Friday, January 31, 2014

Keystone's Morning Wake-Up and Midday Market Action 1/31/14; EOM; Consumer Sentiment; Chairman Bernanke's Final Day

The markets are fast-moving the last couple days limiting the time for commentary. Futures are taking the pipe this morning. Yesterday, the bulls launch a snap-back rally but the flat VIX hints that it was more of a dead-cat bounce. The dollar/yen dictates stock market direction (reference this morning's chart). The dollar/yen moves up to 102.70 and higher yesterday taking the stock market higher, and today, the dollar/yen is down to 102.16 so the stock market moves lower. The bullish sentiment continues in the market with analysts parading across the television screens this morning saying all is fine and the SPX will easily finish above 2K this year. The put/call ratios remain low indicating continued rampant complacency and lack of fear in the markets despite the -4% pull back.

Keybot the Quant flipped bullish yesterday and by the look of the futures may be whipsawed today. Strength in utilities with UTIL leaping to 502 created the market rally. Next week, the UTIL 506.57 level is a key bull-bear line in the sand. The bulls pushed utes higher to get a running start to push even higher today to move above 506.57. If UTIL is not above 506.57 at today's closing bell, this spells trouble for the bulls come Monday morning. Use this is a heads-up for next week. For today, the battle is between financials and commodities. The market bulls need XLF 21.44 and the market bears need GTX 4780. One of these will flinch and send markets in that respective direction. Of course with the futures deteriorating, UTIL and GTX may fail at the opening bell tumbling lower taking the stock market lower and perhaps whipsawing Keybot back to the short side. If the GTX falls under 4780, and the SPX under 1777, Keybot will likely flip short. Pay close attention to the SPX low prints as they occur today.

For the SPX starting at 1794, the bulls need to touch the 1799 handle to accelerate the upside, which looks very unlikely at this juncture. The bears need to push under 1777 to accelerate the downside. This is 17 handles lower, a formidable task, but the futures are making a run for this number. A move through 1778-1798 is sideways action. 
Key S/R is 183218281824.34 (20-day MA)1815.30 (200 EMA on 60-minute)1812.60 (50-day MA)1808-1810 (also the left shoulder of an H&S on the daily), 18061801-1803, 1796, 1793, 1791, 178817811778.88 (20-week MA)1772-1775 (neckline of a potential H&S), 1768.22 (100-day MA)17681763 and 1745. Many traders highlight 1765 or 1767 as a line in the sand. The 1770-1772 is likely more important support. If 1770-1772 fails, the 1768 and 1763 levels may simply be quick rest stops as price drops to 1745.

The new moon occurred yesterday afternoon and markets are typically weak moving through the new moon. Markets are usually bullish through the full moon, which was 1/15/14, and interestingly printed the market top. Therefore stay on guard for a short-term market bottom to print over the next day or three.

Chicago PMI is 9:45 AM shortly after trading begins. Markets will pivot at 10 AM on the Consumer Sentiment data. Chairman Bernanke's last day of work is today; he will likely be dancing out the back door as he throws the market monkey off his back. Unfortunately for new Fed Chair Yellen, the monkey taps her on the shoulder and climbs up on to her back to sit there for the coming years. Fed's Fisher talks at 1:15 PM. Farm Prices are 3 PM which will affect ag stocks and the GTX today.

Today may shape up as a buyable bottom for a countertrend long side play. The BPSPX sits at the 70% level which will signal much more extended and sustainable market downside ahead should it fail. Copper is collapsing and optimistic traders ignore this dire move. Weak copper means the two main drivers of the economy, housing and auto's, are much weaker than anyone thinks. Today is the EOM and January will print negative, the first down month since August and first negative January since 2010. The January Barometer does not predict an up stock market this year since January does not end positively.

Watch GTX 4780, XLF 21.44, UTIL 506.57, and SPX 1799 and 1777 to determine market direction. Futures are S&P -18. Dow -168. Nasdaq -17. The SPX will make a run to 1777 to begin the session. The damage will be minimal and a recovery should result if 1777 holds. If 1777 fails, a move into the 1760's is next and then potentially 1740's. The 200-day MA, which has not been shown respect for over one-year's time, is 1705.29 and rising.

Updating some of the recent trading, Keystone took profits on the NUGT long and RTH short exiting the trades. Will look to reenter both. The dangerous SPXL was bot to play the upside countertrend market move. Keystone is also now long MCP and JCP. JCP took the pipe yesterday collapsing -8% on three times volume, perhaps a capitulatory move where the last of the bulls have finally given up (typically when a stock recovers).

