Wednesday, June 18, 2014

Keystone's Midday Market Action 6/18/14; Fed Decision, Forecasts and Yellen Press Conference

Keybot the Quant remains long. The RTH is up to 59.35 well above the 59.00 bull-bear line so bulls are feeling pretty good. Volatility is lower. TRIN is 0.84 under one which favors the bulls the remainder of the day. JJC is 37.30 remaining below the important JJC 37.59 bull-bear line in the sand. Thus, the stronger retail stocks allow enough juice to keep equities buoyant but copper remaining under JJC 37.59 prohibits the bulls from making headway higher. If the stock market explodes higher after the Fed, watch JJC 37.59 since markets will stall and roll over moving forward unless the 37.59 is taken out. If JJC 37.59 gives way, the SPX is headed above 1951-1956 and printing new all-time highs.

The Fed decision is imminent at 2 PM. A continuation of the $10 billion per month QE taper is expected with purchases decreasing from $45 billion per month down to $35 billion per month going forward. Keep in mind although there is a taper there is still over $35 billion per month of easy money pumping into markets with the ongoing QE. So QE continues albeit at a slower rate. This places an end to QE in the September-October time frame. The prior ends to the Fed QE programs saw equity markets weakening from 4 to 6 weeks ahead of the end date. Thus, moving backwards from the projected end dates, equity markets should weaken in the August and forward time frame. But, what about the next two months? Fed Chair Yellen's press conference from 2:30 PM to 3:30 PM will move markets.

Note Added 1:54 PM: Dollar/yen 102.09 near the 102 pivot. Stock market bulls win if dollar/yen stays above 102. Bears win if dollar/yen drops under 102. SPX is 1941. Dow is 16780. Nasdaq 4323. RUT 1173. Euro 1.3574. Gold is 1272. WTIC 106.03. Brent 114.45. VIX 11.80. 10-year yield 2.621%. TRAN 8122. Copper is positive. TRIN 0.80.

Note Added 2:05 PM: The Fed continues tapering by $10 billion as expected to $35 billion per month less than one-half the highest QE level a few months ago. The highly accommodative policy remains appropriate going forward and additional tapering may occur if conditions improve. The Fed wants it both ways. The Fed says growth in economic activity has rebounded in recent months. The Fed does not mention higher inflation. Household spending is rising moderately. There is not a lot new in the Fed's outlook and comments. Stocks dip lower on the release but quickly rebound and move higher, then trip and stagger lower. The 10-year yield is 2.63%. The 2-year yield is 0.46% well off the 0.51% high yesterday (reference previous chart). The dollar/yen leaps to 102.24. WTIC oil is under 106. Equities are dead flat on the day and did not move on the news--so far. Copper dips a toe negative. TRIN spiked to 1.00, the neutral level, but has now collapsed to 0.84 so this will reward the bulls if it remains under one.

Note Added 2:10 PM:  TRIN plummets to 0.71--bullish. VIX dropping to 11.41 the LOD--bullish. Dollar/yen 102.25. Banzai! Copper now positive again. Equities should move higher in the minutes ahead. The SPX poked up through 1944 this morning so the strong 1949 overhead resistance is in play. Resistance above is 1949 and the all-time closing high at 1951 and all-time high at 1956. Fed Chair Yellen is on tap at 2:30 PM.

Note Added 2:17 PM: Equities are running higher. SPX HOD 1947.72 nearing the 1949 R. TRIN 0.68. VIX 11.25 another low today.

Note Added 2:23 PM: The Fed did not mention inflation concerns so the bulls are running with the continued $35 billion per month QE easy money. The SPX is higher testing the 1949 R now. In the press conference, the word 'inflation' will be key. Since the Fed did not acknowledge inflation in the comments, if Yellen coughs and it sounds like she says inflation, that would likely take the wind out of the stock market upside. If Yellen flaps her dovish wings during the press conference, the rally party will continue into the evening. TRIN and VIX are running lower pumping the stock market higher. A positive for market bears is that JJC is 37.33 higher, but only by a few pennies, and remaining well under the 37.59 number the bulls need to guarantee upside joy to SPX 1960-1980. Thus, the bears may be able to hold the line at SPX 1949 as long as copper does not move any higher.

Note Added 2:31 PM: Yellen says the highly accomodative policy remains in effect. These words always create stock market upside. Boom. Bulls take out 1949 R so 1951 is next. TRIN 0.62. VIX 11.10 nearing a ten-handle. The 10-year yield drops under 2.60%. Dollar/yen is moving back down to 102. Euro is higher so dollar lower and stocks higher. Lower dollar moves dollar/yen pair lower.

Note Added 3:05 PM:  Yellen mentions inflation and the hotter CPI yesterday but discounts the data as noisy. Bingo. That means easy money all the way. The SPX moves up through the all-time closing high at 1951.27 so watch this number into the bell and price is now moving higher to test the all-time intraday record high at 1955.55. Equities are pumping strongly higher. SPX HOD at 1953.58 and climbing. VIX plummets down to 10.87 there are no market bears remaining. Short-sellers are running for their lives as dove Yellen flaps her wings. JJC 37.35 stable.

Note Added 3:35 PM: Yellen continues to not see bubbles in markets and says stocks are not overvalued. This is music to the bullish ears. The Caligula-style toga party rally continues. VIX is 10.82 at the lows from 8 days ago. TRIN 0.64. The bears are getting slapped around. JJC 37.35 holding firm. Bulls need JJC 37.59 to prove and verify that more upside is ahead. The SPX has not yet taken out the all-time 1955.55 high.

Note Added 3:41 PM: Caligula raises his chalice to toast and celebrate the SPX above 1955.55 printing new all-time highs for the first time in history. SPX is now above 1956. Equities are melting-up.

Note Added 3:44 PM:  SPX is above 1957 all-time records begin printed. Yellen has whipped the bullish traders into frenzy saying the markets are undervalued. Yellen is telling everyone to buy stocks without fear or worry. And they are.

Note Added 3:48 PM: The 10-year yield is calm at 2.60%. Yellen says stocks are cheap and traders buy on her recommendation. The SPX prints a HOD at 1957.74. The bulls are dancing on table tops drinking Fed wine to the point of inebriation. Yellen promises that there is plenty more wine available after that runs out. JJC 37.36. Bulls need another twenty cents in JJC to guarantee extended bullish joy but copper is stable wanting to maybe think things over this evening and decide tomorrow on which direction to favor. All sectors are singing from the bull's hymn book sending equities higher, except for copper.

Note Added 4:02 PM: The SPX prints a new all-time intraday high at 1957.74 and new all-time closing high at 1956.98. This is the 20th record close for the S&P 500 this year. Utilities jump +2%. UTIL prints a new all-time intraday high at 564.61 and new all-time closing high at 564.45. The XLU prints a new all-time intraday and closing high at 43.75. Traders are tripping over each other to buy the dividend stocks such as utilities. Ma and Pa Kettle are taking their entire life savings and placing it into dividend stocks right now because the Fed is promising a higher stock market forever. Yellen is carried off the floor on trader's shoulders to the after-party. JJC 37.34. Copper is key.

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