Keystone's Trading Week in Review and Path Ahead 10/27/12

On 10/18/12, Thursday, the China GDP is 7.4%, the seventh consecutive quarter of slowing growth, the slowest growth number since the first quarter of 2009.  China’s Premier Wen Jiabo says the economy is ‘stabilizing’. The data smells since electricity usage is flat in China; growth is not at that pace if electricity usage is flat. Further, the 7.4% is under China’s targeted rate of 7.5% for 2012. But, thinking in the context of the entire year, Q1 was 8.1%, Q2 was 7.6%, and now Q3 is 7.4%, and applying the 7.5% as a target for the entire year, would allow a print for Q4 at 6.9% which would all average out to the 7.5% target for 2012. Everyone keeps playing games so Keystone predicts the China Q4 GDP, released in mid-January 2013, will be 6.9%, bank on it. Spain’s bad loan percentage is now 10.5% versus less than 10% a month ago, the banking situation is obviously deteriorating as more and more investors pull their money from Spanish banks.  The European leaders from 27 nations attend the ECB/Euro Summit likely heading straight for the buffet table. The major U.S. banks provide a letter to Congress and the President stating that the Fiscal Cliff is a huge concern and the uncertainty is hurting the markets and economy. Markets start the session positively into lunch time.  The SPX moves higher only three points away from the closing high for this year 1465.77.  Then whammo!!  The GOOG earnings release surprisingly hits the markets. The printer accidentally releases the earnings early. Traders see that GOOG’s numbers are much worse than expected so GOOG, the Nasdaq and the broad indexes plummet.  GOOG drops with a mini-crash profile from 755 to 776, 80 points, 11%, in only eight minutes, dropping $10 per minute. GOOG is halted from trading.  At 3:20 PM, GOOG begins trading again moving sideways thru 680-700. GOOG officially releases the earnings after the bell and the numbers match the premature release. On a comical side note, the premature release had three words written at the top of the page; ‘PENDING LARRY QUOTE’. This was a placeholder where Larry Page would have inserted a witty quip as the release occurred. In this tech age, a Twitter handle immediately appeared called PendingLarryQuote and the domain name was secured. Funny YouTube videos and other humor appeared across the Internet. Traders are shaken by the debacle which is yet another reason for Ma and Pa to look at the markets as one big casino machine.  The broad indexes finish the day well off the highs. Keystone’s SPX 30-minute chart shows the 8 MA moving down thru the 34 MA indicating bearish markets for the hours and days ahead.  After the close, CMG takes the oven pipe losing 12% and BBT drops 7% on earnings disappointments. A sour mood on technology continues thru the evening hours.

On 10/19/12, Friday, today is OpEx and the twenty-five year anniversary of the 1987 Black Monday Crash.  GE earnings miss on the top line.  HON lowers guidance. MCD misses earnings.  These three bellwether stocks create weak futures heading into the opening bell. During the conference call, GE lowers their growth projection for the next year from 5% down to 3%. The EU Summit announces that they will set a date certain for the banking union to take affect but they avoid the hard work of actually agreeing to a detailed banking union outline.  Rajoy says he feels no pressure to request a bailout. This is due to the lower Spanish yields, the 10-year falling from over 7% to under 6% over the last couple months. The only reason the yields are lower is because of the ECB bond-buying program announcement but the program is based on Spain asking for a bailout; everyone thought that was a given.  Spain wants to avoid the negative connotation that comes with a bailout, the Spaniards are proud people. That is why you hear about all these other ideas such as ‘lines of credit’, Spain wants to receive the bailout life preserver since they are drowning but does not want the word bailout, or any stringent conditionality, to be attached. The problem is that the ECB cannot actually institute bond-buying to save Spain without Spain formally asking for the bailout.  This is the circular drama playing out each day and it is controlling the U.S. markets. Traders are getting sick of these shenanigans, each day waiting for Rajoy to hint that a bailout request is imminent, or not, watching to see if he coughs or picks his nose.  But this is the true nature of global markets in October 2012. Merkel (Germany) and Hollande (France) are clashing over how to structure financial aid. Germany wants austerity and oversight to be put in place first for a troubled nation, then financial aid to follow.  France wants the financial aid to happen quickly and the austerity and oversight can be developed over time. This Hollande-Merkel drama, Hokel, and feeling that the European debt crisis is starting to hit snags again, is weakening global markets.

On Friday, the markets drop at the opening bell and head lower all day. The tech sector weakness, especially chips, bludgeons the Nasdaq and this market leader drags everything south. Semiconductors, SOX, are beaten severely. Copper collapses which causes another leg down.  Then volatility spikes higher further beating the broad indexes. Keystone’s SPX 60-minute chart shows price stabbing down thru the 200 EMA which signals bearish markets for the hours and days ahead. Keystone’s algorithm, Keybot the Quant, flips to the short side at SPX 1442.  By noon, the SPX has lost 20 handles. At 2 PM, the SPX loses the 50-day MA.  The SPX drops from 1457 to 1433 losing 1.7%.  The Dow Industrials lose 1.5% closing at 13344.  The Nasdaq (tech) plummets 2.2% closing at 3006.  The RUT (small caps) drops 1.9% to 821. As highlighted over the last month, the tech and small cap weakness is leading the markets lower.  For the week, the SPX and Dow are flat as Keystone’s singing is, but the Nasdaq loses 1.3% and RUT is down a smidge, again showing the tech and small cap weakness versus the broad market. Quite a dramatic day with the Nasdaq committing a 2.2% hari-kari on the anniversary of the 1987 Crash.

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On 10/21/12, Sunday, the Asian market reaction is muted to the selloff in the States. The Kospi and Nikkei drop but recover from the lows. The Spain regional elections finish in favor of Rajoy; his homeland Galicia supports his ideas.

