Friday, December 13, 2013

Keystone's Morning Wake-Up and Midday Market Action 12/13/13

Today is Friday the 13th so watch out for black cats and ladders. The PPI is flatish hinting that the disinflationary and deflationary story remains alive and well. The 10-year yield drops a couple ticks to 2.86%. The SPX lost the sideways channel at 1782-1808 that was in place for the last month. A back kiss of the 1782-1783 resistance is a reasonable expectation. The SPX remains under the 200 EMA at 1783.13 on the 60-minute chart signaling bearish markets for the hours and days ahead. This number adds further street cred to the 1782-1783 resistance. Bulls will be happy campers if they punch up through 1783 R since a move up to the 20-day MA at 1793-1796 would likely occur next. Bears will be drinking wine at the closing bell and celebrating all weekend if they keep the SPX under 1782 today. The SPX daily chart indicators are weak and bleak (see this morning's chart) so lower lows would be expected even after any dead-cat bounce occurs today or Monday. Markets may develop a 'sell the rallies' mentality moving forward. The Nasdaq lost the 4K level so watch to see if that is regained, or not. Also, the RUT is fighting at the 50-day MA, sitting underneath and bearish, so watch to see who wins that battle today.

Continue monitoring Keystone's 2-10 Spread Indicator number of 255 that verifies happy days for banks ahead due to the steepening yield curve. The spread continues to fight along this 255 number right now and will not choose a direction. Of great interest is the creep up in the 2-year to 0.33% losing the 0.29%-0.30% anchor. Is the Fed losing control? If the 2-year yield moves higher, this means the 10-year yield will have to move even higher to start increasing the 2-10 spread to 260, 265, etc.., to allow the banksters to begin their booze party. The financial stock charts remain weak which hints that the 10-year yield will likely not move higher despite the pending Fed tapering. Of course the 10-year yield may run higher, and the spread may run well above 255 signaling happy times, and the charts slap banks lower, but the higher spread would hint that banks will then recover in 2014 once the charts wash out. The situation is too dicey to call so a few more days or weeks need to play out to provide clarity. We remain in uncharted waters since no one is living that traded during the 1930's. Traders expect the banksters to lead the broad markets higher from here on out so weakness in this sector will forecast trouble ahead for the major indexes.

For the SPX today starting at 1776, a notable number marking a very important date in American history, the bulls need to touch the 1783 handle and the dip-buyers will rush into the markets and accelerate the broad indexes higher. The bears need to push under 1772.50 to accelerate the downside. A move through 1773-1782 is sideways action. The S&P futures are +3 but were +7 an hour ago. The dollar/yen moved higher to 103.60 and higher, hence the S&P's were up +7, now the dollar/yen drops (stronger yen) so the U.S. futures drop. The central bankers are the market. Banzai! UTIL kept bouncing off the 478 trap-door yesterday so the bulls are holding the wolves at bay. Bears need either UTIL 477.87, XLF 20.98, JJC 39.70 and/or SOX 503.25 and the equity selling will continue and accelerate. Bulls need to either move GTX above 4810 or VIX below 14.03 to regain the upside mojo. The beat goes on.

Note Added 10:19 AM:  The trap-door opens and UTIL drops under 477.87. Watch to see if UTIL remains under 477.87, if so, a strong move lower would be anticipated for equities moving forward.

Note Added 10:52 AM:  The trap-door closes again with UTIL above 477.87, so there is nothing to see here, move along, move along, but, no, wait, looks like the bears must be jumping on the boards trying to break the rusted hinges loose on the trap-door since it opens again with UTIL dropping back below 477.87. Looks like the market drama today will center around UTIL 477.87.  If UTIL remains weak today, there may be market carnage. If UTIL recovers above 477.87, equities will likely float sideways to higher into the closing bell.

Note Added 6:19 AM on 12/14/13: UTIL oscillated above and below the 477.87 level, opening the market trap-door, then closing it again, all day long. In the final minute, UTIL drops and closes at 477.81 six pennies under the 477.87 level in the bear camp. Isn't it amazing how Keybot identifies these critical levels ahead of time? So the bears won the tiniest of victories, concerning the utilities impact on broad index direction, but alas, it is meaningless since the UTIL 477.87 number no longer matters. For next week, watch UTIL 473.37 instead. Thus, starting the new week at UTIL 478, the market bulls will actually receive some market help since UTIL will be about 4 points above the danger line. Overall, bears are content with the week's price action. The VIX remains above the 200-day MA, a very bearish signal. The SPX stays under the 200 EMA on the 60-minute chart at 1782.65 signaling bearish markets for the hours and days ahead. The bulls, however, closed the RUT at 1107.05 a tiny hair above the 50-day MA at 1106.07, so price will choose to either bounce, or die, come Monday. The Nasdaq closed above the psychological 4K by less than a point, 4000.98, so the bulls are trying to cling on to any positivity they can grab. Next week will be interesting to see if the 'buy-the-dips' mentality now changes to a 'sell-the-rallies' mentality? The FOMC drama is Wednesday afternoon, 12/18/13, with 'taper' remaining the key word. The full moon is Tuesday and markets are typically bullish moving through the full moon. Markets are also typically bullish from a Tuesday low to a Wednesday high during OpEx week. Thus, market weakness on Monday, and/or Tuesday morning, may provide a quickie long opportunity trade into Wednesday and Thursday. Housing Starts are very important on Wednesday morning. PMI's occur to begin the new week and will set the tone for the new week of trading. If equities begin the week on the bull side, the rally may continue into the FOMC Wednesday afternoon. The expectation is for an important market pivot point to occur, up or down, on Wednesday afternoon.

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