Friday, November 22, 2013

Keystone's Morning Wake-Up 11/22/13

It's surprising the markets are not jumping higher with all the ongoing pumping. The big story that does not receive attention is the yen. Yesterday, at the conclusion of the BOJ 2-day meeting the monetary policy was maintained but the talk was very dovish. Banzai!! The weaker yen (higher dollar/yen currency pair) created the big up in the Nikkei this year as well as U.S. equities. Over the last couple days, the BOJ is beating the yen again and the dollar/yen pops above 100, then yesterday above 101, now at 101.25 helping to create buoyant Japan and U.S. stock markets. On top of this, Bullard is pumping the QE talk and to create a triumphant of bullish market joy, the economic data is weak, both the Philly Fed showing a weak manufacturing sector, and many retail earnings missing estimates. Bulls are happy since bad news is good news and the Fed will have to keep supplying the easy money booze and crack cocaine. Typically, Friday afternoons are buoyant for markets as short traders pare back positions into the weekend. 

The over-the-top bombardment and intervention by the Fed in recent days across media may be falling on deaf ears. How many times can you say QE forever? Well, at least one more time since minutes ago, Fed's Lacker says accomodation can remain for years. This stuff is getting out of hand. Keystone thinks the Fed doth preach too much. If an event occurs out of left field, no one entertains the though that the Fed is out of ammo. The sole focus by traders is the taper timing since all agree that the Fed's QE power and control is a given and is capable of lasting forever. Sometimes it is the large things in front of your face that you cannot see. The put/calls remain low and the CPCE prints 0.48 yesterday signaling uber complacency and a significant market top at hand. This put/call drama now extends for one-month time--a market pull back would have been expected by now making the ongoing daily market drama that much more theatrical.

Fed's George speaks shortly, a lone hawk voice in the wilderness. JOLTS Job Openings Report is 10 AM along with E-Commerce Retail Sales data. Kansas City Fed Mfg Index is 11 AM and Fed's Tarullo will pump the stock market at 12:15 PM. Watch the utilities, UTIL 503.04 today, but this number drops to 481.68 for all of next week, a far easier beat for market bulls. UTIL 489.85 is also important today and for next week so pay attention to UTIL 490 into the closing bell. Below 490 and bears will be happy expecting market weakness next week despite the pending Thanksgiving holiday. Bulls need to keep UTIL above 490 and this will set the markets up for positivity come Monday morning. Keybot the Quant remains short. If UTIL moves above 503.04 today, and SPX above 1797 and higher, Keybot will likely flip long.

The SPX moves through 1782-1802 for the last few days so the exit from this range will be telling. The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead. Bears got nothing until they receive the negative 8/34 cross. For the SPX today starting at 1796, the bulls only need to push above 1797 and this will create an upside acceleration above 1800. S&P futures were flat the last few hours but are pushing towards +2 due to Lacker's pump. The bears need to push under 1784, retracing yesterdays up move, to regain their mojo, a formidable task but not impossible. The bulls reversed the bears Wednesday sell off yesterday. A move through 1785-1796 is sideways action today. The market bulls need higher utilities, copper and/or commodities to create further upside strength. Market bears need to push utilities lower, and move UTIL under 490 before the closing bell today, as well as send volatility higher and financials and semi's lower. The battle continues. The 10-year is 2.78% and the 2-year is 0.30% so the 2-10 spread, highlighted in a couple articles here the last few days, drops to 248, away from the 255 spread number needed by the banks to signal happy times ahead. There are lots of moving parts in the markets nowadays.

Note Added 6:10 PM:  The bulls are receiving a relentless melt-up. Today's upside was fueled by the weaker yen. The dollar/yen remained elevated at 101.30 all day long. When equities drifted lower early afternoon the dollar/yen did not falter and kept the stock market party going. The Fed and BOJ central bankers are the market. The SPX, Dow and RUT all print new all-time highs. The Dow hit its round number at 16K, the SPX hit 1800, but the Nasdaq still needs 8 points for 4K. UTIL closes at 495.31 well above 490 giving the market bulls a strong advantage come Monday morning. Keybot the Quant will likely flip long on Monday morning as long as the SPX heads above 1805 and higher. The SPX tagged the upper standard deviation band highlighted in this morning's chart and the higher high in price on the daily chart now shows negative divergence across all indicators. A market top continues to be expected any day forward despite all the bullish euphoria. Thanksgiving week is typically a bullish week and the Friday shortened-session is the most bullish day of the year. Sunday evening futures will be key since any positivity will indicate that the big bull party will continue with SPX 1810+ on the way. Ditto copper. Ditto dollar/yen. Market bears want to see negative S&P futures and copper overnight Sunday as well as the dollar/yen currency pair moving lower (stronger yen).

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