Thursday, February 13, 2014

Keystone's Morning Wake-Up and Midday Market Action 2/13/14; Retail Sales

The Retail Sales data is weaker than expected. Most importantly, auto sales stall. Equity futures turn south since both key economic drivers, housing and automobiles, appear to be weakening. This action will create weakness in copper. The market negativity began overnight when the dollar/yen dropped under 102. At this writing about one-half hour before the opening bell, the dollar/yen is 101.90. S&P -10. Dow -85. Nasdaq -21.

-- Technical Problems Off and On Today Due to the Winter Weather --

Volatility provides drama yesterday. The battle at the VIX 200-day MA at 14.58 continues today. Bulls win below 14.58. Bears win above 14.58. Scroll back to the VIX chart from a day or two ago to study the VIX  in more detail. Keybot the Quant remains long. The bears need to push XLF under 21.37 to lock in some downside action. Bulls need to push VIX under 14.15. Bears need to create negativity in financials, utilities and commodities to make a stronger run lower. UTIL 504.65 remains a key bull-bear level. For now, the markets appear to be churning, perhaps into the weekend.

The SPX H&S patterns are highlighted in this morning's chart. Bulls must push the SPX back to the all-time highs at 1851 and higher to negate the bearish H&S patterns. The 1824 and 1828 are important overhead resistance levels that the bears must hold. Support below is 1818, 1808-1809, 1809.82 (50-day MA), 1806, 1803, 1801.18 (200 EMA on the 60-minute), 1801.17 (20-day MA), 1796, 1791, 1788, 1783 and 1772 (uber strong support). Markets will pivot at 10 AM on Business Inventories. Natty Gas Inventories 10:30 AM. 30-Year Bond Auction 1 PM.

Note Added 9:33 AM: XLF 21.34 under the 21.37 so this will be key to watch today. Financials quickly recover to XLF 21.40VIX 15.20. UTIL 509.62 above the 504.65. No great shakes today despite the strong move lower for equities. The beat goes on.

Note Added 10:21 AM: Business Inventories rise slightly so this will help GDP but people will need to show up to buy the products on the well-stocked shelves. XLF continues higher to 21.46. VIX continues lower and drops back under the 200-day MA so this creates a bullish push higher. Dollar/yen is back above 102. Banzai! Bears were all bluster today. Nasdaq turns positive and SPX is flat. Bears need to push the VIX back above its 200-day MA and/or the XLF below 21.37 or they got nothing. The SPX dropped at the bell and bounced directly off the 50-day MA at 1809-1810. Price is respecting the S/R listed above with the SPX moving up to test the 1818 R. Use 1828, 1824, 1818 and 1810 as S/R today. Failure at 1818 sends price back down to the 50-day MA at 1810. A push up through 1818 sends price higher to test 1824 R. Use VIX 200-day MA at 14.59 as the main bull-bear guide today; below is happy bulls (now at 14.47), above is happy bears. Also the dollar/yen now at 102.02; above 102 is happy bulls, below 102 is happy bears.

Note Added 3:08 PM: Another market up thrust occurs today. You could see it when XLF moved higher instead of lower. XLF 21.56. Then the dollar/yen moved to 102.20 as Kuroda woke up and started printing yen again to pump the stock market. The BOJ and Fed are colluding in a tag team approach to keep equities elevated. As the dollar/yen oscillates at 102.10-102.25, the Fed goes in and crushes the VIX to create further upside. VIX fell through Keybot's target of 14.15 and this created the acceleration through 1818 resistance, then 1824, then 1828. Next resistance is 1832. The HOD is 1830.25. Above 1832 is the strong resistance gauntlet at 1838-1843; punch through here and new all-time highs are guaranteed. Reference this weekend's SPX S/R missive by scrolling a couple pages back or type 'SPX S/R' into the search box at the right to bring that article up showing support and resistance levels. VIX 14.15 is key. The bears must move VIX above 14.15 asap, otherwise, they will end up in the emergency room. VIX is now at 14.08 and SPX is 1829. Bulls need to punch up through 1832 R and bears need to drop under 1828 S. Note the tame and calm 10-year Treasury note yield sitting at 2.74% all day long shaking its head at all the stock market antics. WTIC crude oil is back above 100.

Note Added 3:41 PM:  Dollar/yen 102.22 remaining elevated. VIX 14.05 remaining under 14.15. SPX 1829 unable to decide if it wants to make the bulls happy by moving above 1832 or the bears happy with sub 1828, or go home neutral staying between 1828-1832.

Note Added 4:13 PM:  Dollar/yen 102.20. VIX 14.14 closing at the 14.15 bull-bear line in the sand. Volatility continues to settle out and printed 14.16, on the bear side, but the market makers took off two pennies to push it under to 14.14 and keep it on the bull side overnight tonight. Isn't it amazing how Keybot the Quant algorithm can identify these numbers before they occur? Whichever way the VIX pivots from the 14.14-14.15 at the opening bell tomorrow, the broad indexes will pivot in the opposite direction. Volatility is the key market direction metric for Friday trading. SPX parks at 1829.83 overnight.

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