Wednesday, January 22, 2014

Keystone's Morning Wake-Up and Midday Market Action 1/22/14

The economic data is very light this week with tomorrow morning the only notable releases on tap. IBM earnings last night were weak and it is down in early trading. UTX beat but trades flat. COH collapses over -6% as the retail news is bad as expected. MS coughs up -1.1%. FCX -2%. So the joyous earnings yesterday morning gives way to the bear side of earnings today. Futures, however, remain flat to positive with the S&P's +1. Use the dollar/yen 104.30 as a pivot. The dollar/yen just moved up above 104.40 in the last few minutes sending the S&P's from -2 to +1. Banzai!! The BOJ and Fed are the markets. If dollar/yen goes up, the stock market goes up. If dollar/yen goes down, the stock market goes down.

The VIX will be interesting today since it spiked well above 13 yesterday before dropping back under. 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 if the SPX moves higher (reference this morning's chart). Keybot the Quant remains short but wants to go long and is in position to go longIf 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 prior charts, Keystone highlighted the importance of the 1832-1838 support area, and the bulls defended 1832 yesterday sending price higher off this support.

Today is an important market day and considering all the sideways slop this year, it is time for the markets to make a firm decision. The standard deviation bands on the SPX daily chart are squeezed in tight so a big price move is at hand (see this morning's chart). The explosive move up, or down, will send the SPX towards 1880-1900, or, down to 1780-1800. One side is going to be very happy and one side is going to be very sad and the outcome will be known by the weekend. The 20-day MA is 1836.67 and a key signal identifying which side is winning.

Watch the dollar/yen. If the BOJ yells Banzai!! and the dollar/yen climbs higher, the bears are going to crumble. If the dollar/yen drops, the bears will growl. 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 going forward with SPX 1849 and higher today. Bears win going forward 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.

Note Added 9:41 AM:  The day begins with status quo. SPX is under 1849. UTIL is above 494.12. JJC is above 40.50. VIX is below 13.65. Dollar/yen 104.45 well above the 104.30 pivot from an hour or two ago. Banzai!! The lift in the dollar/yen maintains the lift in stocks.

Note Added 10:37 AM:  The 8 MA pierces up through the 34 MA on the 30-minute chart placing the bulls in charge. The bears must drive the SPX immediately lower to reverse the 8/34 cross, otherwise, the bullishness will take hold and potentially run through today into tomorrow, and provide the bulls an advantage for an upside break out from the tight bands on the daily chart. The dollar/yen is 104.38 remaining on the elevated bull side so the BOJ is sending the stock market higher again. Market bears need the dollar/yen under 104.30 and lower today. JJC is down to 40.67 but the bears need 17 more cents before they can lock in the market downside due to copper weakness. Utilities keep floating higher. VIX flat. So bulls are happy with the copper, utility and volatility behavior thus far today. Status quo. Watch the 4 parameters mentioned above since one of them is going to flinch.

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