Wednesday, September 18, 2013

Keystone's Morning Wake-Up 9/18/13; Housing Starts; Fed Decision Imminent

Fed Day is here. Chairman Bernanke is likely taking advantage of the free buffet this morning to build energy for the afternoon events.  The Fed tapering decision is at 2 PM followed one-half later by Chairman Bernanke's press conference at 2:30 PM. So markets will pivot at 2 PM and remain erratic as Bernanke provides commentary and clarity on the path forward. The consensus is for a 10 to 15 billion per month taper. A 10 billion reduction, would reduce the Fed purchases from 85 to 75 next month, then 65 the month after, and so on, with the tapering take the Fed to zero in June. As the taper missive discusses this morning, Keystone's guesstimate is a 12 billion per month taper not starting until December and ending in June, with an equal mix of mortgage debt and Treasury debt reductions. It is time to place you guesses on the table to see who has bragging rights when the story is written in about five hours.

Markets stumbled sideways yesterday with the SPX stuttering at 1705 unable to punch up through. The 8 MA is above the 34 MA on the 30-minute chart signaling bullish markets ahead, however, the 2-hour, 1-hour and 30-minute SPX charts are more favorable to a rolling over to the downside (see this morning's SPX chart). For today, the bulls only need to see a smidge of green, to push up through 1705.50, and the 1707 gap fill will occur and a test of the all-time highs at 1709.67 in quick order. The bears need to push under 1698 to accelerate the downside. A move through 1699-1705 is sideways action today. Keystone's trading algo, Keybot the Quant, remains long but the caution flag is out. If the VIX moves above 14.64, now only pennies away, and if the SPX drops under 1698, Keybot will likely flip to the short side.


Four key parameters currently determine market direction; commodities GTX 4888, volatility VIX 14.64, copper JJC 39.90 and utilities UTIL 483.35. Commodities, copper and utes are creating market bearishness while low volatility maintains the market upside. The bears need the VIX to move above 14.64. Note that yesterday the VIX closes at 14.53 one single penny under the critical 200-day MA at 14.54 which determines if the bulls rule the markets, or the bears. The VIX 14.54-14.64 gauntlet is uber important today. A move above VIX 14.54 will cause market bears to crack a smile. The bulls need to push commodities, copper and/or utes higher, and this will seal the continued upside market move. Copper is up in early trading today and will send JJC into the 39.70's and 39.80's near the 39.90 bull-bear line in the sand. GTX 4888 must be watched at the opening bell since this will provide a direct read on market direction right away.

Housing Starts are 891K with a slight downward revision last month, a far cry from the one million plus that would typically provide an all-clear signal for housing. A Tuesday low typically leads to a Wednesday high during OpEx week and the nimble traders that caught the 1697-ish low, or even the 1695 low late Monday, are up almost ten handles. Keystone's Eclipse Indicator identifies the current window right now through 10/10/13 as having a high potential for a major market sell off. GTX 4888, JJC 39.90, VIX 14.64 and UTIL 483.35, as well as SPX 1705.50 and 1698, dictate market direction today. At 2 PM, the fireworks begin. The trading day may be slow until the final two hours which will be a circus.

Keystone took profits on the SCO short oil plays exiting the trades. Also took profits on the DNDN long trade exiting the position. Will look to reenter DNDN long.  Also bot SSG, a double inverse ETF that moves up if semi's move down (see this morning's SOX charts), opening a new long position. Also bot DXD, a double inverse ETF that shorts the Dow Industrials Average, opening a new long position.

Note Added 9:58 AM:  The festivities begin with the bears holding GTX under 4888 but the bulls push copper higher with JJC over 40 now in the bull camp. Thus, the market negativity created by GTX is offset by the positivity in copper. VIX remains under the 14.54-14.64 bull-bear gauntlet favoring bulls. TRIN 0.75 giving the bulls the nod today so far. SPX HOD 1706.10 still short of the 1707 gap fill. The bulls are trying to push the SPX up through the important 1705.50 today but so far they cannot attain their goal.

