Tuesday, August 12, 2014

Keystone's Midday Market Action 8/12/14

Stocks play around moving sideways at the flat line. Volatility is a hair lower (VIX 14.08) helping create market lift. Watch the VIX 200-day MA at 13.64 as a very important bull-bear line for the stock market. Bulls will stage a strong rally if VIX falls under 13.64. If VIX remains above 13.64, the bears are fine and will continue cruising along with the stock market drifting lowerTRIN is 1.19 favoring the bears and the sell side today.

UTIL is 540 remaining in the bear camp under the critical 543.81. XLF is 22.45 remaining under the critical 22.53 bull-bear line in the sand. JJC is 38.64 also under the critical 38.91 bull-bear line. RTH is 59.85 remaining above the important 59.51 bull-bear level. So bulls are unable to push utes, financials or copper higher, and, the bears are unable to push retail stocks lower, so equities stagger sideways.

Note Added 10:08 AM:  Whoa. The VIX collapsed to 13.82 as the bulls made a run for the 200-day described above (lower VIX sends the stock market higher), however, volatility reverses and is now above 14 again (a move higher in volatility creates market weakness). UTIL 540.87. XLF 22.47. JJC 38.64. RTH 59.81. Neither side wants to take the ball and run. Financials are only six pennies from the 22.53 so pay particularly close attention to the banks today. TRIN 1.16. Dollar/yen 102.21. The beat goes on.

Note Added 10:41 AM: The SPX 2-hour chart shows the MACD line remaining long and strong so even though price is at the important S/R pivot at 1937 right now, a move up to 1945 (yesterday's high) is a reasonable expectation. The utes, financials and copper will determine if any market upside has legs, or not. The 2-hour chart needs 1 to 3 candlesticks to create negative divergence so this sideways style price action with an upward bias can continue through much of today. One of the four parameters highlighted above is going to flinch and that will trigger and confirm market direction. Copper turns negative. The dollar/yen is 102.22 remaining stubbornly elevated, however, much of this move higher in the dollar/yen pair is due to the dollar strength caused by euro weakness (from the weak German ZEW data) rather than weaker yen. The BOJ's money printing weakens the yen and the flood of cheap yen into global markets causes the stock market to move higher. A stronger yen sends the dollar/yen pair lower and stocks lower. DAX -1.1%

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