Thursday, October 24, 2013

Keystone's Morning Wake-Up 10/24/13; AMZN; F; MO; MMM; MSFT

The market saga continues. The bulls run all year long and here we are in October nearing Halloween at all-time market highs. The 18-year stock cycle is the most reliable cycle and markets remain in a secular bear from 2000-2018. Sure does not feel like it considering the over 4-1/2 year bull rally now in place. This type of countertrend cyclical behavior is common within the larger secular moves. This rally is one of the top five longest bull rallies in the history of the stock market. It is reminiscent of the October 2007 top that peaked after a 4-1/2 year run from the March 2003 bottom that was marked by the start of the Iraq War. Yes, sadly, war is bullish. The current secular bear market has 5 more years of life in it despite this continuing over extension to the upside due to the Fed and other global central banker money-printing. No one knows exactly how much fluff and air is under the markets; somewhere between 0 and 50%. The obscene market pumping actions by Fed Chairman's Greenspan and Bernanke have several more years to play out. We have only seen the positive side so far. QE Infinity is losing its effectiveness and is now increasing the debt while doing nothing for the economy as evidenced by the ongoing structural unemployment. The Fed knows this. But, as Alfred E. Neuman says, "What, me worry?"

The low CPC and CPCE put/all ratio charts highlighted on the weekend signal a significant market top at hand and must be respected. Type 'CPC' or 'CPCE' into the search box to the right to bring those charts up for continued study. The VIX was under 13 over the last four days and closed at the lows yesterday at 13.42. No one is bearish the markets. Even those pundits, analysts or traders that wax worry in the media are buying stocks on the long side 10 minutes after their interview ends. Ma and Pa are jumping on board all the market hype placing their life savings into dividend stocks. SDY and DVY charts illustrate the current dividend stock bubble that is long in the tooth and prime for popping. Thus, the anticipation is for markets to place a top over the coming days.


This paragraph is very important. When the markets top off and begin to sell off over the next couple weeks, watch the utilities. If UTIL stays above 500, the market move lower will be tame, similar to September's drop, perhaps 80 or so SPX handles then recovery. This is a good outcome for bulls since equities will recover and probably finish the year strong. Conversely, as equities begin to sell off, if UTIL drops under 500 and heads lower, under 490, and lower under the 50-week MA  now at 485-ish, big trouble is ahead for the broad indexes and this pending market sell off is likely the real deal with -5%, -10%, -15% and even a lot more likely ahead. So monitor the concept in this paragraph over the next month. Of course, if UTIL loses ground at any time moving forward, today and forward, that will bolster the bear case. Watch the 10-year Treasury yield, now at 2.50%. A move higher in yields will typically send utes lower while a drop in yields will send utes higher.


Returning to earth and addressing the day at hand, utilities, semiconductors and copper are dictating market direction. Watch UTIL 498.03 (now above causing bullishness), SOX 488.95 (now above causing bullishness) and JJC 40.19 (now below causing bearishness). Thus, bulls need higher copper for party time while bears need lower utilities and semiconductors to accelerate the market downside. If all 3 parameters remain status quo, the markets will stagger along sideways. Keybot the Quant is short the markets. If JJC moves above 40.19, and SPX moves above 1752, and both remain above, Keybot will likely flip back to the long side. Copper is up a touch in early trading. For the SPX starting at 1746, the bulls need to push above 1752 to ignite an upside par-tay back to the all-time high at 1759. The bears need to push under 1741 to accelerate the downside. A move through 1742-1751 is sideways action today.


China PMI is better than expected. Eurozone, France and Germany PMI's are above the 50 level showing expansion but a touch weaker than expected. The euro pops above 1.38 overnight, then dropped back under, now back above at 1.3804. International Trade and Jobless Claims are 8:30 AM. The JOLTS Job Openings Report is 10 AM. New Home Sales were scheduled for today at 10 AM which would create a market pivot point, but it is unknown whether this release will occur today due to the shutdown?  Natty Gas Inventories 10:30 AM. Kansas City Fed Mfg Index 11 AM. 30-Year TIPS Auction at 1 PM. Notable earnings are AMZN, CERN, CL, DO, DOW, EMN, FLS, F, HSY, IP, LUV, MTW, MO, MMM, MSFT, NBR, PHM, RYN, RTN, RS and UA, so a great cross-section of tech, chemicals, auto's, paper, blue chips, defense, steel and retail.


The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours ahead. Bulls will try to create a positive 8/34 cross at the bell this morning to win back control. S&P futures are +7 and a gap-up would create the positive 8/34 cross. Watch the 8/34 cross, UTIL 498, SOX 488.95, JJC 40.19 and SPX 1752 and 1741 since these parameters dictate today's market direction. Keystone updated the Positions and Picks page mid-week and, perhaps not too surprisingly considering the leaning-bearish meme, there are more potential short plays rather than longs. Interesting and attractive potential short picks moving forward include AMZN, CELG, PXD, DG, LKND, FB, NFLX, IYZ, DPZ, LMT, LOW, CBS and BSX, if they exceed their short entry targets.