Note Added 10:38 AM:  GTX 4897. TRIN 0.69.

Note Added 12:28 PM:  GTX way up over 4900. JJC over 40. UTIL 481. VIX 14.59, under the 14.64 bull-bear line identified by Keybot, but above the critical 200-day MA at 14.54 which single-handedly causes market weakness despite the higher commodities and copper. The VIX above the 200-day MA is a very bearish market signal so watch this closely today. Markets are idling sideways waiting for the Fed. The VIX is within the 14.54-14.64 gauntlet; if VIX exits the gauntlet below, equities move higher, if VIX exits above, equities move lower. TRIN at 0.73 helps the bulls today.

Note Added 12:40 PM:  VIX 14.68 above the 14.64 bull-bear line which will create market negativity. Can the bears hold volatility higher in the minutes ahead and through the Fed?

Note Added 1:45 PM:  VIX 14.52. JJC 40.15. GTX 4915. UTIL 482. TRIN 0.69. Things are going the bulls way today despite the slightly negative indexes, however, the 8 MA just sliced down through the 34 MA on the SPX 30-minue chart signaling bearish markets for the hours ahead. Markets are at an inflection point with the Fed tapering decision minutes away at 2 PM followed by Chairman Bernanke's press conference at 2:30 PM. Bulls must catapult markets higher right now to reverse the negative 8/34 cross. Place chairs in the upright position and fasten all seat belts.

Note Added 2:01 PM:  NO TAPER!!!! What a shocker!!! The low and no taper folks were correct. The 85 billion per month of purchases, the easy money crack cocaine, continues. Order more syringes. Equities jump up to the SPX 1718 target from the ascending triangle on this morning's chart just like the jump from the Summers news on Monday morning. The SPX prints new all-time highs. VIX plummets to 13.55. The 10-year yield collapses to 2.76%. The 8 MA is above the 34 MA on the 30-minute signaling bullish markets ahead. Dollar drops to 80.60. Interesting, SPX is up 9 or 10 handles right now. This type of shocking positive news you would expect the SPX to be 25 handles higher. Gold jumps 30 bucks higher to 1340. The economy is so bad that the Fed cannot even reduce the QE by a tiny smidge.

Note Added 2:21 PM:  UTIL 490 due to the lower rates. So utilities add strongly to the upside market fuel now as well. All four key parameters mentioned this morning at the top of this missive are bullish. Dow at new all-time highs. Dow and SPX leading higher. The semi's, tech and small caps are surprisingly lagging. A day of surprises. The 80/20 rule played out with 1680 leading to 1720's. The 1718 leads to 1722 and price just blew through that over 1723. SPX is up 18 handles now more in line with the positive surprise. Chairman Bernanke wipes the jelly stains from his tie as he makes his way to the podium.

Note Added 3:04 PM:  There's the 24-handle up move on the SPX, a slow motion melt-up. Bernanke is moving through the press conference taking Q and A without incident. Sounds like QE Infinity continues for infinity. SPX now running towards the 1730 handle. HOD 1729.44. The 10-year yield is crushed to 2.71%, check that, now 2.69%, creating more and more distance from 3%.  Dollar/yen 98.04.

Note Added 3:08 PM:  Traders are running into stocks and bonds spending all the easy money. The 10-year yield is 2.68%. The 'taper' is now pictured on a milk carton.

Note Added 3:15 PM:  Trannies receive a boost from FDX today but it is surprising to see them lead most indexes higher considering higher oil. FDX is +5.3%. The small caps, tech and semi's continue to lag the broad indexes although the small caps are gaining ground. Two TICK numbers today at +1400, that is off the scale bullish. NYAD over +2200. Bernanke really knows how to spike the punch bowl and throw a par-tay.

51 comments:

  1. my bet is a reduction of only 5 bln $ only in POMO (Treasury) and 0 reduction in MBS.
    from 85 down to 80 bln$/month.

    V.

    ReplyDelete
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    1. Interesting V. That would likely create a strong equity rally.

