Monday, January 6, 2014

Keystone's Morning Wake-Up and Midday Makret Action 1/6/14; Yellen Confirmation

The first full week of trading begins for 2014 as Keystone continues to struggle to remember writing 2014 instead of 2013. Usually by May he will have it down pat. The closing stock prices on Wednesday will allow for an assessment of the January Barometer (see the seasonality article posted this weekend). If stocks are up the first week of the year, the year typically finishes up about 80% of the time. If stocks are down for the first week of the year, the year is a toss-up. Interestingly, the -1% drop in the broad indexes on the first day of trading for 2014, 1/2/14, forecasts a down market this year. China services PMI is weak but Europe is strong. Spain PMI is better than would have been expected. Copper is weak today. The yen is strengthening (reference this morning's chart) so the dollar/yen drops to 104.50 sending the NIKK into a -2.4% tail spin overnight

Factory Orders and ISM Non-Mfg Index are released at 10 AM and may cause a market stutter step. The market drama will heat up as the week moves along with FOMC Minutes Wednesday afternoon, then the ECB Rate Decision and Press Conference Thursday morning and the Monthly Jobs Report circus rolls into town on Friday morning.

Technically, the drama with utilities, volatility, and now also copper, continues. These three parameters dictate market direction today. Watch UTIL 482.19 (now causing bearishness), VIX 14.12 (now causing bullishness) and JJC 40.25 (now causing bullishness). Any change to these parameters will send the broad indexes in that respective direction. UTIL 482.19 is a trap-door for markets but the bulls stopped any serious downside from occurring on Friday by smashing volatility lower. For the next two weeks, if UTIL drops under 480-482, and a 470's handle occurs, there is serious trouble ahead for markets. Bulls will delay any market selling if they push UTIL back above 482.19 this week. Keybot the Quant is short but if UTIL moves back above 482.19, and the SPX back above 1838, and both remain above, Keybot will likely move back to the long side.

For the SPX starting at 1831, the bulls need to push above 1838 to accelerate the upside sending price up to test the 1840-1850 area again as discussed in this morning's SPX chart. The bears need to push under 1829 to accelerate the downside. A move through 1830-1837 is sideways action. S&P futures are +4 at this writing about 1-1/2 hour before the opening bell. The 8 MA is under the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours ahead. Keep an eye on this today to see if the bulls recover as always seems to be the case. Bears also need VIX above its 200-day MA at 14.41 to start performing serious damage to equities. UTIL 482.19, VIX 14.12, JJC 40.25 and SPX 1838 and 1829 dictate market direction today. Janet Yellen will be confirmed today at 5:30 PM EST becoming the first woman to head the Federal Reserve. A Yellen confirmation rally may occur today or tomorrow since she is the Queen of the Doves and everyone expects her to maintain the ZIRP Forever monetary policy.

Note Added 1:46 PM:  UTIL teases around the 482.19 level maintaining bearishness at 482.10. VIX remains under 14.12 not allowing the bears to shine today despite the weakness in equities, thus, status quo today. TRIN is 0.85 favoring bulls. RTH is very sick today now at 60.05 dropping towards the bull-bear danger line at 59.87 that Keybot the Quant algo is now tracking. Overall, a flat day. Bulls need higher utes and bears need higher volatility. Since the first three days are lower thus far this year and new money should be entering the market, the broad indexes should experience a recovery move, perhaps a Yellen rally either this afternoon or tomorrow. Keystone took profits with SSG and will look to reenter once it takes an anticipated pull back. Shorting high yield may be an attractive trade going forward via an HYG short or SJB long but perhaps wait a few days and watch it closely. Telecom is another attractive short and so is financials but for now simply watching and letting the market antics play out.

Note Added 2:06 PM:  UTIL receives an upward thrust above 482.19, turning bullish, thus, note the recovery in the broad indexes. Perhaps traders are sniffing a Yellen dove rally. Pay attention to UTIL 482.19, VIX 14.12 and RTH 59.87. Bears run out of gas and need to turn at least one of these three stooges negative to continue the market selling, otherwise, equities will move higher and receive their first upside love for the year.

Note Added 2:09 PM:  UTIL now 482.05 back under 482.19. The market shenanigans continue.

No comments:

Post a Comment

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