1618.65 that determines bullishness or bearishness ahead. The 20-day and 50-day bracket is back in play again at 1616.73-1625.46. Note the HOD is 1627.06 testing the critical 1627 overhead resistance highlighted this morning, resulting in price failure. The 8 MA heads higher towards a potential bullish cross of the 34 MA on the 30-minute chart so bears have to push equities sharply lower now to avoid relinquishing this signal to the bulls. The 8 MA is 1616.28 so if the SPX stays under here or lower it will curl the 8 MA back to the downside and markets will weaken. If the SPX stays at 1618 and higher then the broad indexes should float higher all day long.

Note Added 1:52 PM:  SPX is 1625.17. The 50-day MA is 1625.60. The dance continues. Volume is very light at a run rate of only one-half a day's average expected volume and should be one of the lowest volume days this year. Traders have obviously chosen to take an extended weekend and the wild market swings today are attributable to thin trading. The SPX is above the 200 EMA on the 60-minute chart and the 8 MA is above the 34 MA on the 30-minute chart signaling bullish markets for the hours and days ahead but markets remain very dicey and indecisiveEgypt violence appears to be growing with gunfire and grenades heard in Cairo. Markets tend to be bullish from the last day of the month through the first four days of the new month which ends today. Interestingly, the new moon is Monday and markets tend to be bearish through the new moon. There is also increased risk of military action over the coming days since this is the darkest time of the month. GTX is 4795 well above 4735 creating market bullishness. UTIL is 474.60 well below the 480.75 danger level and JJC is 37.60 well under the 39.75 danger line both creating market bearishness, status quo, so markets stumble sideways. Looks like today's main gauge will be if the SPX closes above the 50-day MA, or not. SLV is sticky at 18.15 today; it is likely an attractive long here or lower. NEM is sold hard today and very attractive for a long as well.

Note Added 2:14 PM:  There's a push through the 1627 resistance; the 1623-1627 guantlet.  If the bulls can hold 1627 as support they will target 1636 next. HOD now 1629.05 which is resistance.  SPX S/R is 1626-1627, 1629, 1631, 1634 and 1636. TRIN 0.75.

Note Added 2:45 PM:  VIX has dropped from 22.00 to 15.24 over the last nine days and is now testing the 50-day MA at 15.22; the inverse of the SPX that just moved up through its 50-day MA. The 200-day MA for VIX is 15.06 so this 15.06-15.22 is very important for VIX. If it holds, the bears remain in business. If the VIX drops through and closes under 15.06 today that is a huge win for market bulls. Keystone's algo, Keybot the Quant, identifies VIX 14.25 as the bull-bear line in the sand. Thus, a drop under 15 signals further upside for markets and an even lower move under 14.25 will send the SPX well up into the 1630's and 1640's. What say you VIX?

Note Added 3:41 PM:  VIX is 15.33 remaining on the equity bear side of 15.06-15.22. SPX is dancing around the 50-day MA at 1625.65. TRIN at 0.76 and thin volume keeps the bulls in the driver's seat today. Keystone bot more CLF adding to this ongoing long position.

Note Added 3:55 PM:  Bulls are pushing for a happy close.  Keystone shorted more donuts, increasing the short KKD position. Also bot SPXU opening a new long position.

Note Added 4:00 PM:  SPX ignores Egypt and closes at the highs between 1631 S and 1634 R. VIX is 15.09 under its 50-day MA but remaining three pennies above the 200-day MA. Sunday evening may be interesting depending on how Egypt goes over the weekend.

Note Added 9:55 AM on 7/6/13: VIX settles at 14.89 after the dust cleared, under both its 50-day and more importantly, 200-day, MA's. Watch this closely at Monday's opening bell.


  1. What's your take on WLT lately KS? thanks

    1. WLT remains attractive but it is a dangerous one. The gold, silver, coal, mining, metals, and shipping sectors are all attractive. Charts are indicating positive divergence and price basing at these levels. XME ETF provides broad exposure to the mining and metals moving forward into the intermediate term (weeks and months). Insiders are buying in WLT, NRP and X but that may be a red herring. WLT has been targeted for takeover for the last couple years so that is at play as well. So, it is simply another speculative trade. Coal should receive a recovery move going forward. Once the shorts start covering that would create a stronger base.

    2. Agreed, I have made some nice trades on it for dimes, just hesitating on holding any shares...9.88 was the bottom and it can't seem to hold 10.50 for too it got a nice spank and the 10.20 is the key hold...interesting what next week will bring

  2. Let's hope the coming New Moon brings some news to the bears.

    1. The Moon Phase link in the right margin shows 3:15 AM EST (New York) time as the new moon on 7/8/13. So that is interesting, the new moon occurs through the night from Sunday evening into Monday morning's opening bell. Perhaps Sunday evening and overnight futures will be active as the weekend draws to a close. It would also hint that today's prices may serve as the highs thru Monday and/or Tuesday, but, like all other indicators, it is only one tool in the tool box. Egypt is looking shaky.

  3. KS, you said that 1636 will be the next target...
    Does this means correction is over since the low of 1560?
    Are we heading 1720s?
    If we are, then it is not too late to get long?

    1. That’s a toughie since you can only answer that question depending on your risk tolerance, capital, time frames, etc…, but a general answer always provided is to simply follow Keybot the Quant for an answer on market direction. The algo is not designed to catch tops and bottoms but rather travel through the trading year with the lowest risk possible while generating the most attractive return. The markets are too erratic right now and can break either way in the days ahead. So, Keybot is currently on the long side.

  4. KS,

    Any thoughts on DNDN up here. I opened a spec position after you mentioned it a few weeks ago. It's been a fun ride up and I'm thinking she has a real shot of closing the 5/8 gap @ $4.74. Wishful thinking/daydreaming of island living has it making a run to close the 8/3/11 gap...lmao

    Happy 4th and have a couple Yuenglings,
    you deserve it :)

    1. Minute and hourly charts look like its peaked for now. Nothing wrong with ringing the cash register and reentering lower. If it runs, there are always a lot of other fish in the sea.

  5. KS-

    After the S&P 500 bounced from the 1560 level in June, and started its run to todays level, we expected a run up to 1637 and then price roll-over down to ~1580.

    That felt like it was so long ago, since we have been fighting for the 1614 and 1618R gauntlet for so many sessions now; however, since we are approaching the 1637, do we still anticipate rollover from 1637? After I saw Friday's session, I was pretty surprised to see VIX hammered below 15. The technical trend seems to point to a significant melt-up. I just wondered about the rollover from 1637 since it was mentioned recently.


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