Keystone's Morning Wake-Up and Midday Market Action 1/24/14

Lots of drama ongoing in the global markets. The Argentine Peso and Turkish Lira currency crises are unfolding. Syria is a mess. Bombs going off in Egypt. Libya remains in conflict and war. Emerging markets are selling off heavily. European indexes drift lower all morning long and now down well over -1% across the board. And on and on. The dollar/yen started running higher late day yesterday signaling an all-clear but then fell on its sword overnight tumbling down to 102.01. This stronger yen sends the Nikkei down -2% and US futures into a negative tizzy. Over the last hour, the dollar/yen recovers to 102.52 so the weaker yen allows the futures to recover to S&P's -10, Dow -82 and Nasdaq -18. S&P's were down -15 a short time ago.

The markets sustained technical damage yesterday due to the drop in copper. The SPX is under the 20-day MA at 1838.02 and above the 50-day MA at 1812.15. The tight standard deviation bands on the major indexes' daily charts may be squeezing out a downside move. The 8 MA is under the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours ahead. The SPX is above the 200 EMA on the 60-minute at 1825.82 signaling bullish markets for the hours ahead, however, price violated this level yesterday before recovering. Watch 1825.82 like a hawk; it carries clout moving forward. Bad things will happen below.

For the SPX today starting at 1828, the bulls would have to recover yesterday's drop to regain the mojo. Bears need to push under 1820 to accelerate the downside which would likely seek 1818 then 1808. A move through 1821-1841 is sideways action. Keybot the Quant remains short and identifies utilities, financials, commodities and volatility as the key market drivers currently. Bears need UTIL under 496.05 and/or XLF under 21.53 to unleash market carnage. If UTIL fails 494.50 the equity markets will likely drop into free fall. The bulls need VIX under 13.67 and/or GTX above 4780, otherwise, the beatings will continue. The interplay of these parameters determine market direction.

Note Added 9:15 AM: Dollar/yen 102.36. Dollar/yen drifts lower, hence, the stock market drifts lower. The central bankers are the market. S&P -12. Dow -104. Nasdaq -20. The 10-year yield is 2.75% recovering from a drop to a 2.71% handle a few hours ago.

Note Added 9:41 AM:  VIX above 15. XLF collapses under 21.53. UTIL fails 496.05 and also the 494.50, however, sneaks back above 494.50. Markets will remain weak with this behavior. Treat UTIL 494.50 as a trap-door since the SPX may dump 20 or more handles in a heartbeat if it fails. The SPX drops under the 200 EMA on the 60-minute signaling bearish markets for the hours ahead. Dollar/yen 102.20. The SPX fell through 1825.82, through the 1820, through 1818 support, so price likely has a fix on the strong 1808 and 1803 support levels as well as the 50-day MA at 1812.96. Speak of the devil, here it is, the test of the critical 50-day MA support. Price is now printing 1812.31, time to bounce, or die.

Note Added 9:56 AM:  Bounce. SPX is 1815.35 so the bulls bounce it off the 50-day on the first test of this important support level. The December bottom occurred at this exact test of the 50-day, back then it was at 1770-ish. Thus, long traders are sniffing around and starting to nibble looking for an exact repeat of the December bottom. Are these optimistic traders smart looking for a repeat fractal of December's bottom on the daily chart, or, will they get their heads handed to them? XLF, VIX and GTX are causing bearishness. UTIL is causing bullishness now above both key levels listed above throwing the bulls a life line. Price will likely want to take another look at the 50-day at 1813. If price falls through the 50-day MA, the whole complexion of the markets change for the worse. Bulls need to hold this line with all their might.

Note Added 10:57 AM:  VIX above 16. Copper negative. SPX collapses through the 50-day MA. Price now playing around at the strong 1808 S/R. Key S/R is 1818, 1814, the 50-day at 1813, 1812, 1810, 1808, 1806, 1803, 1801, 1796, 1793, 1791 and 1788. LOD is 1805.38. Keystone took profits in the SKF long trade (short financials) exiting the position. Will look to reenter.

