Thursday, January 22, 2015

Keystone's Morning Wake-Up 1/22/15; ECB Rate Decision and President Draghi Press Conference; ECB Announces 1.1 Trillion Euro Stimulus ($1.3 Trillion)

The global market movie reaches a climax over the next couple hours as the ECB decision and press conference is imminent. The ECB decision is 7:45 AM EST and more importantly, President Draghi provides details on the new QE stimulus program at 8:30 AM. Futures, European indexes, currencies and bonds will react.

At 7:20 AM, S&P futures are +3. Dow +32. Nasdaq slips negative. The spu's were up far higher a couple hours ago. DAX (Germany) is down a smidge -0.1%. FTSE (UK) is up +0.5%. CAC (France) is dead flat. Dollar/yen 117.57. Euro 1.1633. Oddly the euro is rising ahead of the announcement when a large QE money bazooka should smack the euro lower. Is the ECB move already priced in? Do insider traders already know the outcome? The pound climbs to 1.52. Gold 1283. Copper drops to 2.587. Traders ignore old-time market bellwethers like copper since the central bankers throw a money party every day directing traders to keep buying stocks.

US Treasury yields are; 2-year 0.52%. 5-year 1.38%, 10-year 1.91%, 30-year 2.51%.

One week ago the ECB said a 500 billion euro QE package would be provided. Then a couple days ago 550 billion euro’s were hinted. Yesterday, the ECB leaked a potential package of 50 billion euro’s per month for at least one year for a total QE package of 600 billion euro’s ($58 billion per month for a total of $700 billion US dollars). 

Traders are focused on the details that Draghi will provide at the 8:30 AM EST press conference especially the duration of the 50 billion euro ($58 billion) per month program since it determines the size of the total QE program providing shock and awe, or not. Traders are expecting a one trillion package which would extend the program into 2016; the 50 billion euro’s per month would run until August 2016. Draghi may surprise with a larger than 50 billion euro per month program. A 60 billion euro’s ($70 billion) per month QE would create a one trillion total by May 2016. So pay attention to the amount and duration of the new QE program.

What will sly ECB head Mario Draghi offer to the masses? He is a magician that always holds a surprise up his sleeve. A total package of one trillion or more euro’s is expected with the current consensus, based on leaked information for 50 billion euro's per month ($58 billion) that runs for one year either into early, or late, 2016, for a range of 600 billion to one trillion euro's ($700 billion to $1.1 trillion).

Keybot the Quant remains short but markets are a coin-flip due to the ECB. The algo is fixated on SOX 672.36 and NYA 10800. Bulls win big if NYA moves above 10800 and the Keybot the Quant algorithm will likely flip long. Bears win big if the SOX drops under 672.36 signaling market selling ahead. Semi's were weak in last evening's afterhours trading. If SOX remains above 672.36 and NYA stays under 10800 the stock market will stagger choppy sideways with a slight upward bias.

The fight at the 200 EMA on the SPX 30-minute chart at 2035.18 continues. Bulls win big for the hours and days ahead if the SPX moves above 2035 and higher. Bears win big for the hours and days ahead if the SPX remains under 2035 heading lower.

Keystone exited the VJET long trade yesterday. The stock received the positive divergence launch so profits were taken. Keystone will look to reenter today or in the days ahead since there should be more upside ahead.

Note Added 7:34 AM: S&P +5. Dow +46. Nasdaq +6. Euro 1.1635 rising. Gold 1284.

Note Added 7:40 AM: S&P +6. Dow +45. Nasdaq +7. Euro 1.1629. The DAX remains negative and FTSE and CAC positive. Gold 1284. US 10-year yield 1.93%. Yields are rising. German bund 0.57%. WTIC oil is 48.86 and Brent oil is back above 50 to 50.28. The ECB statement decision is a few minutes away......

Note Added 7:55 AM: The ECB leaves rates unchanged and says further announcements are on tap at 8:30 AM. The market reaction is muted with the US futures floating higher. S&P +8. Dow +61. Nasdaq +12. Euro drops to 1.626. Dollar/yen 117.54. Gold 1286. US 10-year yield 1.93%. German bund 0.57%.

Note Added 8:07 AM: S&P +11. Dow +90. Nasdaq +15. Euro 1.1628. Dollar/yen 117.61. US futures move higher with the lower euro and retreat if the euro moves higher. Gold 1291. US 10-year yield 1.92%. German 10-year yield 0.56%. DAX recovers to the flat line turning positive. Traders are excited ready for Draghi to fire the QE money bazooka.

Note Added 11:30 AM: The Keystone the Scribe site provides the details on the ECB QE program and the real-time impact on markets. Draghi announces a 60 billion euro per month program that lasts until September 2016 but he is quick to say the easy money will continue as long as the +2% inflating mandate is not met. Traders were unsure if the announcement was open-ended QE or not but the rise in stocks verify that more traders view the ECB QE similar to former Fed Chairman Bernanke's QE Infinity. The ECB QE is 60 billion euro's for 19 months for a total of $1.1 trillion ($70 billion per month for a total of $1.3 trillion). Draghi provides shock and awe exceeding the one trillion number although confusion remains over the true amount of the QE since the ECB is rolling prior programs into the new program. The Dow is up 134 points and the SPX gains 18 points. The bulls are running with the euro collapsing down to 1.1423. German bund yield drops to 0.451% on news of increased bond-buying coming in the months ahead (higher bond prices create lower yields). US 10-year yield 1.88%.

Note Added 11:33 AM: The SOX drops under the 672.32 key bull-bear level identified by the Keybot the Quant algo but then recovers. The NYA runs up to test the critical 10805 level and is rejected on the first try. NYA is currently printing 10782 and SOX is 675.53. Thus, SOX remains above the critical 672.32 and NYA remains under the critical 10805 so equities move sideways choppy with an upward bias. SPX is 2047. Bulls win big with NYA above 10805 and Keybot will likely flip long. Bears win big with SOX under 672.32. Europe ends in sea of green with the DAX gaining +1.4%, FTSE +1% and CAC +1.7%.

Note Added 3:42 PM: The NYA moves above 10805 this afternoon poking a stick in the bear's eye. Keybot the Quant algorithm flips long at SPX 2054. Note that the SPX also moved above the 200 EMA on the 30-minute chart at 2035 this morning forecasting bullishness ahead. The SPX also moves up though the 20 and 50-day MA cluster at 2046. The RUT moves above its 50-day MA at 1179 that would no longer hold as resistance after six days. Watch NYA 10805, XLF 24.11 and VIX 15.85 to determine market direction forward. The upside market orgy is in full swing. Caligula just arrived at the party pouring Fed wine and ECB whisky into golden goblets for bullish traders. All Hail the central bankers! The central bankers control the markets.

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