Wednesday, November 6, 2013

Keystone's Morning Wake-Up 11/6/13

Futures are up strongly overnight with the S&P's +10. Equities drop like a stone after yesterday's opening bell but the Fed steps in to stick-save the markets with two papers  by their top economists (English and Wilcox) that say full steam ahead for QE. That creates the 'V' bottom yesterday and markets quickly recover back to the flat line; another mission accomplished by the Fed. Fed's Williams says the 'stock market doesn't seem to be highly priced' which is an astounding statement, not because of what it says about the broad market but that he comments on the stock market at all. Fed members typically avoid commenting on the stock market like the plague but now the Fed is full of bravado and all-knowing on all markets. It is obvious that the Fed's main goal is to keep equities elevated. The Fed and other central bankers are the market.

ECB's Draghi is on deck tomorrow with the rate decision at 7:30 AM EST and the press conference 8:30 AM. So something will be hitting the fan this time tomorrow, a short 24 hours away. Equities have adopted a sideways tone ahead of this critical decision that will effect the euro and global markets. If Draghi cuts the rate, or leaves the rate unchanged but talks very dovishly, the euro will weaken, dollar will pop, commodities will drop, and equities will likely weaken. If Draghi ignores the easing subject all together, and he is a sly fox, the euro will pop, the dollar will drop, commodities and equities will likely move higher. Perhaps trader's are sniffing this out today? The euro is trying to maintain a 1.35 floor currently and was over 1.38 a few days ago, so perhaps Draghi figures he has wiggle room--let the euro float back to 1.38. Draghi fully knows he needs a weaker euro to stimulate manufacturing and exporters and help the European economy recover, but it is a delicate balancing act by all these central bankers that are manipulating the global markets.

For the SPX today starting at 1763 S/R, the bulls need to push above 1767 to accelerate the upside and with the futures up large the bulls appear to have the nod today. The bears need to push under 1756 to regain their mojo. A move through 1757-1766 is sideways action. The 8 MA is above the 34 MA on the SPX 30-minute chart and the SPX is above the 200 EMA on the 1-hour chart signaling bullish markets for the hours ahead. Bears got nothing unless they can create negative crosses for at least one of these two parameters. Keybot the Quant remains bearish but perhaps today the algo may flip back to the long side. Market direction is dictated by UTIL 504.41 (now bearish), JJC 40.22 (now bearish) and XLF 20.39 (now bullish). Bears need to push XLF under 20.39 and the market downside will appear in force. Bulls need to push UTIL above 504.41 and/or JJC above 40.22 to send equities higher. If either UTIL or JJC turn bullish, and the SPX prints above 1767 and higher, and both stay elevated, Keybot will likely flip long. Copper is higher in early trading set to test the JJC 40.20-40.22 area after the opening bell. Markets may simply stumble sideways through 1759-1772 S/R today and await King Draghi tomorrow since he will tell traders the correct stock market direction. Key SPX S/R is 1775, 1772, 1769, 1763, 1759, 1752, 1745, 1733, 1730, 1722, 1706 and 1697-1698. Watch UTIL 504.41, JJC 40.22 and XLF 20.39 to determine market direction.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.