Monday, April 14, 2014

Keystone's Morning Wake-Up and Midday Market Action 4/14/14; C; Retail Sales; Business Inventories

Today is an interesting date; a palindrome 41414. The break down in semiconductors last week flushed the broad indexes lower. Watch SOX 563.50 since the bulls got nothing unless they push the chips above this number. Copper is also key now creating market negativity with JJC under 37.60. Bulls need to push JJC above 37.60 to create a sustainable recovery rally. Keybot the Quant is short to begin the new four-day holiday-shortened week of trading and markets should remain weak unless the bulls can push semi's and copper higher.

For the SPX starting at 1816, the bears only need a point or so lower, to push under 1814, and a downside acceleration will occur. Bulls need to retrace Friday's 17-point sell off to regain their mojo, a formidable task, so instead bulls will try to push semi's and copper higher to attain one of the goals above which will stop the downside market bleeding. A move through SPX 1815-1834 is sideways action for Monday.

Futures are all over the map since last evening first with S&P's dropping to -6, then recovering to +1 overnight, then back down to -5 about two hours ago now back to flat. Up and down like a yo-yo. C earnings are on tap at 8 AM which will set the market tone. Ditto Retail Sales at 8:30 AM then Business Inventories will create a market pivot point at 10 AM.

Ukraine turmoil is creating market angst. Russia is instigating violence in East Ukraine to create a reason to invade all the while pretending they are doing nothing. The feckless response to Crimea and Ukraine by the West (Europe and the US) promotes more aggression by Russia. The Micex is down -1.6% today but the Russian Ruble remains steady at 36-ish. Russia does not have worries unless the ruble collapses to 36, 37, 38 and moves up towards 40. The US is also investigating allegations that Syria is using chemical weapons against its citizens again which would cause a further collapse in the Middle East situation.

The BPSPX issues a market sell signal (see this morning's chart). The CPC and CPCE put/call ratios finally jump higher showing a tinge of fear developing among traders. The CPC is at 1.15 the highest level since October's market low. Ditto the CPCE at 0.75. This indicates that a recovery rally is likely in the very near term but considering the multi-month complacency the trend is likely that the put/calls will now move higher over the coming weeks and months in conjunction with equities seeking a more firm bottom somewhere in the low 1800's or mid to high 1700's on the SPX.

The Bradley turn was 4/6/14 and was dead-on in identifying a market top. In addition, Keystone's Eclipse Indicator had a window open through 4/4/14 for a significant market top and the 4/4 date was the top. These tools are very esoteric but they must be followed. The next Bradley turn is 4/27/14 so a window is open for a trend change, or a strong acceleration move up or down, in the window from 4/21/14 through 3/2/14. Bradley turns do not forecast direction only that a market trend change is likely or rapid acceleration up or down.

The full moon occurs tomorrow in conjunction with a total lunar eclipse. The full moon is dubbed a 'blood moon' since the alignment of the sun, moon and Earth will create a red hue around the moon. Markets are typically bullish through a full moon. The US tax deadline is tomorrow, 4/15/14, so folks are frantically finishing returns. Many will likely file for extensions this year. Typically, markets are weak moving into tax day since stock is sold to pay Uncle Sam and then markets recover afterwards. OpEx is Thursday since markets are closed on Good Friday this week. Easter is on Sunday. Markets are typically higher from a Tuesday low to a Wednesday high during OpEx week. Markets are also typically bullish moving into a three-day holiday weekend. Thus, markets are lining up for the bulls this week to recover from the two-week drubbing. Will traders front run the seasonally expected bullishness for the back half of this week starting today or will any move up today result in a lower low for markets tomorrow that may identify this weeks low? If Ukraine falls apart obviously geopolitical events will flush markets lower and override all seasonal indicators.

Watch SOX 563.50, JJC 37.60 and SPX 1814 to determine market direction today. The downside accelerates lower if SPX 1814 fails. Bulls got nothing unless they push either SOX above 563.50 or JJC above 37.60. Citigroup earnings and Retail Sales between 8 and 8:30 AM will set the tone and move futures.

On trades, Keystone bot more ARO on Friday but this long trade may need more time to base and bounce off the positive divergence developing. The retail data this morning will affect all retail stocks. Watch RTH and XRT today. Keystone also bot WLT opening a new long position since the charts show very attractive positive divergence for this bludgeoned coal stock.

