Tuesday, December 17, 2013

Keystone's Morning Wake-Up and Midday Market Action 12/17/13

Inflation remains tame. The FOMC 2-day meeting begins but the fireworks do not occur until between 2 PM and 4 PM EST tomorrow. The bulls receive a bounce yesterday, pushing through the 1781-1783 resistance discussed on the weekend so a quick acceleration occurs towards the 20-day MA at 1794.46. The HOD was 1792.22 a couple points shy of a direct back test but price did show respect for the 20-day MA by the move. The SPX continues through the 20-day and 50-day MA bracket. The 50-day MA is 1763.66. So bulls win above 1794. Bears win below 1764. The SPX moves back above the 200 EMA at 1783.02 on the 60-minute chart and the 8 MA is above the 34 MA on the 30-minute both signaling bullish markets for the hours ahead. Equities may stay in a holding pattern until tomorrow afternoon. A full moon is on tap today and the broad indexes tend to be buoyant through the full moon. During OpEx week a Tuesday low typically leads to a Wednesday high, so the bulls have a couple more things going their way today and tomorrow.

The VIX is not drinking the bull Koolaid, however. In fact, yesterday the SPX and VIX were both up, one of them is wrong. The higher VIX, now 16+, shows that some traders are bringing on downside protection. But the put/call ratios show a continued lack of fear and rampant complacency across trading floors. Reference this morning's chart. The market complacency signals a significant market top now in place or in progress. Everyone believes in the Fed so there is no reason to every worry about a market correction ever again. Of course, this is a contrarian indicator. The higher VIX will now create larger and larger intraday and day to day point swings; triple digit Dow days, up and down, may become common moving forward. The 2-Year Note Auction is 1 PM and important due to the 2-10 spread which provides insight into a steepening yield curve, or not. The Senate may vote on the budget plan approval today, if not surely tomorrow, since they already smell the jet fuel from the airport and are anxious to begin another Caligula-style vacation.

Keybot the Quant remains short with 5 parameters dictating market direction currently. The bulls need GTX 4805.75 and/or VIX 14.04 to gain upside fuel. The bears need XLF 20.99, SOX 503.25 and/or UTIL 473.37 to gain downside fuel. To whittle it down tighter, bulls need GTX, commodities, higher, and bears need XLF, financials, lower. For the SPX starting at 1787, the bulls need to push above 1792 and an upside acceleration will occur to again test the 20-day MA and likely slice up through. The bears need to push under 1777.50 to accelerate the downside. A move through 1778-1791 is sideways action. If the GTX moves above 4805.75, and the SPX above 1792, and both remain above, Keybot will likely flip to the long side. Watch the dollar/yen pivot at 102.95-103.00; above 102.95-103.00 and stocks move higher, below 102.95-103.00 and stocks move lower.

Note Added 9:37 AM:  VIX sneaking higher. Dollar/yen 102.93. GTX 4777, lower so far today. XLF lower to 21.17 but remaining above the 21 bull-bear danger line. All 5 parameters remain in their respective bull and bear camps hinting at sideways market action ahead.The SPX drops to back kiss the 200 EMA on the 60-minute at 1783.03.  The SPX is printing 1783.17 so watch the 200 EMA for today's drama; bulls win above 1783, bears win below 1783. TRIN 0.86 favoring bulls.

Note Added 10:53 AM:  Dollar/yen drops to 102.74. SPX 1778.81. GTX 4780. VIX 16.46. XLF 21.11 now only one thin dime away from causing market mayhem. The bears need to break below SPX 1777.50 to accelerate lower so for now, the markets are weak, but sideways. TRIN now 1.06 bear-friendly. XLF 21 will tell you if the markets are in trouble, or not. The SPX is under the 200 EMA on the 60-minute signalling bearish markets for the hours and days ahead, however, markets are very jumpy and erratic unsure on which way to turn, and the Fed decision is now only about one day's time away.

Note Added 2:58 PM:  The 8 MA stabs down through the 34 MA on the SPX 30-minute signaling bearish markets for the hours ahead, however, markets are very much in a sideways dance stumbling into the Fed tomorrow afternoon. The 200 EMA on the 60-minute is 1782.90 and price is now at 1782.50, so this fight at 1783 continues all day long. The bulls could not send GTX above 4805.75 to gain strength. The bears cannot send XLF under 21 to gain downside juice. The SPX 1777.50 support holds all day long. Thus, sideways all day. Dollar/yen at 102.66 so the stronger yen creates the negative bias on equities today. VIX 15.94TRIN 0.99 dead-flat neutral not willing to choose a side.

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