On 10/22/12, Monday, Japan exports drop more than expected. CAT beats on the bottom line but misses on the top line and provides weaker guidance. The markets begin the day moving on each side of the flat line and the SPX wrestles with the 50-day MA at 1433.  Rajoy says the Spain bailout may be delayed until November (he probably wants to get beyond the Catalonia elections on 11/25/12). Spain and Portugal are major concerns moving forward.  The markets are weak all session long until at 2 PM when an article hits the wires saying the Fed may provide even more stimulus in addition to the QE3 Infinity. This is pathetic; Chairman Bernanke already shot all his bullets, now he wants a do-over.  The Fed wants to abandon the calendar date approach for forward guidance in favor of numerical targets for policy. The markets like the QE news.  AAPL jumps higher leading the broad indexes higher into the close.  The Dow Industrials recover almost 100 points.  YHOO and TXN beat after the bell but TXN lowers guidance. The third and final Presidential Debate Obama v. Romney occurs in the evening resulting in a slight edge for President Obama, but this is expected since he knows all the current foreign intelligence. Governor Romney simply demonstrated that he is calm and collected to be the Commander-in-Chief.  Each political side spins the debate in their direction. The election is now only fourteen days away and the independent voters in the middle will decide the outcome.

On 10/23/12, Tuesday, Moody’s lowers the credit ratings on five Spanish regions. Mulberry luxury goods provider in the U.K. lowers guidance dragging Burberry down as well (the wealthy are spending less). The earnings take a turn for the worse with DD hugely disappointing, then UTX, MMM and UPS.  The S&P futures are down over 15 points pre-market.  Many of the earnings reports are falling into a similar trend pattern; beating on the bottom line but missing on the top line and lowering forward guidance. The two-day FOMC Meeting begins. Markets collapse at the opening bell with the SPX falling below 1420. At 10:23 AM EST, the SPX is down 20 points, the Dow Industrials are down 200 and the Nasdaq is down 30 points. Oil falls to 86.  Gold is down 17 falling under 1710.  The VIX spikes to near 19. The euro falls under 1.30.  At 10:50 AM, the SPX is down 23 to 1410, the Dow is down 230 points to 13114, and the Nasdaq is down 37 to 2980.   The VIX is over 19.  A palpable fear is creeping into markets.  The 10-year is 1.76% down from 1.80% yesterday.  The AAPL iPad Mini announcement disappoints with a very high price point at $330 and a product line with too many offerings, the opposite approach that Steve Jobs preferred, where he always wanted streamlined simplicity. AAPL stock is beaten falling from 635 to 612 dragging the broad indexes lower to finish the day with a large sell off.  The SPX lost 21 points, 1.5%, to close at 1413.  The Dow Industrials lose 243 points, the third largest decline of the year, 1.8%, to 13103.  The Nasdaq dumps 27 points, 0.9%, to 2990, losing the 3K level.  The RUT lost four points, 0.5%, to 816.  Tech and small caps have led the recent decline but not today. Gold is at 1711. Oil is 86.49. The VIX jumped over 19 today. FB earnings beat and the stock jumps higher AH’s but NFLX disappoints so its stock it is bludgeoned losing over 16%.

On 10/24/12, Wednesday, China Flash PMI is better than expected which encourages thoughts of a soft landing.  Copper and commodities are buoyant.  Europe begins the session encouraged by China but things quickly deteriorate.  Swedish confidence drops.  German and France PMI’s are worse than expected.  The euro plummets dropping thru 1.30.  The Eurozone PMI disappoints.  German Business Confidence is worse than expected.  The euro continues a downhill slide falling to 1.2934.  The Spain 10-year yield is climbing to 5.69%.  ECB’s Draghi meets with German law makers to explain the OMT bond-buying program.  The broad indexes move sideways into the Fed decision.  The FOMC Rate Decision at 2:15 PM provides no real surprises. Markets tank on the announcement with the SPX falling from 1416 to 1407.

On 10/25/12, Thursday, companies announcing major job cuts this week include F, DOW, DD and AMD. Dow and Dupont are particularly disturbing since chemicals, plastics, paints and resins are the building blocks of all global recoveries. Despite the continued weaker earnings picture, markets bounce strongly after the opening bell.  Volatility is increasing so the intraday market moves are becoming more dramatic, and today is no exception. The SPX tags 1421 then promptly falls on its sword dropping to an intraday low at 1405 at lunchtime. Markets float upwards as the day moves along finishing upbeat anticipating great earnings news from tech bellwethers Amazon and Apple.  After the closing bell, AMZN and AAPL disappoint with earnings. The iPhone and iPad sales are slowing. AAPL slips under the 600 level. Futures and global markets sell off.

