Wednesday, April 9, 2014

Keystone's Morning Wake-Up 4/9/14; 10-Year Note Auction; FOMC Minutes

The market direction drama centers around financials and volatility today. Keybot the Quant is bearish and identifies XLF 21.87 and VIX 14.59 as the two key bull-bear lines in the sand. XLF closed at 21.86 one penny on the bear side causing market negativity. It is amazing how the algorithm can identify these levels before they occur. Very simply, bears win big today if the XLF remains under 21.87 and moves lower. Market bulls win big if XLF moves above 21.87 and higher. Volatility dropped yesterday which provided bull fuel. Watch VIX 14.59 (also the 200-day MA at 14.51 as described in this morning's chart). Bears win big if VIX stays above 14.59 and moves above 15 then 16. Market bulls win big if VIX drops under 14.51.

The dollar/yen fell from over 103 to under 102 yesterday but oddly, the US equity markets remained on the positive side. The drop in the dollar/yen currency pair was more due to a weaker dollar that created lift in commodities and equities. The dolar/yen and equity relationship should come back into sync today. Dollar/yen is 102.06 with S&P futures +5. Futures were flat a few hours ago but steadily march higher and popped a couple handles in the last one-half hour as Treasury Secretary Lew is interviewed telling the markets what they want to hear.

For the SPX today starting at 1852, bulls need only a couple points or so, to poke up through 1855 to accelerate further upside. The bulls are gunning for this outcome as the pump the futures into the opening bell. Bears need to push under 1837.50 to accelerate the downside. A move through 1838-1854 is sideways action today. The BPSPX (reference last evening's chart) is ready to issue a big-time market sell signal so bulls must bounce markets today--there is no other time remaining. If markets do not rally today, the downside should be locked-in for days forward.

The SPX is under the 200 EMA on the 60-minute chart at 1860.71 signaling bearish market for the hours and days ahead. Bulls got nothing unless they push the SPX above 1861. The 20-day MA is 1863.40 so the 1861-1863 is a strong resistance gauntlet and may act as a showdown level as the day begins. XLF 21.87 and VIX 14.59 tells the market story today. If both turn bullish, and the SPX moves above 1855, Keybot will likely flip long. If XLF stays under 21.87, the bears are in full control.

The 10-Year Note Auction is 1 PM and the FOMC Minutes are 2 PM EST which will create a market pivot point. On trades, Keystone took profits on the ARO long and exited the trade but has now reentered so the ARO long remains in place. Keystone also bot TWTR as it starts to seek a bottom after a multi-month drubbing (reference last evening's chart).

Note Added 11:35 AM: The market theatrics continue. Dollar/yen is 101.78 drifting lower and remaining under 102 so this should create selling pressure. XLF 21.87 and VIX 14.59 dictate market direction and are flip-flopping on either side of these critical bull-bear lines in the sand. If XLF moves above 21.87, and VIX below 14.59, and the SPX moves above the intraday high at 1858.38, Keybot will likely flip long. Markets may stagger sideways with a slight upward bias into the FOMC Minutes at 2 PM.

Note Added 11:45 AM:  XLF is 21.89 above the critical 21.87 now creating market bullishness. VIX just now slips to 14.58 one penny under 14.59 also creating bullishness. Bulls are mounting a push higher. SPX is 1857.10 moving up fueled by the higher financials and lower volatility. Dollar/yen 101.81 moving higher. Copper is smacked -1%. The 10-year yield is 2.70% holding steady ahead of the auction at 1 PM an hour away.

Note Added 1:01 PM:  Keybot the Quant flips bullish at SPX 1859 fueled by the higher financials and lower volatility. The 10-Year Note Auction results are due any minute. FOMC Minutes in one hour at 2 PM.

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