Wednesday, October 23, 2013

Keystone's Midday Market Action 10/23/13

Watch UTIL 498, JJC 40.21, SOX 488.95 and VIX 14.79. Semiconductors collapse today which is ushering in market weakness. Utilities continue higher on lower Treasury yields. Keybot the Quant flips to the short side today but the move is tentative so far. SOX is already staging a come-back above 488.95, see if the bulls can recover semi's today, or not. Keystone took profits on the SSG long trade (short semi's) exiting the position that was entered yesterday for an overnight +6% profit. Will look to reenter.

Note Added 11:32 AM:  SOX 489.49 above the 488.95 bull-bear line in the sand. Bulls are trying to recover. JJC 40.13 under the 40.21 bull-bear line in the sand. TRIN 1.34.

Note Added 12:05 PM:  UTIL 503.93. SOX 491.09. JJC 40.05. VIX 13.90. Market bears stay in the game on the short side and are not concerned as long as copper remains weak (JJC under 40.21). Bears need to turn the green parameters red to push markets lower while the bulls need to push JJC above 40.21 and they can pop the corks on the wine bottles again.

Note Added 12:13 PM:  The 8 MA drops under the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours ahead. Monitor this cross to see if it holds today, or not. JJC 40.05.  SOX 490.86 one-point on the bull side supporting the broad indexes, like a lamppost propping up a drunk on the street corner.

Note Added 2:48 PM:  UTIL 504.37. SOX 490.04. JJC 40.00. VIX 13.54. Status quo. Markets will not leak lower with SOX above 488.95Chairman Bernanke keeps the VIX beach ball underwater today (reference Keystone's Sunday Funnies comic by typing 'vix beachball' into the search box to the right) which is the main goal of the Fed--crushing volatility to keep equities pumped up.  Note the drop in the VIX over the last hour that creates the slight buoyancy in equities. SPX 1748. The bulls are turning the 8 MA upwards on the SPX 30-minute to try and create a positive 8/34 MA cross, but, for now, the 8 remains under the 34 signaling bearishness for the hours ahead. Bears need SOX 488.95. Bulls need JJC 40.21.

Note Added 3:31 PM:  SPX 1745. A standoff between copper and semi's continues. Keystone shorted RTH opening a new short position that shorts the retail sector.

Note Added 3:36 PM:  Keystone bot EUO opening a new long position which is a 2x inverse ETF that shorts the euro. Reference this morning's chart for the euro ($XEU). The weekly chart on the euro likely wants another high ($XEU) which corresponds to another low for EUO, and the dollar likely wants another low ($USD) to correspond to the higher high for the euro, however, a quickie bounce is perhaps on tap for EUO (spank down for euro, pop for dollar). EUO would have to be a nimble trade, looking for a bounce, then exit, then reload maybe a week from now. If the trade goes the wrong way (if the euro keeps going higher to 1.38, 1.39 non-stop), then likely hold EUO and add to it a week or two from now.

Note Added 3:43 PM:  UTIL 502 on verge of a 501 handle. If you are bearish the markets, you want SOX under 488.95, but also, you want UTIL sub 500, and sub 498, and lower, into the 480's, since this will indicate major trouble for equities moving forward. If bullish, you need to keep pumping semi's, utes and copper higher and crushing volatility lower. The 8 MA remains under the 34 MA on the 30-minute signaling bearishness ahead but it is touch and go with both moving averages traveling parallel to each other. This means the opening bell tomorrow will have huge importance for markets. SPX sits at 1746. SOX 489.99.

13 comments:

  1. support zone from 1730 to 1740

    http://stockcharts.com/h-sc/ui?s=$SPX&p=60&yr=0&mn=1&dy=15&id=p61061421519&a=312297654&listNum=4

    charts support a bounce or at the least sideways consolidation for a day or two

    ADX suggests another move higher before a sell signal

    http://www.flickr.com/photos/75188609@N07/10441790375/

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    1. the fly in the ointment is the SOX getting hammered which may be why keybot flipped today so fast...?

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    2. Yep Scott the negative divergence on the hourly charts finally rolled it over a little bit. The ADX moving up in May as the SPX topped was at 40 and that move up in the ADX showed that a strong uptrend was in place. not anymore. ADX is challenged in the 20's not signaling the strong up trend like previously. if ADX comes back up as shown in the chart to same levels that would verify the strong uptrend in place so that would push SPX upwards over time to the 1800 targets. Since SPX is well higher than May but ADX not enthusiastic, the thought would be that markets sell off and then ADX may climb as markets sell off thus verifying a strong trend but in the downside direction instead of up. So, just have to keep an eye on it. JJC (copper) was more important for Keybot today, semi's were the icing on the cake, but SOX already bakc on the bull side. JJC 40.21 is uber important and likely determining the fate of markets, above and bulls win, below and bears win. Current print is JJC 40.04 causing market negativity. SOX is 491.36 so this can stop the downside, for now. if SOX drops back under 488.95, markets will start dropping in earnest again. Also watch VIX 14.79. Bulls push VIX under 14 now so that helps stop any downside market action as well.