Note Added 1:56 PM:  VIX 16.26. GTX 4772. XLF 21.26. UTIL 495.95. Bulls need GTX 4780, only a few points away, and that will stop the selling, also XLF back above 21.52 would create a market rally. The bears need UTIL under 496.05, bingo, it just happened one minute ago, and also 494.50 where markets would melt down. The bulls must keep UTIL above 496 through the closing bell or it will set up Monday as a negative day. Whoops, UTIL is slip sliding away, now 495.71. SPX is bouncing between the 1806 R and 1803 S and whoopsies, price is now printing sub 1803. The LOD is 1800.69 stopping just short of the psychological 1800 but since the 1801 support was violated, and since price is so close to 1800, it will likely want to venture down through. First support for price under the 1800 round number is 1796. The very strong support is at 1788. Watch to see if price closes below the 50-day MA at 1813, or not.

Note Added 2:03 PM: SPX ruptures 1800. 1799.99. So watch 1796 S.

Note Added 2:47 PM: Google lost Gmail service as well as Blogger. Keystone's site was down for the last one-half hour. Google's systems appear to be up and running again. Lots of shenanigans going on. Watch your wallet. SPX bounces off 1796 support with a LOD at 1796.80. UTIL lost the two key levels. Markets may get extremely ugly into the closing bell with potential for a large whoosh lower. The bulls keep trying to pump the limp GTX up over 4780, now at 4775, to stop the market selling, but they still cannot muster up the strength. Dollar/yen 102.30. Bears are driving with cruise control on and their feet up on the dashboard.

Note Added 3:29 PM: The UTIL trap-door is pushing equities lower. SPX now using 1793 as support. If 1791 is lost, then price will go down to sit on the strong 1788 sofa next week. Keystone bot MCP opening a new long position. The charts are setting up with positive divergence; the hourly and minute charts look very good. There is a gap directly underneath that price may want to fill but other than that it should float higher. Silver is interesting but probably wait until next week to take another look.

Note Added 4:02 PM: Markets flushed into the close with the Dow down over 3 hundo. The SPX and the Dow lost their 50-day MA support but the COMPQ and RUT have not. SPX pukes 38 points, -2.1%, to 1790, two ticks from the sturdy 1788 support, so price will likely want to at least tap this level. The Dow loses 318 points, -2.0%, to 15879, losing the 15.9K level. The Nasdaq drops 91 points, -2.2%, to 4128. The RUT stumbles 28 points lower, -2.4%, to 1144. Tech and small caps lead lower although the entire market is moving down relatively in sync, so the robots were on duty. Volume is running above average at 130% of an average days volume. VIX is 17.88 up 30% today. The financials losing XLF 21.52 this morning was a wound that brought the markets to its knees. The utility weakness late day, into the closing bell, provided the final blow. The markets lay lifeless in the ditch and will likely remain that way due to the UTIL under 494.50 to begin next week, a potential global currency crisis on tap this weekend, China troubles, and the technical damage that occurred. Keystone needs a couple heart pills and a slice of apple pie to ponder the action.

Argentine Peso and Turkish Lira Fueling Global Contagion Fear

Two currencies on near opposite sides of the planet are fueling global financial worries. Even the big shot bankers, economists and politicians living it up in Davos, Switzerland, at the World Economic Council, lower their champagne flutes and decline further caviar to take notice. The Argentine peso is tumbling lower (chart moves higher) now at 7.93 as the country tries to stabilize and preserve its international reserves. Argentina is moving into protectionism to try and boost their local and internal economy.

The Turkish Lira chart is now above 2.32. The central bank stepped in to prop up the lira but it continues to drop. Both currencies are continuing to set record lows each day at worse levels than the financial crises 10 to 13 years ago. Both countries are losing control of their currencies and the concern is ripple effects and contagion occurring around the world as these butterflies flap their wings. For example, Spain's IBEX is puking -3.2% due in a large part to its exposure to Latin America. The Argentine Peso and Turkish Lira are now dominating the discussions in Davos. 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.