On 10/26/12, Friday, Asian markets sell off on the Amazon and Apple misses.  The euro is at 1.2927.  Spain unemployment is now over 25%. The Spain 10-year yield is at 5.67% with the worst week in eight weeks.  Spain appears in no rush to request a bailout so the ECB will not go in to buy bonds. Germany 10-year yield is down to 1.55% as traders seek perceived safety. S&P rating agency downgrades BNP Paribas and other French banks on concerns over the economic risk in France. JPM’s CEO Dimon says that recession is likely in the U.S. in 2013 and the fiscal cliff dilemma will exacerbate the trouble. Dimon says the fiscal cliff continues to hurt companies because the indecision and worry is causing companies to not hire anyone or expand until they see resolution.  The Libor probe widens to 16 total banks with subpoenas on tap for nine new banks including BAC, Mitsubishi, Credit Suisse, Lloyds, Ragobank, Royal Bank of Canada, Societe Generale, Norinchukin Bank and West LB.  Gold is dropping for three weeks now at 1700-ish. European markets are a sea of red. The S&P futures are down over 10 and the Dow Industrials are down over 100 as traders wake on the East Coast. MRK earnings are better than expected and the GDP comes in at 2.0%. The 2 handle excites bullish traders since 1.8% or lower was expected. The real number, that will probably be reported weeks from now, will likely be lower, but for today, the 2 handle reverses the sad mood from the AMZN and AAPL earnings.  The GDP benefited from the government pumping money into the defense sector over the last few weeks. The futures perform a miraculous comeback from down 12 S&P’s all the way back to the flat line as the opening bell rings. Markets trail lower all morning long and the SPX tests the critically important 1403 support at lunchtime, and bounces. The SPX launches from 1403 up to 1417 then drops into the closing bell finishing at 1412.  The major indexes print another down week the SPX dropping 1.5% this week, the Dow Industrials down 1.8%, Nasdaq (tech) down 0.6% and the RUT (small caps) down 0.9%. Note that the leadership of small caps and tech to the downside over the last three weeks has diminished providing the bulls some hope.

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On 10/29/12, Monday, all eyes are watching the Hurricane Sandy  ‘Frankenstorm’ that is going to hit the East Coast of the U.S.  The BOJ is in focus since easing moves are expected to weaken the value of the yen (dollar/yen pair will move higher).  Earnings season continues. Personal Income and Outlays (a Fed fave).

On 10/30/12, Tuesday, Case-Shiller Housing Index. Consumer Confidence. Fed heads will speak from today thru Friday.

On 10/31/12, Wednesday, Halloween. EOM. Chicago PMI.  Oil Inventories.

On 11/1/12, Thursday, ADP Jobs Report (a warm-up for Friday). Jobless Claims.  ISM Manufacturing Index.

On 11/2/12, Friday, Monthly Jobs Report—last report before the election. Factory Orders.

The moving parts in Europe include the Spain bailout (ECB cannot buy bonds until Spain asks for the bailout relinquishing some of their sovereignty and agreeing to conditionality; bailout request will likely not occur until November), Greece bailout, Cyprus bailout, perhaps all three countries will be packaged together, and the banking union. The ECB rate decision will move the euro on 11/8/12. Greece will likely stay in the euro until Merkel’s reelection occurs next year. The Spain bailout drama is controlling markets currently with the SPX using the Draghi put at 1403 as support.

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On 11/5/12, Monday, ISM Non-Manufacturing Index.

On 11/6/12, Tuesday, U.S. Presidential Election Obama v. Romney, the result will be known in the evening from 9 PM thru 12 PM EST.

On 11/7/12, Wednesday, the election aftermath. 10-Year Note Auction.

On 11/8/12, Thursday, the new China Premier Xi Jinping is officially selected and named the Head of Party, but, where is he?  The transition of China leadership begins with China holding the 18^th Party Congress. ECB Rate Decision and Press Conference; rate cut means euro down and stocks down, no cut means euro up and stocks up. International Trade and Jobless Claims.

On 11/9/12, Friday, Consumer Sentiment.

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On 1/1/13, Tuesday, ESM is officially up and operating.

On 1/2/13, Wednesday, if Congress does not act, the U.S. hits the ‘massive fiscal cliff’ (a phrase coined by Chairman Bernanke in early 2012) that will cut the GDP, increase unemployment and immediately launch the country into recession, but, on the positive side, the nation’s debt will decrease. On 9/13/12, Bernanke says the Fed does not have tools to handle the fiscal cliff.

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In February or March, new China Premier Xi Jinping is named Head of Government and takes over complete control.

SPX Daily Chart Shows the 'Draghi and Bernanke Puts' that Destroy Free Markets

The broad indexes bottomed in early June. The May selloff was sharp and swift.  Positive divergence and oversold conditions created the bounce as June trading began. The sideways channel in late June and July already showed the rally to be losing strength; a failure at the 1330 support level would send markets far lower. On 7/26/12, the ECB's (European Central Bank) Draghi said he would support the euro by all means necessary and do 'whatever it takes'. Bingo. The non-free markets jump higher on the news since the central bankster puppet masters decided to goose the stock market with Draghi's words. At the ECB regular monthly meeting on 9/6/12 Draghi announced the actual bond-buying OMT (Outright Monetary Transactions) program. Again, look at the reaction of the non-free markets catapulting from 1403 to over 1430 in a heartbeat. Then the Fed announces QE3 Infinity that rocket launches the non-free markets from the 1430's to the intraday high for the entire year thus far at 1476.

As a long-time believer in free markets, the central bankster intervention is truly a remarkably depressing and saddening commentary on the current stock market, the now non-free markets. Obviously the markets are goosed by central banksters from 1330 to 1400 then 1400 to 1430 then 1430 to 1476. The 150-handle fabricated move is enough to make good ole Keystone phsyically ill. Not from the stand point of profit and loss, since the money-making was easy via Keystone's algorithm, Keybot the Quant, but rather from the standpoint as to how the markets are being destroyed right under everyone's noses. The SPX ran 150 points higher from July on pure central bankster intervention, not fundamentals. What part of that don't you understand?

On 7/26/12, Draghi intervened creating a floor in the markets since the banksters knew that the failure at 1330 was lights out.  We will visit this area again in the coming weeks, destiny dictates that it should occur.  Focusing on the last two moves, the second and higher Draghi put under the market is at the critical 1403 that Keystone has been harping about in recent days. The Fed's put was at 1430 and that is already in the history books of failure.  How pitiful it was for Chairman Bernanke to announce days ago that a new super-duper QE Infinity-squared may be on tap?  Please cut us all a break. Bernanke already shot his entire load, there is no more ammo. Since Bernake's put failed six days ago, traders are now setting their sights on the Draghi put at 1403. Are you beginning to see why all the drama is occurring at the low 1400's?

