Thursday, November 21, 2013

Keystone's Morning Wake-Up 11/21/13

Utes, semi's and volatility continue to drive markets; UTIL 503.04, SOX 497.12 and VIX 31.97, respectively. Utes and semi's are causing bearishness in equities while low volatility helps the bulls. Any change to these three parameters and markets will move in the same direction. If all 3 remain status quo, markets will drift sideways. Thus, bears need higher volatility, VIX above 13.97, and a strong market down leg will occur. The bulls need either higher utes, UTIL above 503.04, or higher semiconductors, SOX above 497.12, either one would do, to stop the market downside. For the SPX starting at 1781, the bulls need to retrace yesterday's drop and touch the 1796 handle to signal blue skies and a big acceleration higher. This is a formidable task, but not at all impossible, but the bulls will instead target higher utes and semi's today, an easier task, that will create market lift. The bears need to push under 1777 to accelerate the downside. A move through 1778-1795 is sideways action. The BOJ maintains the ongoing monetary policy and speaks dovishly so the yen weakens and the dollar/yen runs to 100.90. The Nikkei pops +2% overnight and the weaker yen also creates lift in the S&P futures moving into the U.S. opening bell.

Fed heads Bullard, Powell and Lacker are all out pumping the stock market higher today. The non-stop Fed market-pumping, with 2 or more members per day telling everyone to buy stocks (since they say no taper in sight), never ends. The Philly Fed data hits at 10 AM. Natty Gas Inventories 10:30 AM. The 10-Year TIPS Auction is 1 PM. Retail earnings this morning all soiled the bed; TGT, ANF, DLTR, SHLD, all sick, so the retail sector should be weak. Retail is typically sold at this time of the year anyway, on a seasonality basis, since the holiday oomph is priced in, and the retail stocks peak by the first week of December. The rich got richer courtesy of Chairman Bernanke's policies but the poor and middle class continue to struggle, paying for the bank bailouts, muddling along in life, many unable to find jobs, running out of money to spend, even at the dollar store. The QE programs create a separation of the classes and concern over potential social unrest (rich against poor) in the months and years ahead. SOX 497.12 is likely the main key today so focus on which way the semiconductors move. If VIX prints above 14, the markets will be in big trouble. Until then, equities can float along sideways. Utes, semi's and volatility dictate market direction today.

Note Added 3:24 PM:  Another odd day. Semi's explode higher so that locked in the market upside today and then volatility is crushed to add further bull fuel. Utilities remain bearish, however. The SPX runs higher recovering yesterday's losses and attacks the 1796 handle as this is typed. Keybot the Quant remains short, one day is stranger than the next. Looks like the algo needs to see stronger utes, copper or commodities to lock in the market upside but none of the 3 are currently cooperating. The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead. Lucy pulled the football away as Charlie Brown ran up to kick it. The bulls will not allow the 8/34 cross to remain negative for more than a couple days so the bears cannot gain any downside traction. The 10-year yield ran up to 2.83% and then retreated to 2.78%. Gold remains weak. Copper strong. The dollar/yen hits 101; remember only a couple days ago we watched the 100 level. The weaker yen due to the dovish BOJ added to the bullish lift in the markets today. Fed's Bullard says there is room on the balance sheet (more QE) so this provides market lift. This is too funny since a day ago he was saying that QE tapering may begin in December. Now that is a confusing flip-flop. Ask him tomorrow and he will wet his index finger, place it in the air to see which way the wind blows, and provide another answer. The beat goes on.

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