There are many interesting potential trades. The copper collapse should result in at least a dead-cat bounce so FCX may have potential as a long. Biotechs continue flying high but are likely continuing to set up as shorts. MYL is an attractive short. Keystone is in MYL getting beat up on the short side currently. CLF has a high short interest and the chart is setting up with positive divergence so it will likely see one of its obscene spikes higher that is prone to occur. SLV and NVGS may be a couple of other long possibilities.

Note Added 12:16 PM: The markets exhibit more drama than a group of teenage girls. GTX failed the 4780 level ushering in market weakness. Utilities are strong since the bulls know they must push UTIL above 506.57 by the closing bell today; otherwise, there will be h*ll to pay come Monday morning. UTIL is now printing 506.41 attacking this important 506.57 resistance level in play all of next week. Isn't it amazing that Keybot can identify these numbers before they occur? The SPX dropped under 1777 down to a LOD at 1772.26 but could not punch down through the 1770-1772 support gauntlet. Equities recover as the day moves along. The dollar/yen fell to 102.00 so the stock market drops; then the dollar/yen recovers to 102.30 so the stock market pops. The BOJ and Fed control the markets. Keybot the Quant remains long, for now. If the SPX drops under 1772.26 and remains under today, Keybot will likely flip short. Pay attention to GTX 4780, UTIL 506.57 and SPX 1722.26. The broad indexes remain tricky and can go either way today and Monday. The bulls will be happy and receive the nod for next week with UTIL 506.57 and higher. The bears will celebrate all weekend long if UTIL stays under 506.57 and GTX under 4780. Use these two parameters as a measure of whether to be bullish or bearish moving forward. Markets are very erratic and unstable. Higher volatility is causing the larger and larger, and more violent, price swings. Keystone bot FCX after the opening bell and may take it as a day trade today. Also added more SPXL for the countertrend upside move.

Note Added 12:34 PM: UTIL 506.57. You have to love it. Utes are likely going to point the way forward. Which way will they choose?

Note Added 3:02 PM: UTIL 506.57, isn't that special? The markets are keeping everyone guessing. UTIL may not tip its hand until the final one-half hour of trading. Keystone took profits on SPXL (playing the snap-back rally side) exiting the position, will look to reenter, perhaps before the close if UTIL moves above 506.57. Also took profits on FCX as a day trade; will look to reenter. Also added more MYL shorts.

Note Added 3:37 PM: The bulls are having trouble keeping UTIL elevated, price now at 506.08 and fading, however, watch to see how near to 506.57 the closing print is, since if it ends only a few pennies away, it would be easy for bulls to push it above come Monday morning. The tricky business continues. Keystone took profits on JO. Coffee remains a fave trade for 2014; will look to reenter. Bot SPXL reopening this long trade to play a countertrend snap-back rally. Bot CLF, a very risky iron ore company opening a new long trade.

Note Added 4:16 PM: The day ends with UTIL 506.26 so the bears are happy campers come Monday morning. The bulls will boost their energy levels this weekend and show up Monday to try and push 31 cents higher above the critical UTIL 506.57 which remains in play all week long. The dollar/yen is 102.12. Say no more. The move from 102.30 back down to 102.12 creates the stock market weakness late day. Simply follow the dollar/yen for market direction. The markets are in a churn and this chops up both short and long side players if you do not tip toe through the wreckage like Jack be Nimble. The January Barometer says 'as January goes, so goes the markets', however, it is really more of a bull-only indicator. If January is up, the stock market is up about 80% of the time for the year. If January is down, however, like this year, the stock market is actually a 50/50 proposition for the year. So the bears have a slight edge but do not receive a ringing endorsement like the bulls would receive if they would have finished the month positive. On the coffee trade metioned, it only apples to the commodity itself, via JO or CAFE, not the garbage stocks such as GMCR, SBUX and DNKN. Keystone bot MGPHF, a penny stock involved in graphene. This is a long positoin that is a long term buy and hold, LTBH, simply putting it on the back burner and forgetting about it. Like Ron Popiel says, "set it and forget it." All trades are risky. The company is involved in graphite and graphene; perhaps a material much in demand in the future. Jimmy Rogers, the commodity guru, is involved in this. As always, anything can go to zero and you can lose all your money, however, this graphene idea may have substance. YouTube has videos. IBM is building a graphene chip. It needs a lot of due diligence but for now, the position serves as a placeholder and it will probably be added to over time and sit in the background and simmer. Remember that funds cannot typically buy penny stocks (stocks under $5) so MGPHF will not receive support from the big boys in its early current days. Like in the Graduate movie, upon graduation, Ben (Dustin Hoffman) was given advice about a career, he was told just one word, "one word, plastics." Perhaps an updated version of the movie would say, "one word, graphene." That was an intense week for trading. Time for a slice of blueberry pie to ponder the situation. The Hungary, Turkey, Ukraine and Russia confluence, that neck of the woods, is worrisome.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.