In a nutshell, the OMT program promises agressive bond purchases but the action can only begin if the troubled nation (Spain) requests a bailout.  The troubled nation must request a bailout since this is the same as going hat-in-hand to ask someone for money; you fully expect that strings will be attached (conditionality). Like the lazy son or brother-in-law that wants to drink beerski's all day while playing video games. You hate to see Sis cry so you provide the dough to help them out but you expect some positive action in return. Promises are made to change ways but we all know how it always ends.

When the ECB developed the OMT program, a request by Spain for a bailout was a given, everyone thought that would occur to open the door for bond purchases. Alas, Rajoy, with Spain elections now ongoing, decides things are looking a bit better so he will hold off for a while.  This Spain bailout situation has been a major market mover, perhaps the major market mover for the last two months. The markets are stuck at SPX 1403 because this represents the Draghi put.  If Spain requests a bailout this week, traders will send the SPX higher immediately, but, as Spain continues to delay, and the request may not actually come until well into November, traders are deciding if they should allow the Draghi put at 1403 to remain in place until the Spain bailout request occurs, or not.

In fact, the move off the top over the last couple weeks is a sign that traders are giving up hope in waiting for Spain to act.  The day-to-day circle jerk of one day Spain imminently requesting the bailout but the next day saying it will be November instead, has traders throwing up their arms and not willing to wait any longer, hence the drama in the low 1400's. If Spain delays the bailout request for a few weeks, traders are not going to wait, the SPX will lose the Draghi put at 1403 and drop down to test 1380-ish and begin to set sight on the intial Draghi put at 1330-1340. What a mess the central banksters have created. We now live in a world of non-free markets, elevated to lofty levels with nothing but air underneath them, only supported by promises, words, and quantitative easing programs that no longer work. The theatrics are now reaching a climax and the 1403 support tells you the ending. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

SPX 30-Minute Chart 8 MA and 34 MA Cross Sideways Channel Potential Inverted H&S Patterns

One of Keystone's fave real-time charts to monitor is the 30-minute. Each candle represents 30 minutes of trading time. A week or so ago you see the market top identified by the red rising wedge, overbot conditions and negative divergene. The smack down occurs as forecasted starting on 10/18/12.  The 8 MA crossed down thru the 34 MA on 10/19/12 which locked in the bearish move ahead. The bears enjoyed the downside until oversold conditions and postive divergence formed on 10/23/12.  This bounced price from 1411-ish but note that the MACD line wanted to see a lower low for price after the bounce occurs.  That lower low occurs on 10/25/12 as the trading day begins and positive divergence is formed once again wanting to see price bounce, which it does from 1407-ish. But, again, the indicators are not in universal agreement with positive divergence. The money flow wants to see a lower low in price after the bounce occurs, and, price comes back down again. The tiny circle shows the 1403 print on Friday, traders testing this uber important support level for only an instant, the universal positive divergence was now in play so price was clear to move up in earnest which it did during the last half of Friday's session.

The darker green linenow shows the indicators with a long and strong profile, higher highs as price makes higher highs.  Therefore, the indicators want to see another price high, probably a couple of them at a minimum before the indicators can negatively diverge again.  The action is sideways for the last five days with important S/R levels at 1424, 1419, 1406 and 1403.  Price is set up to test the 1419 and perhaps 1424 levels early next week.  There are two potential inverted head and shoulders (H&S) patterns developing now shown by the neon green and neon pink bars.  The neon green bars show a head at 1406-ish, left shoulder at 1410 and neckline at 1420-ish so the target would be 1433-1435. Obviously the right shoulder would have to form during the trading early next week.  The neon pink inverted H&S is a larger potential pattern that has the head at 1406 and neckline at 1435-ish which targets the 1457-1463 channel above.

But first thing is first. Early next week watch to see how far the long and strong indicators can send price higher. The 1419 and 1424 resistance levels are very important. If the bulls move above 1424 they can easily move back up into the 1430's.  If 1419 is taken out to the upside, the neon green inverted H&S would be in play. The 1412 close on Friday can serve as a right shoulder.  A break thru 1419 would target the 1433-1435 area.  Markets are stumbling sideways and on the 30-minute time frame shows that price will want to make a couple higher highs, it is only a matter of if the 1419 resistance can stop the bulls, or not. If the bears can hold price under 1419-1420, this will likely lead to a move back down to 1403 to see if price wants to bounce, or die.  If bulls move up thru 1419-1420 they are on their way higher and if the 1424 gives way the bulls will enjoy a rally next week likely back to the 1430's. Thus, focus on the1419-1420 level as the trading circus begins next week.

