Monday, October 14, 2013

Keystone's Morning Wake-Up and Midday Market Action 10/14/13; Shutdown Day 14; Debt Ceiling Limit 3 Days Away

Happy Columbus Day. As Columbus's right-hand ship-mate exclaimed while peering through his telescope from the ship deck, "Is that Ohio, Columbus?, or Columbus, Ohio?" Happy Thanksgiving to all our friends up north in Canada. The stock market is open but the bond market and banks are closed today. Since Treasuries are not trading, the utilities sector may maintain a flat posture today (reference this morning's chart). Politicians promised a pony last week and the markets responded with an orgy of upside, however, Monday morning arrives with a donkey honking 'no deal, no deal'. President Obama rejected all the House suggestions. Senate Leaders Reid (democrat) and McConnell (republican) meet to discuss solutions but their talks broke down yesterday. The budget talks are back to square one. Following the typical political clown playbook from years past, the Senate will likely come to an agreement with a plan, perhaps a short-term extension of the debt ceiling, and shove it down the House's throat on Tuesday, Wednesday or Thursday, for a vote that determines the fate of the markets. This is reminiscent of the vote during the Fall 2008 crash that failed and precipitated the market crash. This type of vote ends in a Julius Caesar-style thumbs up, or thumbs down, where the Dow can explode up 200 or 300 points, or collapse down 200 or 300 points, or more. The 10/17/13 debt ceiling deadline can likely be extended a week or two so it would not be surprising to see this drama continue into the following week. It will be an interesting and epic week for the stock market ahead.

S&P futures were off -17, Dow -135 and Nadaq -27 last evening but overnight the political rhetoric was softened with encouraging words from Reid and McConnell, despite the break down in talks, so futures recover to S&P's -12, Dow -104 and Nasdaq -16. OpEx Monday's are typically bullish. Earnings kick off in earnest this week with GHL, JBHT, PKG and ZNGA providing interest. JBHT is trucking and PKG packaging and cardboard so they provide insight into the health of the economy, or lack thereof. GHL provides insight into the M&A market. Lots of Fed heads are out talking this week, every day, so look for lots of spin. The non-free markets will move this week based on continuing Fed and global central banker intervention and the political budget crisis talks, economic data and fundamentals be d*mned. These are not your grandfather's markets.

Keybot the Quant is long but markets remain erratic and unstable. Watch JJC 40.19, VIX 15.00, GTX 4888 and XLF 20.02. Very simply, if bulls can take JJC 40.19 and/or VIX 15, equities will move far higher. If bears can take GTX 4888 and XLF 20.02, equities will move far lower. Equities will move flat today if all 4 parameters remain in their respective bull and bear camps. For the SPX today starting at 1703, the bulls only need to see a smidge of green during the session and the upside will accelerate to test the strong 1706 resistance, then 1708 and 1710. Reference the SPX weekly chart on the weekend that highlights recent weekly closing numbers at 1710 that form a serious upside line in the sand for markets. The bears need to push under 1689 today to accelerate the downside. A drop of 10 or 12 handles at the open would target the strong 1691-1692 support, short of the 1689 the bears truly need today to gain downside momo. A move through 1690-1702 is sideways action for today. Markets are at the mercy of the Washington Circus. Welcome to another week under the Big Top.

Note Added 8:57 AM:  S&P's -12.50. Dow -107. Nasdaq -19.  Gold 1284. Copper trading higher. Oil lower. Dollar/yen 98.11.  Euro 1.3589. The politicians are likely telling underlings to go long the market after the opening drop since they will take the podium today and announce happy news. That's how the politico's end up with lavish summer homes; the kings of insider trading.

