Friday, May 23, 2014

Keystone's Midday Market Action 5/23/14

The bulls keep slappin' the bears around into the Memorial Day holiday weekend. After today's regular close at 4 PM, the stock market will not reopen until Tuesday morning, 5/27/14. Markets are typically bullish heading into a three-day holiday weekend. Keybot the Quant flipped to the long side with the robust financials creating market lift. Ditto the retail sector today. Watch XLF 21.83 and RTH 58.62. XLF is above 22 clearly in the bull camp creating strong upside in markets. RTH is 58.44 with the bulls needing 18 more cents to confirm the path to SPX 1900 and higher.

If XLF remains above 21.83, and RTH remains below 58.62, the stock market will float along sideways into the closing bell. The SPX 2-hour, 1-hour and 30-minute charts continue developing negative divergence. The indicators are ready to send price lower but the MACD lines and RSI's have a bit more life in them. Thus, two or three more 2-hour candlesticks places the markets into next Tuesday so today the price action may simply float sideways into the closing bell. The SPX hourly and minute charts indicate price topping either late today or to begin the new week after the holiday. In the short term time ahead say through lunch time, equities may drift lower but they should return to the highs which would provide time for the MACD lines and RSI's to line out negatively and create universal negative divergence for an extended move lower.

The Ukraine elections are Sunday. Copper is stronger today helping the bulls. Volatility is lower helping the bulls. TRIN is 0.83 identifying the bulls as the winner today. The dollar/yen is elevated at 101.88 helping the bulls. Banzai! Whichever way the dollar/yen goes, so goes the stock market. The SPX all-time closing high is 1897.45 on 5/13/14 and all-time intraday high is 1902.17 on 5/13/14. Keep an eye on these two numbers today; price is now printing above 1898 which would be a new all-time closing high if it holds until the closing bell. The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead.

In a nutshell, bears need XLF 21.83. Bulls need RTH 58.62. Until one or the other occurs, markets stagger sideways. The time for holiday grilling and outside activity is near. The flags are flying high. Time for apple pie. Keystone took a couple heart pills to prepare for the sticker shock of beef prices as plans are made for the barbeque.

Note Added 10:57 AM: The scorecard is XLF 22.01. RTH 58.35. VIX 11.81. TRIN 0.79. Dollar/yen 101.83. SPX 1898.14. The 10-year yield is 2.53%. The bears will maintain a lid on the market upside as long as RTH remains under 58.62. WTIC crude oil is 104.28 and Brent oil at 110.52. So it will be interesting to see what oil is after the Ukraine elections on Sunday. Oil is remaining elevated in part due to conditions in Libya deteriorating. American consumers are not happy spending a big chunk of the budget on gasoline.

Note Added 7:45 AM on 5/24/14: The bulls run with the expected pre-holiday bullishness creating a new all-time closing high for the SPX at 1900.53 but not a new all-time intraday high which remains at 1902.17. The volume is anemic all week long the lowest volume of the year. The highest volume day this week was the one selling day on Tuesday. The slope of the RUT 150-day MA continues to flatten but is not yet negative so the bulls remain the winner. Financials, semiconductors and tech lead the way higher. Trannies print new all-time highs so the Dow will have to pick up the pace and print new highs next week if the upside is continually verified by Dow Theory. BPSPX remains on a market buy signal at 74.20. VIX at 11.36 is at lows not seen in 14 months. Traders remain complacent and fearless. Why worry when the central bankers will always pump the stock market higher with easy money? The 8 MA remains above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead. The SPX is above the 200 EMA at 1877.65 on the 60-minute chart signaling bullish markets for the hours and days ahead. A back kiss is needed to this critical 1878 level. As mentioned earlier today, the 2-hour, 1-hour and 30-minute charts are setting up with negative divergence so this rally move should peak out at any time. The bulls keep finding ways to move higher and the RSI on the 1-hour and 2-hour charts still have a hair of upside juice as well as the MACD line on the 2-hour. Thus another one to three candlesticks on the 2-hour is  likely needed to create the neggie d for RSI and MACD line and cause a pull back. This is 2 to 6 hours of trading time which will be the bulk of Tuesday trading. This means that a new intraday all-time high above 1902 will likely print on Tuesday. If the Ukraine elections occur without incident, the stock market will be poised for more upside. The expectation would be for the market to top on Tuesday. The bulls need the retail sector to cooperate and move RTH above 58.61 to signal the all-clear for the bulls and send the SPX to 1920. The RTH came up to within pennies of this goal but fell short. RTH 58.61 will tell the market story on Tuesday. If the bulls take out RTH 58.61 to the upside, the bull rally party will be in full swing with lots higher stock market prices ahead. If the bears hold RTH under 58.61, a ceiling is placed on the stock market upside. The new moon is Wednesday, 5/28/14, and markets are typically bearish moving through the new moon. Since this is the peak of nightime darkness for the month, the chances escalate for military conflicts to occur since the side with the night vision equipment wins. So the market bears have two feathers in their caps--RTH 58.61 and the new moon seasonality but the bulls have an entire headdress of feathers on top of their head that would make Geronimo blush.

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