Sunday, March 30, 2014

Keystone's Weekend Reconnaissance 3/30/14

March began at 1859.45 and price is less than two points below at 1857.62 poised to print a negative month. The bulls must come to play on Monday (EOM and EOQ1) if they want to print a positive month for March. The bulls continue to hold price above the 1848-1851 support gauntlet which is a feather in their caps. The year began at 1848.36. The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead, however, the 8 MA is stabbing downward towards the 34 MA for a potential negative cross. There are six 8/34 crosses in the last seven days verifying the ongoing bull-bear sideways fight. One side or the other will win big in the coming days. The SPX is above the 200 EMA on the 60-minute at 1854.15 signaling bullish markets for the hours and days ahead. Watch the 1854.15 like a hawk on Monday. Bears need the negative 8/34 MA cross on the 30-minute and 200 EMA cross on the 60-minute, otherwise, they got nothing.

The 20-day MA is 1863.08 and 50-day is 1834.05 so the price move from this bracket chooses the winner moving forwardKey S/R is at 1884, 1878, 1874, 1868, 1863 (20-day MA), 1859 (March began here), 1855, 1854 (200 EMA on the 60-minute), 1848-1851 support gauntlet (the year began at 1848), 1841-1843 support gauntlet and 1834 (50-day MA).

Volatility remains key. Note how the VIX closed at 14.41 only two measly points above the 14.39 bull-bear level identified by Keybot the Quant algo. At Monday's opening bell which every way VIX pivots, equities will move the opposite way. Bears will have a happy day if VIX remains above 14.39 and heads above 15, 16 and higher. Bulls will rejoice if VIX drops under 14.39 since equities will be moving strongly higher. As always, use the VIX 200-day MA as a market directional signal as well and VIX is under the 200-day making for happy bulls.

Keybot the Quant remains short as the daily roller coaster ride continues. The algo identifies VIX 14.39 and XLF 21.77 as the two key parameters controlling market direction currently. Bulls need VIX under 14.39 (lower volatility) to guarantee market upside and will receive further upside fuel with RTH 59.57 (stronger retail sector). Bears need XLF under 21.77 (weaker banks) to guarantee market downside. Equities will float sideways on Monday if VIX remains above 14.39, RTH under 59.57 and XLF above 21.77. If the VIX drops under 14.39 and the RTH moves above 59.57, Keybot will likely flip long. Also, if the VIX jogs above and below 14.39 several times during the session, this will favor the bulls and enable Keybot to flip long easier. Bears need to spike VIX higher and keep it higher making a statement that market selling will continue.

For the SPX on Monday starting at 1858, the bulls need to push up through 1867 to create an upside acceleration. The bears need to push under 1850 (the sturdy 1848-1851 support gauntlet that will dramatically weaken equities) to accelerate the downside. A move through 1851-1866 is sideways action to begin the week. Price is in the middle so each side needs an 8 or 9-point move to receive the mojo acceleration reward for their respective direction. The BPSPX is 72. Bulls need to hold the 70.00-70.50 level and move higher to maintain a market buy signal. Bears need to push the BPSPX under 70.00-70.50 to create a market sell signal ushering in market mayhem.

Keystone's Eclipse Indicator has a window open this week for a potential large market sell off to occur. A Bradley turn date is 4/6/14 so a Bradley window is open through 4/11/14 for a market trend change to occur. The dollar/yen begins the week at 102.92 moving higher. Equities will be charging higher if dollar/yen runs up through 103. China PMI's as well as other countries and Europe PMI's are important early in the week. The ECB Rate Decision and Press Conference on Thursday morning is the most important event of the week more important than the US Monthly Jobs Report on Friday.

Pay attention to the 20-week MA's on the major indexes. The RUT sits exactly at this support, ditto the Nasdaq, so a bounce or die decision has to occur to begin the week. If tech and small caps continue lower the SPX and Dow will target their respective 20-week MA's. The SPX 20-week MA is 1825.44. The Dow 20-week MA is 16152.46.

Boiling all the above mumbo jumbo into an easy game plan, watch VIX 14.39 to determine market direction. Bulls want to push up above 1859.45 so the positive-month March banner can be waved, then take out the 20-day MA at 1863 to guarantee upside victory ahead. Bears need to maintain a negative-month for March under 1859.45, keep the VIX above 14.39 and heading higher, and then push under the 1848-1851 support gauntlet that guarantees a lower price that will target the 50-day MA at 1834 and then the low 1800's. VIX 14.39 will tell you the winner when the bell rings.

For the big picture projecting out a couple weeks, bulls win big with VIX under 14.39 and SPX above 1863. Bears win big with VIX above 14.39 and SPX under 1834. Anything between SPX 1834-1863 is noise. Russia's Putin keeps massing troops at the Ukraine border kicking sand in everyone's face.

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