Of course the most important aspect of this chart is the 8 and 34 MA cross, now within a hair of the 8 crossing above the 34 to signal bullish markets for the hours and days ahead. The Monday open is very important. If the markets are flat or higher, the 8 is gonig to pierce up thru the 34 to signal the bulls in control. The bears must look for weak futures overnight Sunday and a drop in the SPX at the opening bell so the 8 MA can drop lower and move down away form the 34 MA preventing the cross from occurring. Even if the cross occurs favoring the bulls, watch for the 1419-1420 as discussed, and also once the cross occurs the following two or four candles (one to two hours of trading) are important since the bears would only be able to reverse the cross with a strong move south in the SPX. Once the 8 crosses up thru the 34 and it remains for an hour or two, the bulls will be on their way to happiness for a few days. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

BPSPX Bullish Percent Index Signals Bear Market Ahead

We have been watching the BPSPX and yesterday it provided the all systems go signal for the market bears when price fell under 70%.  For the BPSPX chart two things are important. First, if a six-percentage point reversal occurs and second, the 30% and 70% levels.  Markets were tumbling lower in May and as June began the green falling wedge, oversold conditions and positive divergence pointed to a launch at the doorstep. Sure enough, the BPSPX bounced from 44.  A six percentage point reversal is 50 so once the BPSPX crossed above 50, that was the confirmed Bull Market Rally signal. After large selloffs, the BPSPX typically drops under 30% so the move above the 30% firmly verifies the Bull Market Rally. In June, however, the BPSPX did not come down under 30%, but, no biggie, the six-point reversal to 50% was good enough to signal bullish fun ahead.  The 20 MA crossed up thru the 50 MA in July which prompted Mindy to order up more booze for the liquor cabinets since the bulls planned on celebrating for a long time, and celebrate they did for four months.

The bull rally continued into the triple top of September-October.  The red rising wedge formed with overbot conditions and negative divergence so a spank down was at hand, and it occurred.  From the high print at 79.5, subtracting six, yields 73.5 as the target level where a Bear Market Selloff signal triggers. That occurred three days ago.  Then watch to see if the 70% level ruptures which seals the deal for the Bear Market move for the days, weeks, perhaps months ahead. That occurred yesterday and the BPSPX has now spent two days under 70%. The indicators remain weak and the 20 MA is poised to stab down thru the 50 MA which will further seal the deal for the market bears. The 200-day MA is at the 70-ish level as well and price is below this important moving average adding to the bearishness. The BPSPX says the markets are now in a Bear Market pattern. The bears are driving the bus until further notice. Check the BPSPX each evening next week to see if it remains under the 70% level. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

Keystone's SPX 150-Day MA Slope Indicator Signals Cyclical Bear Market Ahead

A significant market development occurs today that will affect markets on an intermediate term moving forward. The slope of the 150-day MA turned negative today. This is one of Keystone's Cyclical Signals and forecasts the start of a Cyclical Bear Market today. Since the signal just occurred, check the indicator each day next week to verify that the slope remains negative moving forward.  The neon green arrow shows how the slope of the 150-day MA continued higher this year. The wine was flowing like water, each day was a drunken bullish orgy with the markets moving higher with no worries. That changed today. The red arrow shows the future direction, bearish.

If you recall, Keystone highlighted this indicator on 6/4/12 when the slope went negative, but, alas, the very next day the slope went positive again and the signal was a one-day fake-out. The bulls then resumed the upward rally move.  Is today another fake-out move or the real deal? Probably the real deal. The 150-day MA is 1384.67.  You do not care about the price candles shown on the chart, the only thing you are looking at is the blue line. For the last five days the following prints occur for the 150-day MA; 1384.43, 1384.49 (up 6 cents), 1384.60 (up 11 cents), 1384.71 (up 9 cents), and today, 1384.67 (down 4 cents).  Bingo.

Thus, the magic number you are watching is 1384.67. Check the 150-day MA on Monday and as long as it prints under 1384.67 the market bears are rockin' and rollin'. If the moving average prints above 1384.67, then the move is a fake-out and the bulls will be back in biz. The bears are doing some serious damage and now a coveted Cyclical Signal has joined their bear camp and it is a signal that may last weeks and months. Keep an eye on Keystone's UPS 20-week MA and 50-week MA Cross Indicator that is about to show a cross of the 20 down thru the 50.  If this occurs, the cyclical bear picture will have serious street cred and markets will be in big trouble moving forward. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

Keystone's Midday Market Action 10/26/12; Consumer Sentiment

The S&P futures are flat now, the euro is at 1.2917. If only checking the markets over the last few minutes, you would be unaware of all the early morning drama and theatrics.  The S&P's were off 12 only a couple of hours ago. The euro fell thru the psychological 1.29 level but has recovered.  The GDP number is 2.0%, amazing how a positive 2 handle can encourage traders.  Perhaps more data massage is occuring, paging Jack Welch, paging Jack Welch, which is especially easy with GDP numbers.  The final number that is locked in cement months down the road will probably place it closer to 1.5%.  The MRK earnings also helped to lift spirits.  Goodyear, GT, however, disappointed and this is concerning since rubber is another key bellwether.  Rubber makes the wheels go round for the global economy and are rolling strong in great economic times but, alas, not so much in troubled times. Consumer Sentiment at 9:55 AM will create a market pivot point so let the first half hour of trading play out before a feel for the day develops.

The bulls are buying pre-market erasing the earlier losses as mentioned above. It is somewhat unclear as to why since 12 spu's is a large deficit to remove this quickly and it cannot be due to GDP and MRK alone. Tongue-in-cheek, perhaps it was time for Spain to hint at a bailout again?  The SPX is looking for a bounce point anywhere between 1413 and 1391. A back test will be needed at some point forward for the 50-day MA at 1434.46. The 1403 is uber strong support where bad things will happen if it fails. The 20-week MA is 1403.65.  The SPX chart remains weak as highlighted this morning. In addition, the BPSPX fell thru the 70% level which now firmly signals bearish markets ahead.  For today, starting at 1413, the bulls need to touch the 1421 handle to launch an upside acceleration. The bears need to push under 1405 to launch a downside acceleration.  A move thru 1406-1420 is sideways action today.

