Wednesday, January 8, 2014

Keystone's Morning Wake-Up and Midday Market Action 1/8/13; 10-Year Note Auction; FOMC Minutes

Today is a steady drip of economic data releases that should maintain the market drama. ADP Jobs Report is a robust 238K jobs so estimates will likely be raised for Friday morning to above 200K. Yields move a touch higher on the news with the 2-10 spread continuing to make a pivot decision at 255-258. Gold drops and now tests the 20-day MA at 1222. Futures remain flat to negative. Oil Inventories are 10:30 AM. 10-Year Note Auction 1 PM. The auction is key since the 2-10 spread cannot make up its mind about which side of 255 to pivot. A higher spread will send financials higher, lower spread will send banks lower.  FOMC Minutes 2 PM which will create a market pivot point. Consumer Credit 3 PM. The bullish euphoria quickly returned yesterday after the first Fed POMO Pump occurred for the new year sending equities higher. Overnight, the dollar/yen runs higher to 105 again so the NIKK pops +2%. The Fed and BOJ are the markets, isn't it obvious?

European unemployment rates remain elevated with Italy a sick 12.7%. Today is the last day for the 5-day January Barometer. The SPX started the year at 1848, now at 1838, so the bulls need 10 points higher today to signal an up year ahead for this seasonality indicator. If the SPX stays under 1848, the bulls lose, but the bears still do not necessarily win, since the barometer then says the year will be a toss-up. The first day of trading resulted in the broad indexes down about -1% across the board which indicates that the year will be down.

Keybot the Quant is on the long side. Watch UTIL 482.19, VIX 14.09 and RTH 59.91. All 3 parameters are bullish. Bears got nothing unless they turn at least one to the bear side. If so, and the SPX drops under 1829, Keybot will likely flip short again. For the SPX starting at 1838, the bulls need to push up through 1840 and the new all-time highs will print in quick order. The bears need to push under 1829 to accelerate the downside. A move through 1830-1839 is sideways action. The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead. Markets are erratic and unstable so watch your wallet. Remain cautious and alert moving forward. UTIL 482.19, VIX 14.09, RTH 59.91 and SPX 1840 and 1829 dictate market direction today. Markets may idle until the FOMC Minutes this afternoon. The minutes are important since the QE taper was announced last month.

Note Added 3:03 PM: The FOMC Minutes are a non-event so far. The member opinions are all across the board with several wanting a stronger QE taper while others did not want to taper. The token $10 billion taper sounds like a consensus view from a Fed that is simply winging it and making it up as they go along. The 10-year yield sits at 3.00% all day. Ditto the SPX and Dow that are slightly negative and Nasdaq slightly positive. UTIL, VIX and RTH all remain bullish so status quo is the order of the day and markets are flat overall. The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead, however, the 8 MA is sloping lower, and 34 sloping higher, and a negative cross may occur very late today into the close or potentially at tomorrow's opening bell. The TRIN printed an uber low at 0.56 this morning favoring the bulls which helped maintain the elevated stock market today but now moves higher to 0.75 (still bullish under 1.00). Gold plays around at 1222 all day long. Ditto the GLD which is using the 20-day MA at 117.91 as support today. Keystone bot SKF, the double X inverse ETF that goes up if financials sell off. SKF is a speculative knife-catch but the weekly and daily charts are set up with attractive positive divergence. Keystone maintains an FAZ position, the triple X inverse ETF against financials, a carry-over from 2013, but this trade is underwater and likely will be taken as a loss in 2014.

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