Wednesday, December 11, 2013

Keystone's Evening Nightcap 12/11/13; Retail Sales

The SPX takes a dip today and ends at 1782 exactly at the bottom rail of the sideways 1782-1808 channel that is ongoing for the last month. Since the 1782 is such a key level, price will either bounce, or die. The RUT lost the 50-day MA today, a bearish signal, and it appears to be leading the market weakness. The Nasdaq lost the 4K level today but managed to close back above at 4004, a palindrome. Palindromes are interesting since they sometimes indicate key market inflection points such as the market bottom at SPX 676 in March 2009. As mentioned the other day, most traders will be willing to endure a -5% selloff before they panic and start throwing long trades overboard. Off the 1814 market top, this targets the strong 1722 support as a key level moving forward. Dip-buyers will likely enter the market as long as the 1722 holds so the bears have their work cut out for them moving forward. Markets are funny, however, and if the selling continues, traders may start jumping ship a lot faster to lock in long-side gains this year.

Lots of drama is occurring in the markets. Keybot the Quant remains short but markets remain a coin-flip. If the SPX would recover all of today's sell off and print and stay above 1803, Keybot will likely flip long. Watch UTIL 477.87, XLF 20.98, GTX 4811 and VIX 14.02. Utilities, financials and commodities are causing market bullishness while volatility is causing bearishness. UTIL 477.87 is a trap-door for equities and should cause a 20 to 30 handle flush in the SPX if it fails (see previous chart). GTX ended at 4812 one single point on the bull side. Volatility is in the bear camp with VIX above 14.02 and the VIX also moved above the 200-day MA today signaling bearish markets ahead (see previous chart). Any change to the 4 parameters mentioned will send markets in that respective direction. If all 4 remain status quo, markets will stagger sideways.

For the SPX starting at the 1782 strong support, price will either bounce, or die. The bears need 2 points lower, under 1780, and the downside will accelerate. The bulls need to retrace the selloff and move the SPX above 1803, a formidable task. Instead, bulls will be happy to keep utes, financials and commodities elevated, while moving volatility any amount lower, which will be enough to stop the market downside. A move through 1783-1802 is sideways action. The 8 MA is under the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours ahead. Of further import is the SPX dropping under the 200 EMA at 1783.51 on the 60-minute chart signaling bearish markets for the hours and days ahead. Pay close attention to the 1783.51 level as a key bull-bear line in the sand.

Jobless Claims, Import and Export Prices and Retail Sales hit at 8:30 AM. Retail Sales will set the tone for the markets on Thursday. Business Inventories are 10 AM and may create a market stutter step. Natty Gas Inventories are at 10:30 AM. The 30-Year Bond Auction is 1 PM. Watch UTIL 477.87, XLF 20.98, GTX 4811, VIX 14.02, SPX 1780 and 1784 to determine market direction. The bears are trying to flex their muscles. If the SPX stays under the 200 EMA described above, and the VIX remains above the 200-day MA, the markets will continue weakeningKeystone bot MUX, a small gold miner, opening a new long position. MUX is very attractive as a long-term trade and the goal will be to own it for most of 2014, of course entering and exiting if there are profits occurring along the way. The gold miners remain attractive moving through 2014. Keystone also owns NUGT and IAG but IAG will lose ground since the divvy was suspended. For our Mexican friends and all that believe in Our Virgin of Guadalupe, enjoy the celebrations this evening and tomorrow (in 1531, the Virgin Mary appeared before the Mexican peasant, Juan Diego).

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