Watch RTH 44.47 and GTX 4895. Both are contributing bearishly to markets. If the bulls begin a recovery rally, the strength of the move can be judged strong if one or both of these characters join the bull camp. The bears need to push the financials, XLF, under 15.60 to create another strong downside leg for the markets. Watch the 8 MA and 34 MA cross on the 60-minute chart which is currently bearish. Pay attention to the COMPQ versus SPX percentage relationship.  For the selloff in the overnight futures, tech was not leading the downside (Nasdaq versus S&P's), and the futures did indeed recover. Traders are shrugging off AMZN and AAPL disappointments last evening, but, let's see if they feel that way after trading begins. Watch the euro important levels as described in Keystone's XEU chart yesterday; 1.2925 (the bottom rail of the sideways triangle), 1.2900 (psychological level), 1.2880 (key support).  The euro is at 1.2915.

Note Added 10/26/12 at 9:40 AM:  Markets are flat to start the day. SPX is sitting on the strong 1413 S/R.  RTH is 44.25, bearish. GTX is 4873, bearish. VIX is 18 remaining elevated. Utilities sector is weak.  XLF is flat to negative. AAPL and AMZN are on the positive side. COMPQ is up 0.4% while SPX is up 0.2%; tech is leading the broad indexes higher, this encourages the bulls. The 8 MA is under the 34 MA on the SPX 30-minute chart remaining bearish as the day begins. Watch this 8 and 34 MA cross very closely since it will tell you if the recovery rally is real, or a fake-out.  The market pivot is upcoming at 9:55 AM.  The SPX is now at the 1416 S/R.

Note Added 10/26/12 at 10:22 AM:  The broad indexes dropped like a stone on the Consumer Sentiment pivot but is recovering.  The SPX is moving sideways thru 1410-1415 thus far today.  RTH is 44.22, bearish. GTX is 4861 remaining below the important 4895 that the bulls need to be happy. XLF leaks lower now at 15.79 but in the bull camp above 15.60. Apple is dipping a toe in the negative waters. AMZN is up 4%, go figure, perhaps if their earnings disappointment was twice as bad they would be up 8% (said cynically)? Markets are stumbling sideways. The euro has recovered strongly to 1.2941. Watch COMPQ versus SPX, the 8 and 34 MA cross, and AAPL's behavior today to gauge market direction. The Autumn leaves require attention since dogs, cats and small children are now disappearing under the suface when they go for a walk.

Note Added 10/26/12 at 12:38 PM: COMPQ is down 0.8% with the SPX down 0.6% thus, the tech leadership to the upside evaporated and the bears can drive the broad indexes lower now with tech leading the broad markets lower.  The 8 MA remains under the 34 MA.  AAPL is under 600 giving up the ghost today, that enables tech to become weaker. AAPL is printing the lows of the day now at 592.  RTH broke under 44. GTX remains weak.  VIX is printing at the highs today at 18.56.  Keystone's SPX:VIX Ratio Indicator is 75.76, watch for the 68 level that signals all steam ahead for the bears and hope is lost for the bulls. TRIN is 1.40 reflective of steady-eddy selling that can go on for a while. Financials are becoming dicey, the XLF now at the lows at 15.74 only 14 pennies from danger at 15.60. If XLF fails the 15.60 level, the SPX will be slicing down thru the critical 1403 support like a hot knife thru butter and long plays are likely not worth contemplating until 1394-1395 or 1391 as described in this morning's SPX chart. Watch the euro now at 1.2927. Bulls need to keep it here or higher, as a last ditch effort keep it above the psychological 1.29. If the euro loses 1.29 the markets will weaken further, a loss of 1.2880 will signal serious trouble for markets, a loss of 1.2830 and the markets will be noticeable selling off by then with the SPX easily in the 1390's and likely headed towards the 1380's. Pay attention to 1.29 for now to see if the bulls can hang on, or not.

Note Added 10/26/12 at 1:28 PM:  AAPL is at 596.80 printing a LOD at 591.00.  The 200-day MA support is 586.09.  The 586 is also a gap fill.  The 570-586 area is very strong support for Apple.

Note Added 10/26/12 at 3:49 PM:  Status quo.  The 8 MA keeps teasing the 34 MA but remains under.  Markets are flat, leaking a little into the close.

Note Added 10/26/12 at 3:56 PM:  Keystone bot HPQ opening up a new long trade; the positive divergence setting up is attractive.

Note Added 10/26/12 at 4:10 PM:  Reviewing the metrics, the RTH is 44.30, recovering today, but under 44.47, bearish.  GTX is 4859 under the 4895, bearish. The XLF is 15.77, bullish, staying above the 15.60 level where it will drown and drag the broad indexes under as well. The euro is 1.2932.  The utilities, UTIL, were weak today finishing at 475.  The number of importance for UTIL next week is 489.34 so the utes are fifteen points under, bearish. The VIX closed exactly at the 200-day MA support at 17.81; more upside in volatility is expected moving forward. AAPL ended the day down six but above the 600 level at 603.  As Apple recovered today, the COMPQ moved a hair above the SPX so markets moved flat and could remain buoyant. Next week watch the COMPQ's fight at the 200-day MA support. It is the leader so if it fails, the RUT will fail next, then the SPX and Dow Industrials. If the COMPQ holds the 200-day MA, the market bulls may be able to mount a come-back.  The 8 MA remains under the 34 MA (by a single hair) on the SPX 30-minute chart which continues to forecast bearishness for the hours and days ahead. Of greatest interest is the SPX coming down to test the uber strong 1403 horizontal support level, and 20-week MA at 1403.60, with a LOD at 1403.28. A bounce occurred from here up to 1417, so if you were as nimble as Fred Astaire you would have enjoyed 14 points in three hours time, but, alas, Keystone did not catch that bus.  Fear not, there is always another bus that comes along.

Note Added 10/26/12 at 6:21 PM:  The slope of the 150-day MA turns negative today signaling a Cyclical Bear Market ahead. Reference the Cyclical Signal page on this site.