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  2. http://stockcharts.com/h-sc/ui?s=$SPX&p=60&yr=0&mn=1&dy=15&id=p63875859780&listNum=4&a=312297654

    possible small HS forming on the 60 that could measure to 1725ish which would be regression support

    right now though I think spx the linear regression data suggests that price will hold above 1740

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    1. SOX 488.95 is key, SPX may lose the 1740-ish if semi's fail but will not if SOX remains elevated. VIX is getting muscled lower which is maintaining the lift in equities. SOX at 489.96 teasing all day long, dancing along the edge of the cliff only one-point from falling down the canyon. Will the SOX slip on a loose rock, or not?

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  3. KS, I come for the technicals but I stay for the color commentary... :)
    "like a lamppost propping up a drunk on the street corner." LOL

    " Like a blind man in an orgy, I was gonna have to feel my way around." -Leslie Nielsen, the naked gun

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    1. That's funny. Some folks are rooting for red socks (SOX) today and some will be this evening (World Series).

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  4. KS, interesting article on coffee prices today:
    http://www.ibtimes.com/coffee-beans-market-watch-2014-1436836
    Both GS and WSJ saying prices could fall further to $1 a pound from $1.20 next year, producing a long-term bottom. Meantime, JO is at its lower BBs on the daily and weekly charts.

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    1. It continues to be a fave moving forward--as it keeps dipping to new lows. Weekly JO chart all set for a launch to the upside with possie d. Daily chart leaking lower in the VST time frame but possie d in the one-month or so time frame, sans RSI. So price likely to base across this area now. 22 is key since 80/20 rule would say 18 may be on tap. No one wants to see that. 22.20 would lead to 21.80. Price is at 22.45 right now. LOD 22.40. Like it in here but as always its a knife-catch. Will probably add as the days move along, perhaps waiting one to three days to see how price settles. Would be a nice set up if 22.20 would hold.

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  5. KS, question regarding SPX/VIX ratio.
    Looking back at previous corrections (10% type), the SPX/VIX ratio appears to front run a decline sometimes weeks in advance with a steady downtrend. The behavior of the ratio over the last few months is more like a zig-zag with a slight rising bias.
    I am not sure if the ratio is even relevant anymore, but I thought I'd ask. Reason being that I see a lot of people (not on this site) referencing past corrections (2007, 2011, etc) and comparing them to our current market and I just don't see any resemblance. The SPX/VIX ratio would seem to support a market that is trudging higher. thanks KS!

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    1. Indeed!
      if 1754 and after that 1779.52 are taken to the upside, a VERY bullish porn action into the end of year (to approx. 1925-1965 into end of december 2013) is preparing.
      it's all about bankers' bonuses if you know what I mean .... what is coming into january 2014 it's another thing :)

      V.

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    2. On the SPX:VIX ratio, the last significant corrections were in 2011. The longer term chart hints at what you describe, the SPX:VIX ratio tends to peak ahead of time but do not read a whole lot into that. As markets top out, the complacency is at a max, as highlighted the last few days with the put/call ratio's and the low VIX. As VIX moves lower, it is in the denominator of the SPX:VIX ratio, so this catapults the ratio higher and explains why the ratio tends to peak ahead of the markets. But it is not a very useful indicator. Youcan simply watch the VIX, CPC and CPCE to draw the same conclusions. Use the 68 level for the SPX:VIX as a crash signal and we are well elevated above there. Things can change quickly and the ratio can drop dramatically. Note that the SPX:VIX did peak as August began, almost 3 months ago, so this would be consistent with the 2007 and 2011 topping action.

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  6. The low COC and CPCE put/call ratio's must be respected. The complacency is off the charts and readily obvious in the media each day with nothing but wall to wall stock recommendations of stocks moving higher. We remain in a secular bear market 2000-2018 as per the 18-year cycle, the most reliable cycle. So the bears have opportunity to growl very strongly at anytime over the next 5 years. The current rally off the March 2009 bottom is now over 4-1/2 years long, very long by historical standards, one of the top five longest bull runs in the history of the markets. All of Keystone's cyclical indicators (reference the signal pages on this site) show the bullishness in place a long time and a reversion to the mean is desperately needed. Now would be as good a time as any.

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