Tuesday, January 21, 2014

Keystone's Morning Wake-Up 1/21/14

The PBOC steps in to provide liquidity to prop up Chinese markets again. That was expected ahead of the new years celebrations. The liquidity injections will continue with greater frequency as the wheels continue to wobble and the lug nuts fall off. The BOJ 2-day meeting occurs and the yen weakens, sending the dollar/yen higher to 104.60+. Therefore, the Japan markets and US futures should be higher. NIKK is up +1%. S&P futures +4. Banzai!! The central bankers are the market.

The data is light for this 4-day holiday-shortened week. Thursday is important with PMI's on tap and housing indicators. Copper is down about -0.7% today. Commodities are soft due to slowing growth in China as well as a more buoyant US Dollar. The equity market drama continues. Last week the broad indexes printed new all-time highs and turned briefly positive on the year. The SPX starts 2014 at 1848 so this number bears watching as the last nine trading days of January play out. For the SPX starting the day at 1839, the bulls need to push up through 1846 and blue skies are above. The SPX will accelerate to the all-time high at 1851 quickly. The bears need to push under 1835 to accelerate the downside. A move through 1836-1845 is sideways action.

Keybot the Quant is short to begin the week with copper, utilities and volatility most impacting market direction currently. Watch UTIL 491.68 and 494.12, JJC 40.42 and VIX 13.83. UTIL begins the day between the two levels listed. Copper (JJC) and volatility (VIX) are both causing bullishness. The market bulls need UTIL 494.12 and a happy upside rally will be in play with the SPX moving to 1851 and higher. If UTIL moves above 494.12, and the SPX above 1846, and both remain above, Keybot will likely flip long. The bears need UTIL under 491.68 which will create serious trouble ahead for equities. The bears will also try to push JJC under 40.42 and VIX above 13.83 to create market negativity. The copper weakness this morning, if it remains, would send JJC down for a test of the bull-bear danger line at 40.42.

The S&P futures are +4 pointing to a positive start for today (note above the bulls need about 7 points or more to break to the upside) but the weakness in copper, and the higher yields, the 10-year now at 2.86%, which would be expected to send utilities lower, may turn the mood sour. France's power producer Alstom is getting thwacked -12% today. 

Bradley turns occurred at 1/1/14 and 1/9/14. The 1/1/14 turn was a major turn date. The Bradley does not forecast direction, only that a major inflection point occurs +/- 7 days from the date, more typically, a move occurs closer in towards the date at +/- 3 days. The major 1/1/14 date occurred with the near-term market top to begin the year. This may prove to be a significant top? The 1/9/14 date marked the top before the drop last Monday, however, markets pivot at the near-term bottom on 1/14/14 and jump higher. The two turns did identify that some wild erratic action would occur to begin the year and that has been the case. The next Bradley turn date is 3/22/14. Overall, equities move sideways thus far this year. Watch UTIL 491.68, 494.12, JJC 40.42, VIX 13.83, and SPX 1846 and 1835 to determine market direction.

Note Added 6:01 AM:  Dollar/yen 104.73 climbing higher (weaker yen). Banzai!! S&P's +5. The dollar is moving higher with USD at 81.20 so this creates lift in the dollar/yen and may mute the equity oomph that would typically be expected from the higher dollar/yen. The euro drops to 1.3541 as the dollar strengthens. The higher dollar creates pressure on commodities, copper, oil, gold, silver, etc...

Note Added 7:28 PM: Another interesting day. The BOJ and Fed control the markets. The dollar/yen dropped to 104.10 into noon time, hence stocks sold off into noon time, then the dollar/yen recovers back above 104.30, so equities recover in the afternoon. Utilities leap higher so that punched the bears in the belly. Copper dropped but recovered as the day plays out. In the morning, the VIX and SPX were both up so one of them were wrong. The VIX ran strongly higher above 13 but pulled back in the afternoon. Note that the SPX came up to the starting number for the month, 1848-1849, and failed. The 8 MA is under the 34 MA signaling bearish markets for the hours ahead, however, the 8 is about to pierce up through the 34 for a positive bullish cross tomorrow morning if the SPX moves higher. The bears must punch the SPX lower from the get-go. Keybot the Quant remains short but wants to go long and is in position to go long. If the SPX prints above 1849.31 and remains above, Keybot will likely flip long. The bears need either UTIL 494.12, JJC 40.50 and/or VIX 13.65, and fast, or they are going to fold like a cheap suit. In the prior chart, Keystone highlighted the importance of the 1832-1838 support area, and the bulls defended 1832 and sent price higher. Place a feather in the bulls cap. Wednesday is critical and considering all the sideways slop this year, it is time for the markets to make a decision. The standard deviation bands on the SPX daily chart are squeezed in tight, the tightest in months, tighter than a drum, tighter than Joan Rivers' face, so a big coiled spring move is about to occur, perhaps setting the path to SPX 1880, or sub 1800. One side is going to be very happy and one side is going to be very sad and this will likely begin tomorrow and be known by the weekend. The 20-day MA is 1836.67. Watch the dollar/yen; now at 104.25. If the BOJ yells Banzai!! and the dollar/yen climbs higher overnight, the bears may as well take measurements for the pine box. If the dollar/yen drops, the bears will come to play. Watch the 8/34 MA cross on the SPX 30-minute chart to see if the negative 8/34 cross remains, or not. Bulls win with SPX 1849 and higher. Bears win with either UTIL 494.12, JJC 40.50 and/or VIX 13.65; any 1 of the 3 would do. If these four parameters remain status quo, then markets continue the sideways dance.

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