Note Added 10:24 AM:  SPX drops to the strong 1691-1692 support and bounces. Market bears need sub 1689 to gain mojo. JJC pops above 40.19 which will create market bullishness but GTX falls under 4888 creating bearishness, thus, a net wash. Utilities drop with UTIL at a 485 handle. Note that the 50-week MA is 484 which would cause another leg lower in the broad indexes today (reference this morning's UTIL chart and technical analysis). JJC 40.19, GTX 4888 and UTIL 484 are steering the market ship today. LOD 1692.13 so watch this number closely. A 1691-1692 failure would test the 1689 support, then down to the strong 1685 support and likely lower if 1689 fails today. TRIN is 0.80 supporting the bulls today despite the market negativity. The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullishness for the hours ahead, however, the 8 MA has curled to the downside heading for a potential negative cross this afternoon. The SPX is above the 200 EMA on the 60-minute at 1683.36 signaling bullishness for the hours and days ahead. This 1683 support gels with the strong 1685 support to form a gauntlet at 1683-1685. The 50-day MA is 1678.12. The 20-day MA is 1693.18 so watch to see if price drops down into the sideways 20-day and 50-day MA bracket moving forward, 1678-1693, or not.

Note Added 10:41 AM:  UTIL is 483.74 losing the 50-week MA at 484 so equities should remain weak moving forward, at the least this action will place a lid on the market upside for now. TRIN 0.90.

Note Added 11:27 AM: UTIL 484.92 recovering so equities float a touch higher. TRIN 1.02 now guiding markets towards the bear side by a hair. SPX is coming up to test the strong 1697-1698 resistance.

Note Added 2:07 PM: Leader Reid speaks optimistically about a resolution to the budget talks so equities march higher. GTX is 4905 well over 4888 supplying bull fuel which provides the bulls the edge today. UTIL 487.47 running higher. With commodities and utes running higher, there is no lid on the market upside. Reid and McConnell both appear on the Senate floor minutes ago further pumping the idea of a political resolution to the budget crisis. Equities move higher on the happy talk. Of course the politicians bot the market at today's low and now pump equities higher in front of the television cameras so they can collect easy profits. Life is good for the insiders. SPX punches up through the strong 1706 resistance. Resistance above is 1708 then the 1710 which is the weekly closing and intraweek highs over the last two weeks. If 1710 gives way, 1722 is likely. SPX is trying to establish a beach head at 1708 right now. Market bears need to push the SPX under 1706, otherwise, they will fold like a cheap suit. There is a meeting with President Obama and Congressional leaders at the Whitehouse at 3 PM which will provide further market drama.

Note Added 2:22 PM:  Here's the test of the critical SPX 1710. HOD 1709.61. TRIN 0.61 strongly bullish for today. Traders nearly universally believe that markets will continue higher, and they are. SPX may park at 1710 and wait for the Whitehouse meeting to decide if 1722 is next, or 1697-1698.

Note Added 3:04 PM: About 20 minutes ago, the Whitehouse meeting is postponed. The SPX drops to test the strong 1706 and bounced since the politicians continue to talk up an imminent deal; they simply need a little more time on the details. Thus, price moves through the 1706, 1708 and 1710 S/R as the drama plays out. VIX drops a touch under 16 which will create more bull energy. Most parameters are bullish sending the markets higher today. TRIN 0.63 creating the bullish thrust today. The market bulls need the VIX to drop under 15 and new all-time market highs are assured. The bears can only stop the upside with GTX under 4888, or UTIL under 484 or SPX under 1706.

Note Added 3:13 PM:  Bulls are pushing hard taking out 1710 resistance, however, the SPX 2-hour and 1-hour charts are negatively diverged wanting to see a price drop ahead. The 2-hour chart shows the RSI not in overbot territory so that would leave the door open to another push higher after, and if, the pull back occurs for the hour or three time period ahead. The SPX is testing the important 1710 resistance (reference the SPX weekly chart from this weekend) now up through to a HOD at 1711. Traders are optimistic today over the perceived imminent political solution. OpEx Monday bullishness surfaces today as well. The 1710+, if it holds through the close, should lead to 1722.

20 comments:

  1. Hi KS!

    I don't really have the feeling that they won't resolve ALL until Thursday. I'm not on the bearish side ....too dangerous...
    But, I might be wrong , of course, and today/tomorrow might be a huge bearish reversal day in front of Thursday.

    V.

