Friday, January 24, 2014

Keystone's Morning Wake-Up and Midday Market Action 1/24/14

Lots of drama ongoing in the global markets. The Argentine Peso and Turkish Lira currency crises are unfolding. Syria is a mess. Bombs going off in Egypt. Libya remains in conflict and war. Emerging markets are selling off heavily. European indexes drift lower all morning long and now down well over -1% across the board. And on and on. The dollar/yen started running higher late day yesterday signaling an all-clear but then fell on its sword overnight tumbling down to 102.01. This stronger yen sends the Nikkei down -2% and US futures into a negative tizzy. Over the last hour, the dollar/yen recovers to 102.52 so the weaker yen allows the futures to recover to S&P's -10, Dow -82 and Nasdaq -18. S&P's were down -15 a short time ago.

The markets sustained technical damage yesterday due to the drop in copper. The SPX is under the 20-day MA at 1838.02 and above the 50-day MA at 1812.15. The tight standard deviation bands on the major indexes' daily charts may be squeezing out a downside move. The 8 MA is under the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours ahead. The SPX is above the 200 EMA on the 60-minute at 1825.82 signaling bullish markets for the hours ahead, however, price violated this level yesterday before recovering. Watch 1825.82 like a hawk; it carries clout moving forward. Bad things will happen below.

For the SPX today starting at 1828, the bulls would have to recover yesterday's drop to regain the mojo. Bears need to push under 1820 to accelerate the downside which would likely seek 1818 then 1808. A move through 1821-1841 is sideways action. Keybot the Quant remains short and identifies utilities, financials, commodities and volatility as the key market drivers currently. Bears need UTIL under 496.05 and/or XLF under 21.53 to unleash market carnage. If UTIL fails 494.50 the equity markets will likely drop into free fall. The bulls need VIX under 13.67 and/or GTX above 4780, otherwise, the beatings will continue. The interplay of these parameters determine market direction.

Note Added 9:15 AM: Dollar/yen 102.36. Dollar/yen drifts lower, hence, the stock market drifts lower. The central bankers are the market. S&P -12. Dow -104. Nasdaq -20. The 10-year yield is 2.75% recovering from a drop to a 2.71% handle a few hours ago.

Note Added 9:41 AM:  VIX above 15. XLF collapses under 21.53. UTIL fails 496.05 and also the 494.50, however, sneaks back above 494.50. Markets will remain weak with this behavior. Treat UTIL 494.50 as a trap-door since the SPX may dump 20 or more handles in a heartbeat if it fails. The SPX drops under the 200 EMA on the 60-minute signaling bearish markets for the hours ahead. Dollar/yen 102.20. The SPX fell through 1825.82, through the 1820, through 1818 support, so price likely has a fix on the strong 1808 and 1803 support levels as well as the 50-day MA at 1812.96. Speak of the devil, here it is, the test of the critical 50-day MA support. Price is now printing 1812.31, time to bounce, or die.

Note Added 9:56 AM:  Bounce. SPX is 1815.35 so the bulls bounce it off the 50-day on the first test of this important support level. The December bottom occurred at this exact test of the 50-day, back then it was at 1770-ish. Thus, long traders are sniffing around and starting to nibble looking for an exact repeat of the December bottom. Are these optimistic traders smart looking for a repeat fractal of December's bottom on the daily chart, or, will they get their heads handed to them? XLF, VIX and GTX are causing bearishness. UTIL is causing bullishness now above both key levels listed above throwing the bulls a life line. Price will likely want to take another look at the 50-day at 1813. If price falls through the 50-day MA, the whole complexion of the markets change for the worse. Bulls need to hold this line with all their might.

Note Added 10:57 AM:  VIX above 16. Copper negative. SPX collapses through the 50-day MA. Price now playing around at the strong 1808 S/R. Key S/R is 1818, 1814, the 50-day at 1813, 1812, 1810, 1808, 1806, 1803, 1801, 1796, 1793, 1791 and 1788. LOD is 1805.38. Keystone took profits in the SKF long trade (short financials) exiting the position. Will look to reenter.

Note Added 1:56 PM:  VIX 16.26. GTX 4772. XLF 21.26. UTIL 495.95. Bulls need GTX 4780, only a few points away, and that will stop the selling, also XLF back above 21.52 would create a market rally. The bears need UTIL under 496.05, bingo, it just happened one minute ago, and also 494.50 where markets would melt down. The bulls must keep UTIL above 496 through the closing bell or it will set up Monday as a negative day. Whoops, UTIL is slip sliding away, now 495.71. SPX is bouncing between the 1806 R and 1803 S and whoopsies, price is now printing sub 1803. The LOD is 1800.69 stopping just short of the psychological 1800 but since the 1801 support was violated, and since price is so close to 1800, it will likely want to venture down through. First support for price under the 1800 round number is 1796. The very strong support is at 1788. Watch to see if price closes below the 50-day MA at 1813, or not.

Note Added 2:03 PM: SPX ruptures 1800. 1799.99. So watch 1796 S.

Note Added 2:47 PM: Google lost Gmail service as well as Blogger. Keystone's site was down for the last one-half hour. Google's systems appear to be up and running again. Lots of shenanigans going on. Watch your wallet. SPX bounces off 1796 support with a LOD at 1796.80. UTIL lost the two key levels. Markets may get extremely ugly into the closing bell with potential for a large whoosh lower. The bulls keep trying to pump the limp GTX up over 4780, now at 4775, to stop the market selling, but they still cannot muster up the strength. Dollar/yen 102.30. Bears are driving with cruise control on and their feet up on the dashboard.

Note Added 3:29 PM: The UTIL trap-door is pushing equities lower. SPX now using 1793 as support. If 1791 is lost, then price will go down to sit on the strong 1788 sofa next week. Keystone bot MCP opening a new long position. The charts are setting up with positive divergence; the hourly and minute charts look very good. There is a gap directly underneath that price may want to fill but other than that it should float higher. Silver is interesting but probably wait until next week to take another look.

Note Added 4:02 PM: Markets flushed into the close with the Dow down over 3 hundo. The SPX and the Dow lost their 50-day MA support but the COMPQ and RUT have not. SPX pukes 38 points, -2.1%, to 1790, two ticks from the sturdy 1788 support, so price will likely want to at least tap this level. The Dow loses 318 points, -2.0%, to 15879, losing the 15.9K level. The Nasdaq drops 91 points, -2.2%, to 4128. The RUT stumbles 28 points lower, -2.4%, to 1144. Tech and small caps lead lower although the entire market is moving down relatively in sync, so the robots were on duty. Volume is running above average at 130% of an average days volume. VIX is 17.88 up 30% today. The financials losing XLF 21.52 this morning was a wound that brought the markets to its knees. The utility weakness late day, into the closing bell, provided the final blow. The markets lay lifeless in the ditch and will likely remain that way due to the UTIL under 494.50 to begin next week, a potential global currency crisis on tap this weekend, China troubles, and the technical damage that occurred. Keystone needs a couple heart pills and a slice of apple pie to ponder the action.

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