Tuesday, December 24, 2013

Keystone's Morning Wake-Up and Midday Market Action 12/24/13; Christmas Eve

The bulls keep running higher fueled by eggnog spiked with Fed booze. The flash spike and flash crash in the RUT remains unnoticed. Traders simply lift the rug and sweep the RUT incident under. No need to dampen the festive mood. As mentioned yesterday, the SPX hourly and minute charts are topping with negative divergence so the Santa Claus rally, which is the period from now through the end of the year where markets typically float upwards, is in jeopardy. The low put/call ratio's continue to signal a significant market top at hand. Any longs you are not willing to hold for a few years should already be thrown overboard. The short side is preferred moving forward. If you do not like to play the short side simply sit in cash for a month or two and watch to see what happens. Remember, everyone has group think so like many of you, everyone thinks they can exit the market in plenty of time if equities turn south. With major indexes (RUT) catapulting and collapsing at huge 6% moves in minutes, this strategy and thinking is likely flawed.

The bulls need to push UTIL above 492.95 to confirm further upside ahead for equities. If utilities cannot push higher, a lid in the market upside should develop or be in place. The bears need either UTIL 476.89, JJC 39.92 and/or VIX above 14.20 to regain mojo. If all 4 parameters remain status quo, equities will float sideways with an upward bias. The SPX begins at another new all-time high at 1828. The bulls only need 2 points, to touch the 1830 handle to accelerate higher. The bears need to push under 1823 to accelerate the downside. A move through 1824-1829 is sideways action. December began at 1805.81 so pay attention to this number over the coming days. The SPX will need to back kiss the 20-day MA now at 1800. The 10-year is over 2.96%.

China's troubled banking system receives a $5 billion liquidity injection to keep the corpse alive, at least for a couple more weeks, but another intervention move will be required in January ahead of the Chinese new year. Italy approves a 'google tax' to force GOOG to pay taxes in Italy. The news is not good for GOOG moving forward and at the same time it smacks of desperation on Italy's part. Italy has already collected the loose change under the sofa cushions at the Leaning Tower of Pisa tourist center and is now desperate for cash, hence, creative taxation is the path ahead. New Home Sales and Richomnd Fed Index are released at 10 AM so markets may stutter step. Today is an early close at 1 PM ahead of the Christmas holiday. Today is Christmas Eve, when all through the NYSE house, not a bear was stirring, they all lay under the bus. The bulls are dancing with joy, anticipating higher markets, but the spank down is coming, and will take all their toys. Seasons Greetings.

Note Added 10:32 AM:  VIX collapses under 13 so equities jump higher. The MACD line on the SPX 2-hour chart continues to take its good ole time to top out and roll over. The money flow has now received some extra juice so the bulls want to keep markets elevated and happy into Christmas. Looks like a lot of holiday gifts may be stock. The 10-year yield jumps to 2.97%. UTIL is 489.52 moving up, not down, as yields move up, but remaining under the 493 bull-bear line in the sand. There is no stopping the bulls with Santy Bernanke on their side. Dollar/yen remaining well above 104 so the continuing weaker yen helps create the lift in equities.

Note Added 2:02 PM: Markets are closed until Thursday morning. The status is quo today. No change to the 4 parameters highlighted above so markets float sideways with the upward bias. VIX tumbled lower so the bulls ran and the bears folded like a cheap suit. Chalk up the last couple days to holiday joy. Yen remains weak with dollar/yen above 104. Use this as a guide forward. Market bulls want the dollar/yen to continue higher; bears want it to drop under 104 since the stronger yen will send equities lower. The SPX 2-hour chart continues to set up negatively and is expected to roll price over to the downside going forward. Keystone's 80/20 guidelines are all met. 1780 led to 1820. 1818 led to 1822. 1828 led to 1832. 1831.80 led to 1832.20. Above here would be expected to be a stall zone but the bulls keep on going with 1832.80 leading to 1833.20, also achieved. Rest up and enjoy the holiday. Markets should become far more intense moving forward. Merry Christmas.

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