Monday, May 5, 2014

Keystone's Morning Wake-Up and Midday Market Action 5/5/14; PMI's; PFE; ISM Non-Mfg; AIG

Ukraine turmoil continues with civil war ongoing. Kiev has likely lost control of eastern and southern Ukraine. Regional disputes break out; elections will probably be meaningless if the country is in civil war. China's HSBC disappoints missing estimates so copper is weaker. Oil remains elevated and gold and wheat head higher on the Ukraine turmoil. Oil is in a tug-o-war dragged lower by a weakening Chinese economy but at the same time pushed higher due to increasing geopolitical tensions. The 10-year yield is teetering at 2.58% a multi-month support level. Bounce or die. Yield died a short time ago falling below but continues to fight back to try to hold the support. Lower yields bolster the disinflation and deflation scenario moving forward.

S&P futures were flat overnight but at 4:30 AM things changed when the dollar/yen fell under 102. S&P futures are -7 at this writing about one hour before the opening bell. Dow -70. Nasdaq -17. SPX S/R (see this weekends analysis for support and resistance levels) are 1891, 1884, 1878, 1874, 1868 and 1859. The SPX begins at 1881 so a test of the 1874 support appears to be on tap. Keybot the Quant is long but if either XLF drops under 21.80, GTX under 4937 and/or VIX above 14.62, any one of these three would do, and the SPX drops under 1879, which appears on tap, Keybot will likely flip short. In other words, despite a weaker opening for equities, if none of these three parameters turn bearish, the bears got nothing and stocks will recover today.

The bulls will gain upside fuel with either RTH 58.85 and/or JJC 37.50. The retail sector may weaken today with the broad market and copper is trading weaker. The 8 MA is under the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours ahead but the SPX is above the 200 EMA at 1865-1866 on the 60-minute chart signaling bullish markets for the hours and days ahead. One of them is wrong and whichever side flips tells you the winner forward. Bears need sub 1865 or they got nothing.

The ISM Non-Mfg Index is 10 AM which may create a market pivot. Typically it is not much of a market mover. A PMI reading is released before the ISM. PFE is -0.8% pre-market which will drag the Dow lower due to a beat on EPS but miss on top line sales. Companies cannot increase the top line across any sector since the structural unemployment leaves many Americans unable to spend. Companies can only cut expenses and employees to meet EPS targets but this cannot go on forever. AIG earnings are after the bell.

If the 10-year yield falls under 2.58% this should be in concert with equities moving lower providing a deflationary vibe. Watch the 30-minute and 60-minute chart signals to see who wins. Monitor the five parameters above (RTH 58.85, JJC 37.50, XLF 21.80, GTX 4936 and VIX 14.62) to see which side receives the go signal. Bulls need a higher retail sector and copper while the bears receive downside juice with lower financials, commodities and higher volatility. VIX begins at 12.91. The 10-year yield is 2.58%. The dollar/yen is 101.92. The drama at these 2.58% and 102 pivot points continue. Check the BPSPX this evening since at 69.40 price is only 0.60, less than one buck, away from the 70% level to receive a market buy signal. The BPSPX remains on a market sell signal as long as it stays under 70.

Note Added 2:45 PM: Dollar/yen 102.05. 10-year yield 2.61%. The broad indexes are flat showing the sideways vibe the charts were hinting at this morning. The five parameters above are status quo, hence markets stagger sideways. Equities drop at the opening bell today due to the weak financials. XLF fell under 21.80 so the bears were on easy street but at 10 AM the XLF moves back above 21.80 so the bears were frantically trying to place the corks back in the celebratory wine bottles. As would be expected, equities recover and meander sideways all day. The SPX came down and bounced off the critical 200 EMA bull-bear support line in the sand highlighted above. The 8 MA remains under the 34 MA on the SPX 30-minute chart, however, the 8 MA is climbing rapidly and should pierce up through the 34 MA by the closing bell today or first thing tomorrow. So the bears must reverse equities right here right now. Instead, the SPX is popping higher now up at 1885. VIX is collapsing down to 13.08 providing bull fuel. Watch XLF 21.82 as the bull-bear line in the sand that will create market negativity if it fails. The XLF is spiking up to 21.90 as this is typed. The bears appear to be folding like a cheap suit. Bears need to muster all their energy and perform a reversal right now or bulls may run higher into the mid-week. BPSPX is 69.80 only a whisker from the 70 level which would give the bulls a market buy signal.

Note Added 2:58 PM:  Dollar/yen 102.13 so the weaker yen, even a small amount, adds upside bull fuel for stocks. The SPX pops to 1885.50 and now plays around at the strong 1884 S/R. Above 1884 leads to 1891 R. Below 1884 leads to 1878 S. Copper remains weak all day. XLF 21.89. Bears got nothing and need to start fighting immediately or they will get run over. Watch XLF 21.82.

Note Added 3:39 PM:  The 8 MA crosses above the 34 MA on the 30-minute chart (the 8 MA is 1882.53 and 34 MA is 1882.47) signaling bullish markets for the hours ahead. The 30-minute and 60-minute chart signals now both agree and favor the bull path ahead. The 8/34 cross is very tentative since only about fifteen or twenty minutes remain for today. The bears are laying down on the side of the road after getting hit by the bull bus. Bears must reverse equities now there is no further breathing room remaining. The bulls are gaining strength by the minute. XLF is 21.90. Dollar/yen remaining elevated at 102.10 so stocks remain elevated. Okay bears, whatchu got?

Note Added 3:45 PM: Counterpunch. The 8 MA crosses below the 34 MA on the 30-minute chart (the 8 MA is 1882.39 and 34 MA is 1882.44) signaling bearish markets for the hours ahead. The battle continues. Bears are not giving up without a fight. XLF 21.89.

Note Added 3:48 PM:  The 8/34 cross flips again to the bull side. High drama.

Note Added 3:50 PM:  Ha, ha. The 8/34 cross flips again to the bear side. The action is like the final seconds of a basketball game. Independent on which side wins today, the price action after tomorrow's opening bell will be extremely important and likely identify which side wins for the next couple days or more. Price sits on the strong 1884 S/R.

Note Added 4:01 PM:  The 10-year yield is 2.61% and held the 2.58% support. Dollar/yen 102.15 keeping the stock market elevated. The broad indexes finish higher. RUT is negative. VIX is up today with equities up so one of them is wrong and will be exposed in the morning. XLF 21.90. The bulls win the battle with the 8/34 MA cross on the SPX 30-minute and receive the nod moving forward. Bears have one single chance to stop this bullish market thrust that is beginning and that is in the minutes after the opening bell tomorrow morning. Bears better come to play tomorrow and start playing overnight, otherwise, the SPX will chart a path to SPX 1900. Bulls need RTH 58.85 or JJC 37.50 to verify the upside. Copper was weak today so JJC is stalled. RTH finishes at 58.59 and has a lot of work to do to move higher. So even though the bulls have the ball, they need stronger retail or copper, or they got nothing.

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