Monday, February 10, 2014

Keystone's Morning Wake-Up and Midday Market Action 2/10/14

Financials are key today. Keybot the Quant is long and the algo is tracking XLF 21.38 with great interest. XLF begins at 21.29. If the XLF moves above 21.38, the stock market will rocket higher. If the XLF remains under 21.38, the stock market will likely weaken and roll over to the downside. S&P futures are -5 at this writing a couple of hours before the opening bell. There are no economic data releases today so the markets will move based on earnings releases and the news wires.

The bullish euphoria, optimism, enthusiasm and complacency remains in the stock market. Today will be a great test of the dip-buyers if the drop occurs at the opening bell as the futures project. Oddly, the CPCE put call moved higher last week with markets moving higher. Everything was bot on Friday; stocks, bonds, gold. Money flowed into all classes so it was not a ringing endorsement of stocks only. At the same time that traders bot equities, they were buying Treasuries for a safer haven, and also buying put protection for the downside. Very odd market behavior. One big confusing mess. The Fed, BOJ and other central bankers have destroyed price discovery to the point that no one actually knows what anything is truly worth these days. The stock market has a dead-cat bounce feel and today we see how optimistic the long traders actually are.

As discussed in previous posts, the key S/R is 1828, 1808-1809, 1803-1804, 1799, 1796, 1791, 1788, 1783, and 1772. The 50-day MA is 1809.35. The 20-day MA is 1804.25. Keystone's 200 EMA on the 60-minute at 1798.90 signal shows the bears in control of the markets for the hours ahead, however, the bulls only need a couple points to reverse the signal (see this morning's chart). The 20-week MA is 1782.66 which gave way on Friday allowing the launch move higher.

Late last week the seasonality appeared to set up bullishly with the full moon this Friday, pre-holiday bullishness expected late this week, and the OpEx Tuesday to Wednesday bullishness expected from 2/18 to 2/19, however, as this weekends February Seasonality missive highlights, the period through the Washington/Presidents Day holiday is typically bearish; specifically this Friday, 2/14/14, Valentine's Day, through the following Thursday, 2/20/14. Looks like the love may be lost during these romantic days. Since the seasonality projects conflicting signals it can be taken as a wash, with a slight advantage given to bears.

More interestingly, the month of February typically finishes weak. The debt ceiling deadline must be resolved by 2/27/14 or the US will not be able to pay all its bills. This hints at some trouble ahead to finish the month unless Congress announces progress with the debt ceiling negotiations this week. Also of interest is that the Q4 tech strength typically gives way in February. Traders start to sell out of tech during the second week of February (this week), then more so during the last week. So pay attention to the tech sector; the COMPQ (Nasdaq), XLK, semiconductors (SOX and SMH), AAPL, GOOG and all the other stooges, to see if the interest wanes, or not. Fed Chair Yellen will be speaking tomorrow, her debut appearance, so she will be the main focus of markets.

The bulls need XLF 21.38 and/or UTIL 504.65 to receive the all-clear signal for blue skies and rainbows ahead. The bears must keep these two parameters negative and move GTX under 4780. The 200 EMA on the SPX 60-minute at 1799 is key today and will dictate who wins moving forward. Watch the VIX 200-day MA at 14.57 since this level is another key bull-bear signal. The VIX begins today at 15.29 favoring bears (volatility moves inversely to the stock market); bulls need to push the VIX under 14.57 to prove they can send equities higher. The dollar/yen is 102.11 so use 102.20-102.30 as a pivot; above and the stock market is positive moving higher, below and stocks are selling off. The Fed and BOJ control the markets.

Note Added 8:53 AM:  XLF remains dead flat at 21.27-21.33 pre-market. Volatility is leaking slightly lower. S&P futures -4. Dow -19. Nadaq -2. Dollar/yen is 102.19 creeping a touch higher, hence, futures recover a touch higher. The BOJ is not yet able to yell Banzai to pump the stock market higher with the dollar/yen stalled at 102.19. Gold catches a bid today as the Chinese lose confidence in their own economy and start to seek the yellow metal again.

Note Added 10:38 AM: Dollar/yen 102.14; no real movement so equities stagger sideways. VIX flat at 15.57 remaining above the 200-day MA at 14.58; bearish. XLF 21.23; bearish. SPX teasing along the important 1796 S/R and remains under the 200 EMA on the 60-minute at 1798.83 continuing to signal bearish markets for the hours ahead. UTIL 504.88 above 504.65 so this provides bull juice. UTIL 504.65 will dictate market direction so it needs to be monitored closely. TRIN is 1.41 reflecting steady-eddy selling today. Keystone took profits on the NEM long exiting the trade. A quick +5% in a day and one-half needs to be locked in. Will look to reenter. NEM should have more upside ahead. Also bot more SJB which is very thinly traded with Keystone accounting for much of the activity today. HYG is printing new highs and the neggie d on the weekly chart is plain as day hinting at a move lower for high-yield as the days and weeks play out. Also added more JGBS to this ongoing long which is also thinly traded.

Note Added 12:20 PM: SPX is sticky at the 1796 S/R and if you remember, Friday's action favored this level as well. Price came down to print the 1791 handle and bounced so the price action is following the S/R listed above. Now price tests 1796 again to see if it has the oomph to move up through. Utilities say no. UTIL gives up the ghost falling back under 504.65 into the bear camp. Use UTIL 504.65 as a market direction guide today. Bulls need UTIL above 504.65 so they can push the SPX above 1796 R and develop upside momo.

Note Added 2:49 PM: Dollar/yen moving higher to 102.22 providing market lift. Banzai! UTIL above 504.65 providing bull fuel. XLF now at 21.31 with a HOD at 21.33 a hair away from the 2.36 bull-bear line (use 21.36 now instead of the 21.38 mentioned above). SPX punches through the 200 EMA at 1798.76 but tentatively, now only 67 cents above. XLF will tell the story; bulls win above XLF 21.36; bears win below XLF 21.36. Keystone bot more WLT adding to this highly speculative long position.

Note Added 2:58 PM:  SPX is 1798.99. The 200 EMA is 1798.76. The 20-day MA is 1802.08. The HOD is 1799.94 so price came within 2 points of testing the 20-day MA and technically, it is close enough for government work to serve as a back kiss. High drama into the close, watch the 200 EMA and 20-day MA, and the closing print will be important in relation to these two levels. Also monitor XLF 21.36 and UTIL 504.65.

Note Added 4:10 PM: SPX ends at 1799.84. HOD 1799.94. The 200 EMA is 1798.76 so the bulls close one point above signaling bullish markets for the hours and days ahead, however, the beat is cheesy so tomorrow needs to play out to see if the bulls can remain above 1798.76, or not. The 20-day MA is 1802.13. UTIL 506.70. Utilities helped the bulls today; the drop in yields send utes higher. XLF 21.34 closing at the high; how do you like that? VIX 15.25 dead flat today remaining above the 200-day MA. Thus, the inflection points remain in place so traders are likely waiting for Chair Yellen to speak tomorrow to see if she makes it through the hearings unscathed. Yellen just picked up her top hat and tails at the cleaners, bot a cane and old Fred Astaire and Ginger Rogers DVD at the dollar store and she is also shining her tap shoes. She will be doing a lot of dancing; the ole soft shoe. Yellen should not cause any disruption but you never know. XLF 21.36-21.37 will tell you the market answer tomorrow.

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