Friday, April 25, 2014

Keystone's Midday Market Action 4/25/14; Consumer Sentiment

Consumer Sentiment is a key market metric and the University of Michigan number is 84.1 the best level since last summer. Typically, higher gasoline prices will dampen the mood but instead folks remain optimistic. Ukraine schmoocraine. Weak housing data, no worries. AMZN stumbling. F drives into a ditch this morning. No worries. Complacency rules. Now analysts say stocks like GM, F and IBM are a 2015 story when only a month ago they said buy with both hands since they will catapult to the moon in short order. The market circus continues. Yesterday was a mixed market day with the Dow printing a very rare flat day at zero cents gain and loss; not seen since the 10035.34 print on 12/24/01, over 12 years ago. The secular bear cycle remains in play for the 18-year cycle from 2000-2018 so perhaps this action provides a hint that the Dow has a meeting planned for 10K-12K over the coming years to finish the most reliable 18-year bear cycle.

Looking at today, the theatrics continue. Equities take on a sour tone because of Ukraine turmoil with traders finally paying attention to geopolitical events. Keybot the Quant remains bullish. The retail sector and copper help create the recent boost in stocks. Watch RTH 58.96 and JJC 37.46. RTH collapses back into the bear camp today but copper remains bullish, respectively. So retail sector weakness is creating broad market weakness. The VIX climbs higher to 14.41 one penny above the critical bull-bear level at the 200-day MA at 14.40. The VIX will lock in market weakness ahead if it stays above 14.40. Keybot is currently identifying VIX 14.75 as the bull-bear line in the sand a tougher criteria. Keybot is also watching XLF 21.77 now at 21.87 creating bullishness. Equities will take a strong leg lower if the banks fail at XLF 21.77.

This morning's charts highlight support and resistance levels. The SPX 1858-1860 level is key and the 20-day MA is at 1862.43. If the 20-day MA fails, stocks will likely accelerate lower. The BPSPX is 68.20 remaining on a market sell signal. The bulls need BPSPX above 70 to receive a market buy signal. Sunday is a Bradley turn day so a market inflection point is expected give or take a few days so the Bradley may be identifying a near-term market top. A new moon occurs on Monday at 1 PM and equities are typically weak moving through a new moon. The new moon also offers an opportunity to initiate military conflicts since the side with the superior night vision technology wins. Ominous timing considering the Ukraine turmoil.

Watch VIX 14.75, XLF 21.77 and JJC 37.46 to determine market direction. Watch the 20-day MA at 1862.32. Whoa, as this is typed, the SPX is 1862.10. Failure. Hold on to your socks. This 1858-1863 support level is critical as discussed this morning.

On trading, Keystone took profits in FUEL the other day and bot HERO for a long position. HERO already bounced and Keystone took profits exiting the position. Also bot FUEL reopening a long position as it drops again. Keystone also took profits on the WLT trade exiting that position. The ARO, WLT, FUEL and HERO plays all remain attractive on the long side going forward. In a strong market downturn these stocks should hold up better since they are already bludgeoned. The positive divergence on the weekly and daily charts should aid the recovery in these bloodied stocks and push them sideways to sideways higher for weeks to come. Keystone also continues to add SJB, JGBS, MGPHF and SSNI. Caution is needed since these plays are thinly traded. All of the tickers listed are long plays (SJB is an inverse against HYG so is actually bearish). Keystone continues to hold and add inverse ETF's against the broad market since a multi-year top is likely forming now, or is already in place, or will top out within the next month or two.

Note Added 11:10 AM: VIX is 14.66 very near the 14.75 bull-bear line in the sand that will add bear fuel to markets. XLF is 21.84 remaining above the 21.77 bull-bear line in the sand. SPX is 1862.04 losing the 20-day MA at 1862.32 but this fight may continue a short while. Since the VIX and XLF are not green-lighting the bears, the SPX should recover. Bears need either VIX above 14.75, XLF under 21.77 and/or the SPX under 1860-ish, or they got nothing.

Note Added 11:41 AM: Equities recover off the lows. The dollar/yen is 102.06 refusing to give up the 102 level so this helps the bulls maintain market buoyancy. The BOJ is there supporting the stock market in collusion with the Fed. Bears need a stronger yen (dollar/yen under 102), higher volatility, lower financials and lower copper, or they got nothing. The bulls maintain the 20-day MA support and bounce. So, nothing to see here, move along, move along. Bears need to eat a big lunch so they have energy to make another push lower. They do not have the oomph so far today to create any market damage. The 10-year yield is 2.65% showing that traders continue to prefer the perceived safety of Treasuries rather than risky stocks.

Note Added 1:33 PM: Status quo. Bulls walk around with a feather in their cap since the SPX remains above the 20-day MA at 1862.37, XLF above 21.77, JJC above 37.46 and and VIX remains under 14.75. However, the bears are trying to get a toe-hold and create negativity with the VIX above the 200-day MA at 14.40. VIX is now printing 14.09 nine pennies on the bear side causing market weakness. Since the VIX is at the 200-day pivot use this as the key metric for the short time ahead. Market bulls win if VIX drops under 14.40. Market bears win if VIX stays above 14.40 and win big above 14.75. Dollar/yen is 102.14 so the weaker yen (from 102.06 up to 102.14) keeps stocks buoyant.

Note Added 1:43 PM: The SPX comes down for another look at the 20-day MA and bounces. Bears did not eat a big enough lunch since they do not have energy. It's probably do it or die time for bears today. If they do not push lower then the bulls will likely take the ball and run stocks higher into the closing bell. The VIX 14.40 level will tell you the story. VIX 14.48.

Note Added 1:46 PM:  VIX 14.41 bears holding on to the 200-day MA at 14.40 by one penny. It's do it or die time. Bears must bounce VIX and send it higher to begin market selling carnage to end the week. Bulls must flush the VIX lower to catapult markets higher into the closing bell. High drama ...... VIX is stuck at 14.41, blow on it and see which way it goes.

Note Added 1:49 PM:  Here it is for all the marbles. VIX exactly at 14.40; whichever way VIX pivots the markets will move the opposite way. SPX is at 1864.75. The tension mounts....

Note Added 8:14 AM on 4/26/14: Bears could not keep the VIX above the 200-day MA so the bulls are happy. The bulls also close the SPX out above the 20-day MA and above the 200 EMA on the 60-minute. The bears, however, did close the Dow under its important 20-day MA.

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