      Delete
    2. maybe KS.
      maybe only to squash the shorts.
      all will observe after that that the QE reduction process has begin.
      I'm in cash as I consider this market untradeable - too high and near the upper BB to enter long now (with so much neg.div.) but the same time allowing a rally in case of a pro-markets FED decision.
      This position is not ok for me.
      If I didn't get long at the right time now it's a dangerous position to get long right now (or during the possible rally after FED's decision).
      I remember that Scott told us that during 20 and 26 sept. a turning window for markets is opened. I'll assess the situation in a few days to find opportunities.
      Now it's too late, I stay in cash.
      GL!

      V.

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  2. If you're not trying to trade every little nuance in the markets, and you're confident in your investment plan, then these are the kind of days to put away the computer and go for a long walk in the woods. See you tomorrow, KS.

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    1. Yep, that is a good idea. The Fed may be a non-event, or the mix of mortgage versus Treasury debt may be the key. The put/call ratio's have yet to create the market selling ahead. Appears that the move may be down for equities, or, if the Fed is Mr. Happy news, a pop to 1715-1730 then roll over. If no taper or a low number, probably higher for a couple weeks.

      Delete
  3. Good morning gentlemen-

    Ironman slept in this morning and decides to take the day off. Keystone, I have a box of glazed Krispy Kremes in front of me as I wait for the main event to kick off. Lol.

    Good luck, I'll sit on the bench in cash with V and my box of KKD.

    FeS2

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    1. Technically speaking we mai have from 1627 either 5 waves up (so we have a full 5 sub-waves wave) or if subwave 3 subdivided 2 more sub-waves to go: one down to 1679-1683 and after that up to 1720-1735 (and that may be all the rise from 1627 or only wave 1 of a larger up wave).
      If it's all the upside we get from 1627 at 1720- 1735 next is low 1520's. (low to medium chances).
      If it's only wave 1 of a larger up wave target is in 1925-1980 area and it will be a multi-months wave (very low chances).

      Anyway, the bull market is not over.
      It's final target is in the 1850-2100 area.
      It's my targeted area since 2012 and I'm holding this target. As time it will be reached in the first half of 2014 (maybe even q1/2014).

      But short-term this market is untradeable for me. That's why now I'm in cash. A few days and the dust will settle and I will be able to see the medium term direction. Now it's impossible for me.
      In a centralized FED coordinated market it can go either way ...up or down.We are not talking here companies balace-sheets or companies results.... we are talking here about the will of a few pigs that bu their decisions impact the US market and the whole world. FU Ben! You and your crazy market-centralized QE ideas!

      V.

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    2. Maybe V, however, remember that at 4-1/2 years, this rally is in the top five length of rallies in all of market history, very long in the tooth. The low put/call ratio's have not flexed their muscles yet either. It is a matter of how far the Fed can keep pumping higher. We will find out shortly.

      Delete
    3. yes, it's a top 5 rally but if you take a look at FED's expansion of monetary base (M1) versus GDP evolution and versus SPX 500 evolution it will give you true chills! Those guys really pumped the market!
      It would be interesting to make an article with a graph of M1, US GDP and SPX 500 since , let's say, 2000 or 1990. They are in full correlation!
      This rally was , is, and will be FED induced!

      V.

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  4. But just for fun, my bet is $5 billion, 30:70 Treasuries and MBS.

    FeS2

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  5. There is a lot of folks calling for the smaller numbers. Maybe that will be it. But it seems that at least 10 should be used since Bernanke had said he would like to see the exit by mid-November, so a max of 9 months is a base of 9 or 10 billion per month or higher to get to zero by next summer. It will be interesting.

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    1. Yes, indeed, it will be interesting.
      I miss Arnie.
      I'd like to see his opinion on a medium or long term.

      V.

      Delete
  6. You might be right, I just said $5 BB because the FED doesnt like boring predictable moves; they always like to do the unpredictable. That should be their slogan;

    Federal Reserve

    Doing the unexpected...for 100 years. Cheers!

