Keystone's Midday Market Action 12/3/13

Volatility continues higher (see previous chart). VIX is 14.48 above the important 13.94 bull-bear danger line, identified by Keybot the Quant, and now also above the 200-day MA at 14.38. The VIX move above the 200-day creates the early market weakness but note that UTIL is 487.57, well above the 482.94 danger line. The SPX dropped to test 1796 support and bounced since utilities did not weaken. The 10-year yield drops from 2.80% to 2.78% so this is favorable for interest-rate sensitive stocks like utilities. GTX is 4786 nearing the 4805 bull-bear line in the sand. Market bulls can gain strength if they push GTX above 4805. The 8 MA is under the 34 MA on the SPX 30-minute chart signaling bearish markets for the ours ahead (see previous chart). Key S/R is 1807-1808, 1803, 1798-1799, 1796 and 1791. December begins at 1805.81 so the month is negative but only 2 days old. The SPX is staggering through 1798-1799. Below 1798 will lead to 1796 then 1791. Above 1799 will lead to 1803 and 1807-1808.

Today is an obscene Fed double POMO pump day. The printing presses are on overtime this week with 6 POMO pumps in all, 2 today. The central bankers are the market. The pomo pumps are clearly evident each day since they create the rally moves from 10 or 11 AM on. Copper remains weak. Dr. Copper is always a key indicator for the economy and markets but the Fed has destroyed most asset relationships. Copper and commodities are weak all year long, the global economy is stumbling along at best, but equities catapult higher day after day due to the Fed's money-printing, fundamentals be d*mned. Markets appear at an inflection point. Financials are expected to lead the broad indexes higher into and through 2014 so watch the XLF closely (see this morning's chart for further study).

The long-only funds are happy this year and are willing to hold onto all long positions through a 5% pull back. This would be about 90 handles lower to SPX 1725. If the SPX stays above 1725, the dip-buyers will likely continue to buy. Once the SPX 1725-ish area is broken, the demeanor of the markets would turn far more negative. The market price action was bearish on both Friday and Monday, this is a bearish signal. In bull markets, you will see Friday's and Monday's moving higher week after week, and, visa versa for bear markets. In addition, the markets have sold off late-session for the last 5 consecutive days, 4 quite strongly to the downside. This is bearish action as well as traders exit the back doors in the final minutes each day.

Complacency continues in the markets with the low CPC and CPCE put/call ratios. The VIX is finally moving higher as highlighted above showing that some traders are starting to seek downside protection. Analysts are parading across the television screens each proclaiming SPX 2000 targets for 2014, and many say early 2014. The dip-buyers are anxious to buy today with the RUT now inching towards the positive. The weaker yen over the last month is the main driver of the higher stock market lately. Early this morning the dollar/yen pair was at 103.10 and then a few hours ago it dropped under 103, so futures dropped. Dollar/yen is now at 102.55 and this stronger yen move helps create market negativity along with the higher VIX. Remember, however, the Fed is coming out with both POMO barrels today dropping money from helicopters, so this is bull favorable. Congress returns next week and the budget and political battles will heat up again which should be a market negative. For today, bulls need UTIL 491.20, VIX 13.94 and/or GTX 4805 and equities will move higher again. Bears need UTIL 482.94 and to keep VIX above 13.94. Markets remain a crap-shoot.

Note Added 10:46 AM:  GTX is 4812 jumping above the 4808 bull-bear line (use this number instead of 4805). Obviously, the Fed's POMO pumping is doing its job. Note the tag-team affect with the BOJ backing off to make way for the double Fed pump today. The central bankers are colluding to keep the stock market elevated. The bullishness with GTX above 4808 will help equities recover or at least remain elevated. Bears need to send GTX back below GTX 4808. GTX 4808 will tell a lot today.

Note Added 11:48 AM:  GTX is 4801.90 having trouble attaining the 4808.90 bull-bear line in the sand. UTIL is 486.43 so the bulls do not have juice to push it above 491.20 and bears do not have juice to push it under 482.94, but one of them will win as time plays out. Note how UTIL dropped and bounced up off the 483 trap-door today just like yesterday. Traders are seeking protection as the VIX jumps +5% today now at 14.89 causing market bearishness. Bulls need GTX 4808.90+. Bears need UTIL 482.94. The SPX fell through 1796 support so it is now testing 1791 support. Bounce or die time. Support below is 1791, 1788, 1786.65 (20-day MA), 1782, 1775.35 (Keystone's 200 EMA on the 60-minute chart), 1775 and 1772.  These levels create a confluence of support at 1791, then 1787-1788, then 1782, then 1775-1776, then 1772. TRIN is 1.27 reflecting orderly selling.