JJC Copper ETN Daily Chart Golden Cross Sideways Channels

Copper tumbles lower today which creates much of the overall market weakness. Keystone's algo, Keybot the Quant, identifies JJC 40.45 as the bull-bear line in the sand and price failed below today ushering in market negativity. Bulls need to move JJC back above 40.45 as soon as possible. Ironically, on such a negative day, the 50-day MA crosses above the 200-day MA creating a golden cross. $COPPER has already created the golden cross to begin the year so the cross was expected for JJC. The golden cross is a bullish signal but what typically happens more often than not is price will be in or initiate a downside move as the golden cross occurs then recover as the weeks play out ahead.

The black circle shows the death cross that occurred in April and price did fall from the 43-44 area down to 37 and now remaining below at 40-ish. The blue support lines, which favor the whole number levels show potential avenues for price to run moving forward. The indicators are weak and bleak wanting further lows over time but the stochastics is agreeable to create a bounce off this price, 50-day and 200-day confluence at 40. Lower prices would be anticipated after any bounce would occur.

Bad news out of China sours the copper market. Dr. Copper is the main key to the global economy. The two largest users of copper are auto's and houses, the two key industries that dictate economic health, or not. Dr. Copper is ill and walking to sick bay for treatment. Will he heal or keel over? The golden cross says heal, but perhaps the golden cross will fail moving forward reverting back to a death cross. 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.

VIX Volatility Daily Chart

Volatility gaps higher today. The red line is the 13.65 level currently identified by Keybot the Quant, Keystone's trading algo, as the key bull-bear line in the sand. The VIX is above 13.65 which creates market selling. Market bulls need to drive the VIX back under 13.65 as soon as possible. Another useful gauge is the 200-day MA and you can always track this one yourself. Serious market trouble begins when the VIX moves above the 200-day MA now at 14.37. If VIX stays under the 200-day, and then trails lower again, the equity markets will recover and start rallying again.

The blue ovals show two fractals from August and September of interest. Back then price gapped up to the 200-day MA. The VIX then pulled back to rest for a day, or three, then launched above the 200-day creating serious market selling. Thus, if the fractals repeat, tomorrow will be a less volatile day than today as everyone simply slides into the weekend but next week the market ugliness may continue in force. The indicators are all ramping higher with long and strong profiles so higher highs in the VIX are desired even after any pull back would occur with the VIX. Watch the 200-day MA since lots more equity downside damage will occur if/when the VIX crosses above the 200-day at 14.37. 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.

VIX Volatility Weekly Chart

Volatility remains very calm and complacent indicating that traders do not have any worry or fear about any serious market selling ever occurring again. The red circles show significant market tops and the green circles are significant market bottoms. What do you think is about to happen as the red circle on the right hand side prints? Note the downward pattern over the last couple years that clearly illustrates the power of the Fed, BOJ and other global central bankers. The stock market is goosed to the point that price discovery is lost and no one truly knows what anything is worth anymore. This is why the VIX trails lower month after month. There is zero fear. The Fed's new mission is to keep the stock market pumped higher and make the rich richer. Volatility moves inverse to the broad indexes so the VIX drops.

Note the falling blue wedge over the last two years. Even with obscene money printing and other central banker shenanigans, over the longer term, the bill comes due, and the technicals will win out. A falling wedge is a bullish pattern for VIX (bearish for the markets). The indicators all favor positive divergence over the last couple years. As the VIX keeps teasing new lows, the indicators are no longer interested in moving lower and would rather see a higher VIX. Since traders are lulled into a Rip van Winkle sleepy complacency when volatility and put/call ratios remain low for long periods of time, many will be shocked at the viciousness that can appear quickly as equities tumble into free fall.