    FeS2

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  7. Buy today's selloff, J Yellen is coming to keep the markets roaring for years to come!!!!

    Prestcott B Hayes II

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    1. Hi Prestcott,

      Related to your idea what do you think about this link? It's about changing of FED's chair(wo)men ...

      http://advisorperspectives.com/dshort/guest/Franz-Lischka-130916-Impact-of-Change-in-Fed-Chair.php

      please read it.

      V.

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  8. Looks like President Obama would like Geithner to tkae the Fed Head position but he turned it down again. Poor Yellen, if selected, it is not a ringing endorsement, more like settling for chopped liver. LOL But, she may surprise everyone. She is a smart cookie.

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    1. What happened to EOE? Haha, more labor laws have not helped her case?

      FeS2

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    2. Good call on NUGT off $54.

      FeS2

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  9. http://www.ustream.tv/federalreserve

    FED kept 85 bln.

    V.

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  10. No taper.

    Surprise? No.

    LOL. They're out of their minds.

    ReplyDelete
  11. wow - kaboom! and to new highs we go - TO THE MOON ALICE! LOL

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    1. the VO on both these charts were showing normal decay for the cycle and then boom, back up they went. too funny.

      http://stockcharts.com/h-sc/ui?s=$NAAD&p=D&yr=1&mn=0&dy=0&id=p05610478350&a=313444570

      http://stockcharts.com/h-sc/ui?s=$NYUD&p=D&yr=0&mn=5&dy=0&id=p77733831192&a=312380641

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    2. hahahahaha - rocket fuel at the end of the cycle - good god; my lord; shut my mouth!

      Delete
  12. GDX is about to confirm a major cycle bottom I think...

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  13. Prestcott B Hayes II. I told you guys!!!!

    I have been the only bull on this website for a long time. Follow me to the promise land.

    Be long or be wrong!!!!

    ReplyDelete
    Replies
    1. Gwhat!?!@!@? THE ONLY bull???

      I've been getting kicked in the teeth regularly for my predictions!

      god no one in this culture can read...they are all up in their heads! lol

      welcome to the party Prestcott, even though you cant even spell your own name! ROFLMAO!

      Delete
  14. The Chairman is the decider and he did not want to taper. It is surprising since it confirms that he thinks the economy remains very weak. It will take a while for traders to think this one over. Round 2 is on tap in a few minutes. SPX new all-time highs, and the 80/20 rule is fulfilled, the 1680 did end up leading to 1720's. The 1718 should lead to 1722. HOD currently 1721.82.

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    1. now what??? do we go back to good news being good or is it still bad?? and are we rooting for the good guys or the bad guys?? I am so confused LOL
      Grant

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    2. Simply roll with the flow. If trading over the short to intermediate term, watch Keybot.

      Delete
  15. This comment has been removed by the author.

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  16. completely wiped-out the divergence on the nasdaq AD line and probably will on the NYSE AD as well

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  17. Divergence? What a silly concept....Do people really follow that crap

    ReplyDelete
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    1. Prestcott? is that youuuuuuu? lol crap indeed

      Delete
  18. Someone called me (derisively) a "retailer" for pointing out the bullish relationship between QE and the stock market.

    The Bernanke Fed is blowing another bubble, and this time it's the mother of all bubbles. When it pops, as they always do, the usual suspects will appear to say "who could've seen this bust coming?"

    But, for now it's pretty hard to not see the obvious. And the obvious has been for a long time that Bernanke IS the market.

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  19. all the breadth charts that were already getting pretty bullish are all going to be uber-bullish when they update...

    this one is going to give a strong intermediate buy signal...

    http://stockcharts.com/h-sc/ui?s=$SUPHLP&p=D&yr=1&mn=0&dy=0&id=p03620192205&a=309249836

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  20. Scott, Bernanke Just took a dump on your divergence. LOL

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    1. my divergence? what the hell are you talking about? again I have to say the number of anons here that come out of the cracks to make cracks is astonishing.