22 comments:

  1. Clearly KS is not very well educated when it come to the US economy. To make a statement that the debt is doing little for our unemployment problem is just wrong In 1929 we faced a similar debt implosion and the fed decided to teach everyone a lesson and constricted the money supply. We quickly skyrocketed to 30% unemployment and ushered in a stock market collapse and 15 years of depression. This time the fed acted to delay and temper the disaster by printing money and expanding the money supply. We have 7.5% unemployment rate and a stock market that has doubled. The whole thing may still come crashing down but at least Benanke bought us some time and has allowed me to reap a fortune over the last 5 years.

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    1. Anon, you will be one of the success stories. Cash out of all those longs and reap the rewards. Send a thank you card to the FOMC and perhaps ask your neighbor if he needs a hand, since he has been out of work for over 3 years and his family is falling apart.

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    2. Well said KS. Notice how all his focus was on all the money he made in the stock market and not about how poorly the economy is really doing...... I thought his whole point when he first opened his mouth was the ECONOMY????

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    3. I guess he doesn't even know what the Labor Participation rate is either....

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    4. Everybody, this original poster is a troll. The last line was our tip-off.

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    5. that is like comparing apples to donuts

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  2. "Like a midget at a urinal, we're gonna have to keep on our toes" -NL AH thank you, I'll be here all week. Try the veal piccata and don't forget to tip your waitress... :)

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  3. I already have a few friends slipping through the cracks. Just wait till the market turns down in a big way, it won't be pretty. Social unrest.

    Speaking of turning down, the market has a few weeks of bearish divergence to burn off before it can zoom higher. A slow drift down to 1707 ish might not do it. Might have to scare folks. Well see.

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    1. these kinds of narratives will keep you from actually seeing what is happening...

      we may already had the end of Oct pullback - watch the gap on the 60 min and if the dow starts to catch up.

      transports have been very bullish -

      there is a low schedule for mid Nov and and significant pullback in mid Dec.

      this is still an uptrend and we may be in wave 5

      given that the SPX has broken above a long term meridian, as long as it stays above 1650ish then there is a fair possibility that the secular bear market is over...

      sideways markets do not last forever.

      it is at least possibility and creating narratives is not analysis....

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    2. The Dow is interesting nowadays, as the SPX and RUT rock higher, the blue chips are lagging, so it is key to watch to see if the Dow can move above 15700 (now at 15509). Trannies are spiking vertically due to the drop in oil.

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  4. This is simply incredible.. we might never see a correction ever again... i hope gsguy is alright.... cant someone turn 8ff the printing press

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  5. KS,
    AMZN? From a fundamental perspective drastically overbought on every metric. It still keeps ticking upward. What do you think about getting short?

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    1. AMZN bounced strongly last evening on the earnings beat. It may pull a NFLX where it ends the day down today. The weekly and daily charts are negatively diverged across the board, this is a set up you never want to fade, hence, the short side is the side to be on despite any further price pop. AMZN is likely on borrowed time. The holiday season is on tap so they are trying to create lots of buzz and excitement. It should be sideways to sideways down here forward. It may take a few days for the smoke to clear.

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  6. above 1753 and the gap on the 60 min and the HS pattern is a bust

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    1. That is interesting Scott, price came up to fill that gap with Thursday afternoon's price action.

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  7. up up and...

    oh you know how the song goes...


    LOL

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    1. http://stockcharts.com/h-sc/ui?s=$INDU&p=60&yr=0&mn=1&dy=0&id=p08153970094&a=319046691

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    2. Negative divergence across every indicator over the couple-week time frame. The RSI's show a hair of juice but the indicators hint that a roll over is on tap. Lower lows on money flow over the last couple days. Stochastics overbot at the ceiling.

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    3. (The RSI juice is only in the last couple hour time frame so it may lead to early strength Friday morning but it should peter out.)

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  8. The key target is now between 1777 and 1826 to be reached until October's FOMC.
    Like Scott said...up, up and away !

    V.

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    1. Okay, V, sounds like lots of folks remain on the bull side. The FOMC decision is less than 4 trading days away now (Wednesday afternoon). Everything is painted bullish by all the analysts and media pundits these days. Even Fed's Fisher is now flapping dovish wings. Many now say QE continues until the summertime. Traders are giddy with excitement. CPC dips to 0.81. VIX remains low. The bull party continues; it is about 2 AM and folks are staggering around, some are passed out, no one is feeling pain, and everyone sees no reason to exit stocks. The band plays on although an odd request comes from the guy sipping coffee in the corner requesting to hear 'Taps'.

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    2. V, your bullish call will be on target if you see JJC above 40.19 and UTIL above 506. If JJC remains under 40.19 and UTIL cannot move above 506, probably not.

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