The last large market sell offs were in 2012 where the market bottoms were identified by the VIX above 23. Since a reversion to the mean is desperately needed for the equity markets right now, and the technicals and charts are lined up this way, a move up into the green circle, and probably well up into the 20's, perhaps higher, is likely on tap. As discussed with the recent CPC and CPCE put/call ratio charts, the prudent move is to already be out of any long position that you are not willing to hold for several years. Sit in cash or start shorting depending on your risk tolerance. Prepare a shopping list and the time to buy the longs will be when there is blood in the streets as the VIX moves into the 20's, perhaps 30's, perhaps higher. Simply scale in as the VIX climbs but do not consider any long until the VIX is up into the 20's and higher.

If the VIX runs to 50 and higher we will be in an event like the August 2011 crash or the Fall 2008 crash. Of course the height of panic and fear, with blood and carnage in the streets, when folks are jumping from windows, hopefully only first-floor windows, is exactly when you want to go long. Until then, simply monitor the market action with a hefty cash position set aside and/or play the short side. The large sell offs were about 120 to 200 SPX handles or more. The smaller sell offs from 40 to 120 SPX points. The SPX is at 1840-ish so a move down into the 1680-1810 range is easily doable, probably more towards the lower end at 1680-1780.

Can the VIX head lower and the good times continue? Yes. Nonetheless, the low VIX, flattening and recovery of the moving averages, falling wedge, reversion to the mean on tap and positive divergence all hint that the equity market top is either in or very very near. Projection is for a higher VIX, and the spke may come fast and quick, and correspondingly lower equity markets, for the weeks and months to come. Higher volatility will return and likely be a theme for 2014. 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.

TWTR Twitter Daily Chart Sideways Channels Sideways Symmetrical Triangle

Twitter is interesting to watch as its technical parameters remain in infancy, the weekly charts far from providing any useful information. The 50-day MA is beginning to print since, obviously, TWTR is over 50 days old. Note the tight bands that squeezed out the sharp upside move in early December. Since price violated the top band, a move back to the middle band, the 20-day MA at 62.93, is in play, which occurred, as well as the lower band at 54.24. Note how the brown horizontal lines highlight strong price support so all these factors come together to form a strong confluence of support at 52-55. This will be a key level for Twitter moving forward. Failure at 52-55 will likely send price down to the 40 support.

When this chart was last posted to begin the new year, the expectation was for price to come back up for a matching or higher high which would create a very good shorting opportunity. Note how price was coming back up the first couple days of the new year but then, whammo, price is smacked by downgrades occurring over multiple days. Too bad the analysts could not wait for a couple or three days more for price to achieve 75+ again. This action now creates a funky sideways channel pattern through 55-70 with price hugging the 20-day MA; the robots latching onto this critical moving average as a guide.

The pink sideways triangle requires an up or down decision today and the move can be about 18 handles (the distance of the pink vertical line), hence, an upside breakout targets 75-80, and the downside break down targets 44-50. Suffice it to say the direction move today will likely either send price to 75, or down to 52.

The RSI and MACD line continue to want price to come back up to 75-ish (small green circles) since they were jipped due to the negativity caused by the analyst downgrades. The question is does price go down to test 52-55 support first, then back up to 75-ish, then down, or, does price come back up to 75-ish now and roll over to the downside? The stock does not provide an attractive opportunity right now. Perhaps a short can be placed once price prints 75+, or, if price drops to the 52-55 gauntlet, go long for a quickie recovery move, then short at 70+ after price recovers. Twitter will likely explore its identity through 40-70 for many weeks and months ahead. 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.

HLF Herbalife Weekly Chart

Herbalife has supplied lots of drama over the last year as activist traders Icahn (long HLF) and Ackman (short HLF) trade punches. The negative divergence smack down in 2012 created the initial negativity in HLF. Price collapsed to 27, but the positive divergence appeared creating the bottom. As 2013 continued, the inverted H&S and C&H patterns were highlighted pointing to higher prices and a happy Icahn and sad Ackerman, which all occurred. Using the dark blue lines (you can experiment with other price levels for the patterns) for the inverted H&S, a head at 27 and neckline at 53 targets 79, which was achieved. Note that price never back kissed the 53 neck line which is very uncharacteristic, and price will need to come back to show respect. Herbalife is caught up in all the media hype and hedge fund big wig drama during 2013 which helped fuel the upside orgy as other funds started gunning for Ackman to squeeze him tight.