SPX Daily Chart Fibonacci Retracements Head and Shoulders (H&S) Patterns

We discussed the triple top and negative divergence as it formed during October and price has broken down.  The H&S pattern shown by the red bars is currently in play with the head at 1470-ish, neckline at 1430-ish so the target is the 1390's which is key S/R from late July.  The triple top and H&S should be viewed as one in the same for this chart even though the shoulders are at the same relative height as the head.  Price fell thru the neckline at 1430-ish and has not yet back tested this failure so keep this thought in mind moving forward. Also note the intraday high the last two days is 1420-ish so this resistance level is important moving forward.  The neon green lines show a potential larger H&S under development.  The head is 1475-ish, just like the red head and shoulders, but the neck line for the potential H&S is at the 1395-1400 area.  A break of the neck line places the lower target at 1310 in play. Note how the 1310 level is a very attractive horizontal support level as well. A confluence of an H&S downside target and horizontal support sometimes acts as a stronger magnetic force to pull price down. But let's not get ahead of the game too much. Simply keep the neon green H&S in mind moving forward; a right shoulder will obviously be needed and that can be placed when the broad markets receive the obligatory relief bounce at some point in the coming days. The 1420, 1424 and 1430-1435 levels all serve as upside targets for a recovery bounce.

The Fibonacci retracements for the move from the June low to the October high are provided.  Price may retrace down to the 38% Fib at 1395-ish, 50% Fib at 1379-ish and 62% Fib at 1345. The 1394 and 1391 levels are very strong support levels and as mentioned above, the red H&S targets the 1390's and the strong support area and neon green neckline level is at this 1400-ish area.  The 1403 support can be viewed as an extremely important support level. If price falls thru 1403, there is likely extended and substantial trouble ahead for the broad markets.  SPX S/R is 1436.17 (200 EMA on 60-minute chart), 1435, 1434.46 (50-day MA), 1433, 1431, 1429, 1424, 1422, 1419, 1416, 1413, 1409, 1406, 1404, 1403.65 (20-week MA), 1403, 1399, 1397, 1395.81 (100-day MA), 1394, 1391 and 1389. The pink circle shows textbook distribution with the large volume sell days after the lower-volume up days. This is where the large fund houses are distributing shares to Ma and Pa Sucka at the top just before the roll over. Every top needs the bag holder to show up and Joe Sixpack kindly obliges once again. The stochastics helped create the intraday bounce yesterday but the indicators are all showing weak and bleak profiles (red lines all sloping lower) forecasting lower prices ahead.

What does all this mean? The SPX is likely looking for a level to bounce from for a quickie relief rally. This bounce level may be from 1413 (current print), 1409, 1406, 1404, 1403, 1394 or 1391. The bounce should be short-lived, perhaps occurring next week on full moon Monday, or during the expected seasonal bullishness that appears the last couple days of October. The move up may target a back kiss of the red H&S at 1431, 1433 or 1435, and note this neckline back kiss would also fulfill a back test of the 50-day MA.  At that point, price will fell free to start lower again, thru the 1390's, thru the neon green neckline and lower, the 50% Fib serving as the next downside target. The S&P futures are off seven points now, they were off as much as 12 this morning.  It appears a test of the critical 1403 support may occur after the opening bell. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

Keystone's Midday Market Action 10/25/12; AMZN; AAPL

The markets are set to bounce at the open. Watch RTH 44.47 to gauge the strength of the move. If RTH moves above 44.47 the move has legs, if not, the rally will fade.  Likewise GTX 4895. If GTX moves above 4895 the rally has legs, if not, the move will fade.  Watch the 8 and 34 MA cross on the SPX 30-minute chart as posted this morning. The rally has legs if the 8 MA crosses up thru the 34 MA.  The BPSPX is on the verge of dropping under 70% which reinforces a strong market sell signal so check that each evening.  Watch the slope of the SPX 150-day MA since it is flattening now and may roll over to a negative slope which would be a cyclical bear signal moving forward.  Likewise the UPS 20 and 50-week MA cross which is on the verge of crossing to signal a cyclical bear market, but not yet.

Pending Home Sales are at 10 AM, Natty Gas Inventories 10:30 AM and the Kansas City Mfg Index at 11 AM. The 7-Year Note Auction is at 1 PM.  AMZN and AAPL report earnings after the bell today. Apple's earnings and conference call is 5 PM EST. A Bradley window opens today for a market turn to occur at anytime over the next ten trading days but the turn would  be more expected next week.  If markets rally from now into next week that turn may manifest as a down move next week. If today's rally peters out and markets stay flat to lower into next week, the trend change may be to the bullish recovery rally side instead. Keystone will not be around in the afternoon today so use the above metrics to gauge the strength of the market recovery rally.  Today, we see what the bulls got.  SPX S/R is 1424, 1422, 1419, 1416, 1413, 1409, 1406, 1404, 1403.44 (20-week MA), 1403 and 1399. A move up to 1419 is no biggie for the bears. If the bulls can punch up thru 1419, however, that would encourage further upside. The euro is at 1.2985.