      MY DIVERGENCE?...can any of you actually REASON without betraying your evolutionary brain damage?

      what the hell - let me say that again! WHAT THE HELL!???

      Delete
  21. Boy what a market selloff. Wow, I didnt see that coming.

    FeS2

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  22. one of my friends who does really good cycle work told me to load into GDX 2 days ago - I passed because of this chart and how price was well below two important resistance areas and especially because the INV HS had broken down completely.

    http://stockcharts.com/h-sc/ui?s=GDX&p=D&yr=0&mn=10&dy=13&id=p00937676403&a=298220672

    I will be listening to my friend more often...! 10% one day move - lol I make money, he makes wealth!

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    Replies
    1. Good call Scott, you're projection was correct since last week. Shoulda been long. Kudos.

      FeS2

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  23. SOX pattern measures to 520ish and the cycle could extend as far out as to the 14th...very odd days indeed

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  24. Scott,

    Can you clarify "to the 14th"?
    Do you mean October 14th? Sept 14th has passed.

    Thanks!

    ReplyDelete
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    1. OCT... the cycle as I have it has an expiration date between this fri and next fri

      a friend of mine Tony does his a bit different and has an expiration on the 14th.

      If the VO does not fall quickly to the zero line on the two charts I posted earlier, then it is possible for the cycle to go to the 14th and for any pullback at the end to be muted.

      I have an intermediate cycle bottom projection for
      the end of OCT so the coming decline might be sharp and scary but not deep. (?)

      another chart turns bullish - lol
      http://stockcharts.com/h-sc/ui?s=$NYSI&p=D&yr=0&mn=3&dy=0&id=p18570875051&a=278181225

      Delete
    2. Hey Scott,

      On Monday Obama will announce the next FED chairman.

      That will spark something.
      Daniel Wrixon noted the large sold SPY volumes yesterday ... some good old professional trader sold hard the FED spike!

      http://online.wsj.com/mdc/public/page/2_3022-mflppg-moneyflow.html#daily

      They know something.... not sure if related to this Monday or something else unknown (maybe related to Syria, or Debt ceilling, or something else).

      The main idea is that some biggie guys took their money and ran away. Those are not retailers. Think that the retailers shorted! Covering shorts means buy volumes, not negative volumes!

      How do you comment that? MFI (money flow index) is a basic very important indicator.

      KS , what is your opinion?

      V.

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    3. The Fed head selection is such a mess now it is hard to know what to think. Bernanke may end up staying on?

      Delete
  25. Yes good call Scott

    Stopped out 1689

    BB

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  26. Does anyone have an opinion on the money flow data, is it useful information?

    The data shows the SPY got sold hard today, more so block trades which indicates professionals.

    Please advise and thank you!

    http://online.wsj.com/mdc/public/page/2_3022-mflppg-moneyflow.html#daily

    ReplyDelete
    Replies
    1. Yes, it is very useful. On a chart you can simply add money flow, or the Chaikin money flow indicators to the chart and watch for divergences to indicate price direction. You want to monitor trend, momo and money flow that is why at a minimum, 4 basic indicators will cover all bases; the RSI, MACD line and histogram, stochastics and money flow, as most of Keystone's charts display.

      Delete
  27. Anyway,

    Now I'm 100% bullish invested and I won't stop until I won't see my target : 1850-2100 during the fall'13, winter'13 or spring '14.

    That's it!
    I'm done with playing with little waves.
    As long as FED wants to expand the leverage level and the risk taking in the market using QE policy , I'm all in!

    First targets: 1768, 1724, 1779, 1820, 1868, 1928, 1956.
    I don't care of what US will become, all I want is to make money in this market, I'm not here to study ethics.
    If the FED's are that crazy, it's ok with me.

    Show me the money you fools!

    V.

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    Replies
    1. I thought the same thing today. Now the more I think about it, the more obvious it is that a FED taper cannot happen; the illusion would be over. I dont see how you can taper QE4 at this point without a total implosion of the market. Might as well go long and stay long to 1950. Why fight the trend? Even if it is artificial.

      FeS2

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