As mentioned a month or so ago, the chart was setting up in Ackman's favor moving forward, and an initial negative divergence smack down occurs (red lines). Depending on which lower red trend line you use, price has either failed and back kissed, or remains, above the trend line. The 69-70 level is strong support and can be used as an initial neckline for a potential H&S. With a head at 83 and neck line at 69, a downside target of 55-57 would be in play. Interestingly, this is in the area of the dark blue neck line of the inverted H&S that was never back tested. HLF likely has a meeting planned with the 50's price level, and perhaps 40's moving through the year. The neon blue lines highlight a sideways range of 42-68 that may develop for months forward.

The RSI printed a lower low than four months ago so the expectation is for continued weakness moving forward. Price can easily pop to 80 again, especially considering the volatility in the name, and that Icahn may Tweet at any time to try and pump his profits. As price falls, Icahn is going to have to start selling off shares and exiting the back door. That will likely drive the price strongly lower into the 50's as discussed above. HLF should only be viewed from the short side moving forward and any sharp spikes higher will likely provide attractive entry points to bring on shorts for speculative traders. Icahn was laughing last year but Ackman will laugh this year. 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 1:01 PM: News hits today that Congress may investigate HLF so it is taken to the shed out back and beaten mercilessly down -13% to 64.23 with a LOD at 62.33. The news acts as a catalyst to kick in the chart negativity as described above.

YHOO Yahoo Weekly Chart Overbot Negative Divergence Potential M Top

Last time the YHOO chart was reviewed was in the 20's that appeared to be a topping out area but turned out to only be a rest stop on the way higher. The obvious driver of this stock is Alibaba. Or perhaps 95% Alibaba and 5% Marissa Mayer's sexy persona. However, all good things come to an end. Detailed fundamental analysis is required for this stock to fully understand the Alibaba Yahoo relationship.

On the technical side, the blue expansion channel highlights the phenomenal price move from 15 to 40, +170%, in only 16 months. Alibaba supplies the magic carpet ride. The diamond pattern last summer turned out to be a diamond continuation pattern. Diamonds are tricky and not a particularly useful pattern since half the time they dictate the trend change and the other half of the time they maintain the price move. The first leg up was from 15 to 27, about 12 handles, then the diamond pattern, then out the other side from 27 which would target 39 (27+12). Bingo. Price is bumping around this area currently and the diamond pattern is satisfied.

The red lines show the negative divergence spank down over the last 2 weeks. The MACD line, however, was still peaking with price, so it wants to see price come up one more time. This would set up a double-top, or M top pattern, with a roll over to the downside expected. When price moves higher watch the maroon lines in the right margin since they will all likely maintain negative divergence creating a firm and extended spank down. Keystone's 80/20 rule says 8's typically lead to 2's, so 38 would lead to 42 and 39.80 would lead to 40.20 and 40.80 will lead to 41.20. YHOO is not attractive from the long side. A short may be an attractive trade, say from 42 and higher, with a downside target of 34-37 perhaps by spring and summer. The price move back up to create the M top and roll over should occur within the next month.

The magic Alibaba carpet is sputtering. Mayer is frantically rubbing the lamp hoping for the genie to return but it appears that all the wishes have ended for Yahoo. The chart says it is time to cycle out of Yahoo, and perhaps short above 42 for the speculative traders, and to simply move on to other opportunities. 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 Morning Wake-Up and Midday Market Action 1/22/14

The economic data is very light this week with tomorrow morning the only notable releases on tap. IBM earnings last night were weak and it is down in early trading. UTX beat but trades flat. COH collapses over -6% as the retail news is bad as expected. MS coughs up -1.1%. FCX -2%. So the joyous earnings yesterday morning gives way to the bear side of earnings today. Futures, however, remain flat to positive with the S&P's +1. Use the dollar/yen 104.30 as a pivot. The dollar/yen just moved up above 104.40 in the last few minutes sending the S&P's from -2 to +1. Banzai!! The BOJ and Fed are the markets. If dollar/yen goes up, the stock market goes up. If dollar/yen goes down, the stock market goes down.