Note Added 10/25/12 at 10:16 AM:  RTH ran upwards, and a penny or so thru the 44.47, but then reversed and is now sitting at 44.32.  GTX is at 4866 under the 4895 level the bulls need to create happiness.  The SPX ran upwards and bumped its head on 1419, now printing 1418.  The 1422 and 1424 may be in play today.  The 8 MA remains under the 34 MA on the 30-minute chart favoring bears, for now, keep watching it all day long. AAPL is a smidge red. AMZN is flat. The COMPQ is up 0.59% while the SPX is up 0.64% so tech is not leading the broad indexes higher so the bulls probably do not have much oomph today.  The VIX is at 17.5, remaining elevated, playing around at the 200-day MA at 17.83.  The elevated volatility, here and higher, will start to create wild intraday price swings, and large day to day price swings, so the action may become quite turbulent moving forward. The earnings season is a circus.  If the earnings beat, the stock is rewarded by staying flat.  If the earnings meet or miss, or if one word is misplaced on a statement, look out, the guillotine falls and the stock's head lands in a basket. Some stocks are getting hit from 5% to 25% after their earnings releases.  BBY is the latest culprit this morning although their news is due to restructuring. As a rule, company layoffs are great for a stock price since it means expenses are lowered and the company is moving towards a lean and mean structure, all good. But a shake-up at the top will lose the confidence of traders, the perception is no one is steering the ship, and the stock will sell off.  Keystone continues to like his longs; AMD, BBY and DNDN and will continue adding as time moves along. For now they are simmering on the back burner.  The euro is 1.2970. If the euro is not enthusiastic, then there is no reason for the markets to be enthusiastic. Reference this morning's euro chart and see that the 1.2925 is the bottom rail of the triangle and would start downside trouble for the euro. Down euro = down markets.  Up euro = up markets.

Note Added 10/25/12 at 11:17 AM:  Markets bumping along today.  The COMPQ is now leading the SPX by a hair. If tech starts to outperform to the upside today it will pull the broad indexes higher. Copper is negative.  WTIC oil is negative at 85.57.  The euro continues to slowly leak lower now at 1.2956.

Note Added 10/25/12 at 11:29 PM:  The Dow Industrials turn negative.  Tech is not leading the downside, however, the bears will need that to happen to drive the SPX down for a potential test of the uber important support at 1403.  The SPX is fighting the strong 1409 support right now.  The euro is 1.2944....

Note Added 10/26/12 at 6:10 AM:  AMZN and AAPL disappointed on earnings after the closing bell. The iPad and iPhone sales are weaker than expected. AAPL went under 600 in the AH's trading.  Asian markets sell off on the the tech weakness. S&P rating agency downgrades BNP Paribas (France banks).  The Libor probe expands with more bank subpoenas on tap. Europe is selling off.  The euro is now at 1.2920 testing the bottom rail of the triangle Keystone described yesterday (simply type 'XEU' into the search box above to bring up the euro chart). S&P futures are down 11 printing at the overnight lows. Copper, gold and oil are all lower.  The euro is now 1.2916.......

Note Added 10/26/12 at 6:31 AM:  The euro is 1.2908..... 1.2905 .....see if it breaks the psychological 1.29 level. S&P's are down 11. GDP is two hours away.

Note Added 10/26/12 at 6:49 AM:  The euro lost 1.29 now printing 1.2893. S&P's are off 12.

SPX 30-Minute Chart 8 MA and 34 MA Cross

Watch the 8 MA and 34 MA potential upside cross today to gauge if the market recovery move has legs, or not (the S&P futures point to a higher open). If the 8 moves above the 34 the rally has legs for a few hours and days ahead. Currently, the 8 is under the 34 so the bears rule for the hours and days ahead. The green lines show positive divergence over the last two days that will help create this mornings bounce. Over the last few hours, however, the red lines show that some further weakness in price is desired.  The RSI and ROC show the sideways nature of price movement currently.  SPX 1409, 1413, and 1419 are strong resistance levels above.  A lot can happen but look for a price move to the 1413-1419 area and if the 8 MA is not above the 34 MA the move will fade and price will drop. If the 8 MA moves above the 34 MA, the SPX will likely move up thru 1419 to 1424 and perhaps higher. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

Note Added 10/26/12 at 6:00 AM:  The 8 MA finished the Thursday session remaining under the 34 MA so the bears rule.  Considering the AMZN and AAPL earnings disappontments last evening, it appears the 8 will likely stay under the 34 which forecasts bearishness for the hours and days ahead.  The GDP and Consumer Sentiment economic data is important this morning.

AAPL Apple Daily Chart Downward-Sloping Channel Earnings Today

Keystone highlighted the negative divergence top as it occurred in September.  The red rising wedge, overbot conditions and negative divergece (red lines) created the smack down.  The weekly chart is nasty as well with firm negative divergence in place.  Typically, once price was thru 680, the 720's would be anticipated but, alas, AAPL topped out at 705-ish. The green downward-sloping channel is in play ever since the move lower began. The last six weeks shows a trend of lower lows and lower highs.  The red box shows the high volume occurring on the sell days as the large funds distribute shares to the bag-holding public as the stock is continually pumped in the media.

Once the sub 620 numbers were printing, a move to the 580's would be in order. Note how price balked at dropping thru the psychological 600 level. If 600 lets loose, the 570-580 may occur in a heartbeat.  The MACD line is firmly negative so even if a price bounce occurs today on earnings, lower prices are desired moving forward, so any bounce is a potential shorting opportunity. Apple really provides no interest on the long side until the 570-590 area prints. A price failure from the 580-ish area would lead to 520-525. Note that AAPL is on an island currently that was formed when price gapped from 425 to 450; the island is 450 and higher.  Earnings hit after the closing bell today. A bounce up to 640-650 would likely provide a nice short opportunity. A drop to the 565-580 area would likely provide an interesting entry for a very short-term long play. Iin general, Apple appears much more attractive to short on the bounces rather than playing it long anymore.  The AAPL weekly chart can easily forecast the path to an eventual island reversal. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

Note Added 10/26/12 at 5:52 AM:  AAPL earnings disappoint after the closing bell yesterday. Sales of iPhone's and iPad's are lower than expected. Apple dipped under 600 in the AH's trading