Keystone's Market Action 4-21-11

Some quick thoughts before the jelly beans and chocolate candy.  Expected bullish buoyancy continues in front of a long weekend.  SPX now within only 3 ponts of filling that 1340 gap left behind from February; this would close out all loose ends up top.  Thus, the percentage trade would be to close in this gap either today or Monday.  The 1340-1343 zone is very important now; 1343 was the February high.

If traders do not have a belly ache from too many Easter eggs on Sunday, then the typical Monday buoyancy would be expected.  This would serve as the final table setting for the all important Fed talk, FOMC meeting, and Ben's Q&A debut, next week.  Chairman Bernanke holds the fate of the markets in his hands now.  The market is already pricing in QE2.5 and even some of QE3 so even the slightest hint of a strong dollar policy (the opposite of the current policy), would rebound the dollar, commodities would sell off as well as equities.  Flip a coin, no one knows.

Earnings started out slow a week ago but made up for it this week.  Beating by a penny is back in vogue although some tickers only matched the top line, some did disappoint but they are in the minority.  Mickey D's plans on inching up food prices during the remainder of the year. The trannies are getting back on track today, TRAN up about 0.8% today, after the train derailment, CSX and UNP, yesterday.  DD reported great earnings and popped early but has started to fall on its sword.  Reference the chart from the previous blog post and monitor if the negative divergence stays in place, especially you budding technical analysts.

The Arms Index, TRIN is flat today across the bull-bear line at one, so even though you see buying today, it is not strong buying.  We'll check the volume later but as of now, NYA will be lucky to do only 80% of the average, many traders already heading for home to color some eggs. Looks like the strong volume down days and lower volume up days trend continues along.

SPX:VIX ratio hit 90 again today, well above the 68 level so bearishness is nowhere to be found.  Bullish euphoria continues, do not believe the talk about a wall of worry, there is no wall and there is no worry.  CPC put call was down below 0.6 this morning, hanging around 0.7 for a while, VIX under 15, there is no fear at all, traders expect the markets to go only one way, up, complacency rules.  So for the contrarian traders, this is fresh meat, albeit speculative fresh meat.

Gold and silver continue on a rampage upwards, anyone shorting getting their faces ripped off, Keystone's face is half ripped off but he likes this trade currently.

A week ago many traders ventured into defensive sectors such as utes, staples and healthcare but these sectors are flattish today, XLU, XLP, XLV, and this is testimony to the bullishness existing in the markets now.

SPX hit the 1333 handle this morning so the move accelerated as expected, now pushing 1337. Typically, markets are buoyant on the last day of the week in the afternoon since shorts lighten up a bit because of the potential for good news to hit on any given weekend.  Thus, short traders have to lower their short exposure to be prudent.  That said, markets jumped quite a bit the last two days already so a sideways move in the markets to run the clock out would be a fair guess.

Financials continue to mop up the floor, copper moved into the bullish camp this morning, so keep an eye on these two characters today to note their action.  Lots of charts and analysis will be posted over this Easter weekend so check back often, we will sort things out after the dust clears today, right now, some Easter eggs need a fancy design, perhaps a few with dollar signs will be interesting considering anything is worth more than the dollar right now.  Stay on guard, watch the SPX 1340 potential gap fill, and Happy Easter.