The VIX will be interesting today since it spiked well above 13 yesterday before dropping back under. The 8 MA is under the 34 MA signaling bearish markets for the hours ahead, however, the 8 is about to pierce up through the 34 for a positive bullish cross if the SPX moves higher (reference this morning's chart). Keybot the Quant remains short but wants to go long and is in position to go long. If the SPX prints above 1849.31 and remains above, Keybot will likely flip long. The bears need either UTIL 494.12, JJC 40.50 and/or VIX 13.65, and fast, or they are going to fold like a cheap suit. In prior charts, Keystone highlighted the importance of the 1832-1838 support area, and the bulls defended 1832 yesterday sending price higher off this support.

Today is an important market day and considering all the sideways slop this year, it is time for the markets to make a firm decision. The standard deviation bands on the SPX daily chart are squeezed in tight so a big price move is at hand (see this morning's chart). The explosive move up, or down, will send the SPX towards 1880-1900, or, down to 1780-1800. One side is going to be very happy and one side is going to be very sad and the outcome will be known by the weekend. The 20-day MA is 1836.67 and a key signal identifying which side is winning.

Watch the dollar/yen. If the BOJ yells Banzai!! and the dollar/yen climbs higher, the bears are going to crumble. If the dollar/yen drops, the bears will growl. Watch the 8/34 MA cross on the SPX 30-minute chart to see if the negative 8/34 cross remains, or not. Bulls win going forward with SPX 1849 and higher today. Bears win going forward with either UTIL 494.12, JJC 40.50 and/or VIX 13.65; any 1 of the 3 would do. If these four parameters remain status quo, then markets continue the sideways dance.

Note Added 9:41 AM:  The day begins with status quo. SPX is under 1849. UTIL is above 494.12. JJC is above 40.50. VIX is below 13.65. Dollar/yen 104.45 well above the 104.30 pivot from an hour or two ago. Banzai!! The lift in the dollar/yen maintains the lift in stocks.

Note Added 10:37 AM:  The 8 MA pierces up through the 34 MA on the 30-minute chart placing the bulls in charge. The bears must drive the SPX immediately lower to reverse the 8/34 cross, otherwise, the bullishness will take hold and potentially run through today into tomorrow, and provide the bulls an advantage for an upside break out from the tight bands on the daily chart. The dollar/yen is 104.38 remaining on the elevated bull side so the BOJ is sending the stock market higher again. Market bears need the dollar/yen under 104.30 and lower today. JJC is down to 40.67 but the bears need 17 more cents before they can lock in the market downside due to copper weakness. Utilities keep floating higher. VIX flat. So bulls are happy with the copper, utility and volatility behavior thus far today. Status quo. Watch the 4 parameters mentioned above since one of them is going to flinch.

SPX 30-Minute Chart 8/34 MA Cross Expansion Pattern Sideways Channels

The 8 MA remains under the 34 MA signaling bearish markets for the hours ahead, however, the 8 is moving higher for a potential positive 8/34 cross to place the bulls in charge (pink circle). The move early in the session is very important. The bulls need to maintian price at 1842-1843 and moving higher to create the positive cross. The bears need to send price under 1841 and lower to maintain the negative 8/34 cross. The blue lines show an expansion pattern in play which would be maintained even if price comes up today to print and play around at 1845-1847.

The short green lines show long and strong indicators wanting to see more higher highs so price may elevate for 2 to 6 candlesticks more which is from 1 to 3 hours. Thus, maybe the market price action this afternoon will be more interesting. Price should move through the horizontal support/resistance lines looking for a sideways channel to follow. The SPX should move higher to test the resistance levels above and the top rail of the expansion pattern at 1846-1848. Watch the 8/34 cross since it tells you the winner moving forward. Key S/R is 1851, 1849, 1848, 1846, 1843, 1840, 1832, 1818, 1808 and 1803. 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.