Note Added 8:23 AM: Citigroup beats on the top and bottom line surprising traders and analysts. C catapults +2.5% higher then moves over +3% higher. The market mood changes quickly favoring bulls. The S&P futures leap to +6.5. Dow +40. Nasdaq +12. The dollar/yen moves higher to 101.82 so the BOJ is weakening the yen to help boost stocks. The SOX 563.50 and JJC 37.60 levels will show if the market bounce today is a dead-cat bounce, or if it has strong upside legs.

Note Added 8:33 AM: Retail Sales are up 1.1% better than expected. The bulls come to play this week and may run markets higher wall-to-wall from Monday to Thursday the way the week is beginning. S&P's +9. Dow +60. Nasdaq +20. The 10-year yield moves up to 2.65% approaching that back test of the sideways triangle (reference this morning's chart).

Note Added 3:12 PM: The SOX jumped above 563.10 this morning (use this number instead of the 563.50--Keybot is constantly recalculating the target numbers in real-time) so this pumped equities higher. A short time ago, SOX fell back under 563.10 creating the late-day swoon. Copper was positive overnight and much of the day, now copper is negative. The SPX ran up to the strong 1828 resistance, also the 100-day MA at 1828.43, and punched above so the robots pumped markets higher. The 20-week MA is 1829.91 another important moving average resistance level. The SPX pumped above 1828-1829 when the ECB provided more happy stimulus talk about 10 AM. The central bankers control the market and traders react like Pavlov's dog. When they heard ECB stimulus, markets jumped  higher. Interestingly, the dollar/yen higher and euro higher, with dollar lower, has driven markets higher for months. A new dynamic may develop with the euro weakening, which would help strengthen the dollar and pressure the dollar/yen. Despite the potential change coming, which should potentially weaken markets, traders simply goosed markets without thinking as soon as the ECB provided the stimulus lip service. Stimulus is heroin and traders do not even think of the various outcomes instead they simply are trained to react and buy stocks. The computers were in charge since midday the SPX, Dow, Nasdaq and RUT were all up about +0.9%, uniformly, indicating programmed trading running the show today. The robots reverse course and flush the markets lower off the tops. The RUT, Nasdaq and biotech sector all topped before lunch and headed lower. The SPX peaked at 12:30 PM and Dow at 1 PM all of them rolling over with tech and small caps leading lower. Since SOX and JJC remain in the bear camp, today's rally appears to be a dead-cat bounce. Remember, seasonality-wise, the bulls are favored from a low tomorrow into Thursday, the last trading day of the week, unless Ukraine or other problems develop that will punish markets. Keystone took profits on the WLT long since there is no reason to give up a +5% gain in a few hours time. Will look to reenter. WLT takes an initial launch off the possie d and should plot a sideways to sideways up path ahead so it is likely a safe long play going forward.

Note Added 3:30 PM:  Nasdaq turns red. RUT red. This sounds like Red Rum for any of you that ever read The Shining. The strongest support/resistance in this area is 1832, 1828, 1824, 1820, 1811 and 1808. With the 1828 failure since late last week, 1808 should be shown respect moving forward. TRIN is 0.79 strongly favoring bulls so equities should recover into the close.

Note Added 3:41 PM:  SOX moves above 563.10 creating market bullishness again. Use SOX 563.10 as the rudder steering the market ship and this will continue into tomorrow's session.

Note Added 4:20 PM:  Wild finish. SOX spiked wildly higher to finish at 565.02 two points above the bull-bear line creating upside market oomph. TRIN collapses to 0.60 providing bull fuel. VIX collapses from 17.5 to 16.11 providing bull fuel. Volume is below average today. Semiconductors will be important again tomorrow. The SPX recovers and overtakes the strong 1828 resistance, again, today, closing at 1830.61, above the 100-day MA at 1828.57 and 20-week MA at 1830.57. Well look at that, the bulls only managed a close four pennies above the 20-week MA, but above nonetheless so the bulls receive a feather for their caps. Pay attention to the 20-week MA moving forward. Dollar/yen 101.85. Euro 1.3821. The US dollar/yen/euro relationship will be important moving forward now that the ECB is trying to jawbone the euro lower. Brent crude oil is near 109 showing that oil traders are concerned over the Ukraine and Syria turmoil but stock traders do not care about geopolitical events. C earnings and Retail Sales carried the positive day while traders ignored the fact that Business Inventories are rising with soft sales.

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