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    1. also , there is another aspect in play now ...bears know that now it's the opex week and I don't know how much bears will touch shorts.
      even that might free all the shorting devils in the market but bears will only watch, without participating (fear of chasing waterfalls).
      that's also a possibility.

      V.

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    2. Yep V, it is all a crap-shoot right now. Flip a coin. During OpEx, Mondays are typically bullish, Columbus Day holiday typically bullish as well. A Tuesday low leads to a Wednesday high usually for OpEx week. Full moon Friday so stocks may be bullish thru the weekend. So the bulls continue to receive the nod. Even if the budget mess is resolved, the focus will be on earnings which have not started out well with the banks missing top lines, YUM, the China bellewether weak, and so forth, so it may be a sell the news event. The weekly closes are key and that 1710 level may need tested today or tomorrow and that would likely tell a lot. If UTIL goes sub 484, that should cast a pall on the market moving forward. Whoopsies daisies. UTIL is 483.59 and the 50-week MA is 484.07 so this should create some further market weakness today.

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    3. Hey KS,
      check out this news:
      http://www.zerohedge.com/news/2013-10-11/cme-hikes-e-mini-and-big-sp-nasdaq-and-dow-jones-margins

      at CME the margins were hiked on Friday and that usually bodes for a not-to-bullish future for stocks (or assets , generally).

      V.

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  2. http://stockcharts.com/h-sc/ui?s=$SPX&p=W&yr=2&mn=0&dy=0&id=p92850912163&listNum=2&a=289471133

    this is similar to the wave count I was talking about last week - looks to be right...

    http://www.thewavetrading.com/wp-content/uploads/2013/10/spx-60-min1.png

    I have equity strength indicated until the end of the month - 28th/29th?


    this is looking pretty bullish and supports the roadmap I drew the other day...

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    1. Coincides with the next Bradley turn date-11/3.

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  3. http://stockcharts.com/h-sc/ui?s=$SPX&p=60&yr=0&mn=1&dy=0&id=p84655483392&a=312297654

    hitting the gap at 1705 - took longer than I thought but here we go -

    what happens here is o so important - lol

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    1. http://stockcharts.com/h-sc/ui?s=$MID&p=D&yr=0&mn=6&dy=0&id=p04277151724&a=279010633&listNum=6

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    2. Both charts now showing negative divergence universally across all indicators.

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  4. Scott-R u seeing the mkts go higher from hereon or is there a pull back first to 1680-1690 region? BS

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    1. we had the pullback - now we need to move through the gap at 1705 to confirm the c move to test the highs - I am of the opinion that how ever the waves play out 1750 to 1800 is what we see before a serious correction

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    2. Had a dream a month ago 1805 was the number.

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  5. http://stockcharts.com/h-sc/ui?s=$SPX&p=W&yr=6&mn=0&dy=0&id=p69430664526&a=308399180

    I did a chart about a year and a half ago...lol

    do your dreams come with standard deviations?

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  6. Here's the test of the important weekly numbers at 1710 resistance.

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  7. http://stockcharts.com/h-sc/ui?s=$INDU&p=60&yr=0&mn=1&dy=0&id=p80886933393&a=319046691

    dows turn to turn or not lol

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    1. Interesting Scott, neggie d across all indicators just like the SPX. Here's price tapping at 1710 again, bounce or die. 1-hour and 2-hour charts are all negatively diverged wanting to see weakness ahead but the RSI on the 2-hour did not reach oversold territory as yet--this leaves the door open to another move up to the 1710 area after and if the spank down occurs in this one hour time frame as the charts suggest.

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    2. http://stockcharts.com/h-sc/ui?s=$SPX&p=15&yr=0&mn=0&dy=12&id=p98227054658&a=318198736

      this is a concern also - measures slightly below 1690 if it does breakout

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  8. Scott,
    Could you please give a small description or explanation like Keystone did whenever you post a chart...greatly appreciated!

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    1. sure if you send me a donation like you do Keystone! lol - spend some time with the charts and they will make sense

      I dont have the time to post an explanation usually

      pretty bullish eod

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