Monday, November 18, 2013

Keystone's Morning Wake-Up 11/18/13; Fed Heads Out in Force Today Pumping the Stock Market

The bulls are verifying the market upside move with UTIL above 503.04. Keybot the Quant remains short, and has been in the imminent turn phase for the last week and one-half, so today may be the day the algo flips to the long side. If UTIL stays above 503.04, and the SPX prints above 1798.50, and both remain above, Keybot will likely flip long. Pay attention to the highs of the day as they occur. Keybot has many moving parts but a key parameter is the HOD's. Market bears can hold on if the SPX jumps higher at the open, but then drops, since Keybot is going to want to see confirmation with the higher highs (the higher high remains in place for several minutes and longer). Bulls will be best off to see a slow steady rise in price today. Copper is weaker but traders no longer care about fundamentals. Perhaps the most amazing move this year is the weaker copper and commodities since the spring time but the stock market moves higher, obviously, due to QE. Even the tried and true CRB Rind Index which projects the needs for lesser-used commodities such as leather, paper, metal scraps and so forth, to project the health of smaller manufacturers, has been dead the last few months, but traders do not care. Ride the easy money wave and hang ten. The Fed is selling rose-colored glasses on the beach today.

Traders are now on round number watch; SPX 1800; Dow 16K and Nasdaq 4K. Everyone guarantees these numbers this week, all say they are cast in concrete, take them to the bank. There is lots of hubris in the markets these days. The put/call ratios (see the chart on the weekend) continue to signal a significant market top at hand, as the ratios have for an odd one-month time period. Typically, markets would have topped out by now due to this ongoing and rampant market complacency. The low relative VIX and high bullish sentiment on the Investors Intelligence Survey further verifies this complete lack of fear. Everyone believes QE tapering does not occur until March or later so it is party time for the next few months and the sky is the limit. A 4-1/2 year plus rally is very long by historic standards. Equity prices are extended above their standard deviation bands as well as the moving average ribbons requiring a mean reversion (lower prices).

The bulls want the SPX 1800 print today. S&P futures are +3 wanting to give the bulls the nod higher. The full moon remains bright, lighting the outside like daylight overnight, and the indexes will log another bullish move through the full moon for this month. The Fed heads are out in full force this week, a shameful 13 speeches are planned in 5 days to pump the stock market higher. Chairman Bernanke speaks tomorrow evening. The FOMC Minutes are Wednesday afternoon but as mentioned above, no one expects tapering until next spring or summer. Fed's Rosengren, Dudley, Plosser and Kocherlakota are on tap today. They talk so they can receive the free buffet. TIC data this morning will highlight foreign investment in the States. The NAHB Housing Index is 10 AM and may cause a slight market stutter step. E-Commerce Retail Sales are 10 AM as well.

The bulls need to print above SPX 1798.50 to ignite the upside through 1800 for the first time in history. Bears need to push under 1791 to accelerate the downside. A move through 1792-1798 is sideways action for today. The 8 MA is above the 34 MA on the SPX 30-minute chart (see this morning's chart) signaling bullish markets for the hours ahead. Bears got nothing until they receive the negative 8/34 cross. Watch UTIL 503.04 and SPX 1798.50 and 1791. Keybot the Quant may flip long today but even if it does, as illustrated by this morning's charts, a move back to the short side would likely occur again in relatively short order moving forward.

Note Added 4:31 AM on 11/19/13: The bulls had an easy road yesterday only having to show up and they would receive a payday, however, the cab must have had a flat tire. The pop and drop after the opening bell printed a new all-time high for the SPX at 1802.33 and then lower. Keybot the Quant remains short but was on the verge of flipping long yesterday when the bulls dropped the ball. Bulls need to push above SPX 1802.50 to lock in the long side and get Keybot to flip long. Note how the SPX closed on top of the strong 1791-1792 support/resistance level highlighted on the weekend. The SPX prints above the psychological 1800 level and Dow above 16K, both retreating in the afternoon, but the Nasdaq 4K remains elusive. The market weakness in the afternoon was blamed on Carl Icahn voicing concern over the markets but instead the negative divergence kicked in for the hourly and minute charts as discussed above and on the 30-minute chart yesterday. Markets continue to print history day after day. These are special times.

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