Friday, August 15, 2014

Keystone's Morning Wake-Up and Midday Market Action 8/15/14; Consumer Sentiment; OpEx

The bears were punched in the face yesterday. When the SPX moved up through the 200 EMA on the 60-minute at 1948.55 the fix was in for the bulls. Volatility drops with VIX sporting a 12 handle. Semi's pop. Utilities outperform the indexes yesterday. The bulls are cruising. A showdown should occur at the strong SPX 1960-1961 horizontal support.

Note that price closed exactly between the 50-day MA at 1956.77 and 20-day MA at 1952.83The move from this bracket identifies the winner moving forward and S&P futures are +5. The 38% and 50% Fib retracements for the move down from 1991 to below 1910 are taken out to the upside. The 62% Fib is 1958.35 so a strong gauntlet of resistance is in place at 1957-1961. If 1961+ occurs, the bulls are likely headed to all-time highs in the stock market. The bears remain in the game if they maintain price under the current 1955-1957 level. The battle continues at 1957-1961. A move above 1961 will send price to the strong 1963 and 1968 resistance levels next.

The bull flag pattern on the hour charts is in play and targets the SPX 1960-1968 area. Low volatility and higher semi's and utes drove the rally higher yesterday, however, and very interestingly, the bulls will need copper and commodities to provide future strength and these sectors are moving down not up. Keybot the Quant is long. The bears need either UTIL under 543.81, SOX under 617.76 and/or VIX above 12.87 to stop the market upside. Use these three parameters to gauge market strength. If all three remain bullish, the SPX floats higher to tease the important 1957-1961 resistance zone. If any 1 of the 3 turn bearish the stock market rally will fail.

US futures are higher. S&P +5. However, Treasury yields continue to tick lower with the 10-year at 2.40% a few hours ago, then 2.39% at 5 AM EST, now at 2.38%. Traders are buying both stocks and bonds in a whacky simultaneous risk-on and risk-off market. Since Treasuries remain well bid, the stock market move higher is likely due to traders simply raping some more upside with the Fed's and other central banker easy money. Putin's conciliatory comments one week ago on Friday morning, and yesterday, drive the stock market rally so listen for any additional words of wisdom from the Ruskie leader.

Note Added 8:40 AM: PPI and Empire State Mfg Index just hit. Inflation remains tame but food and energy remain elevated. The Empire is well short of estimates and last month's joy but futures are unaffected. Traders are already sipping the Fed's wine ahead of the weekend so everything appears rosy. TIC data that shows foreign investment interest in Treasuries and Industrial Production data hit shortly. Consumer Sentiment is released at 9:55 AM and will pivot markets so the way the stock market moves the first one-half hour may not be indicative of the path ahead today. Today is OpEx so volume should be elevated at the open and at the close.

Note Added 9:47 AM:  The SPX is chomping at the 1960-1961 resistance. Bounce or die. The pivot is in 8 minutes with Consumer Sentiment. Utes and semi's catapult higher and volatility collapses with VIX briefly under 12 printing an 11 handle. This initially indicates that a long day is in store for the bears. The bulls are on cruise control, so far, but bulls need to prove they mean business by taking out 1961.

Note Added 10:01 AM:  Consumer Sentiment is 79.2 under 80 and the lowest since last Fall. Sentiment, schmentiment. Bad news is good news since the Fed will continue the easy money policies and send the stock market higher. The SPX breaks up through the 1960-1961 resistance. Will it hold? Looks like yes since price is already attacking the 1963 R. HOD is .....boom, price is up through the 1963 R like a hot knife through butter. Bulls are setting sights on the strong 1968 resistance next. The bull flag pattern target is being satisfied now at this level. SPX S/R is 1960-1961, 1963 and 1968. Price is printing at the highs above 1963.

Note Added 10:53 AM on Saturday, 8/16/14: News that Ukraine troops attacked a Russian military convoy sent stocks lower. The VIX popped from 12 to 15. SPX HOD was 1964.04 likely on its way to the 1968 R. Intraday, the SPX fell under the 200 EMA on the 60-minute at 1948.77 but price closed above. If the bears mean business they would have kept price under 1949. A small feather is provided for the bear's cap since the SPX closed under the 50-day MA at 1957.06. The SPX likely wants to visit the 1960's again. It will depend on the geopolitical news over the weekend.

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