Some quickie notes to close the week out. The preannouncements were nearly non-existent except for the large egg dropped by IR at the open this morning with cutting sales and profit forecasts. This is a problem since it is such a noteworthy bellwether for not only the U.S. but the whole planet. 40% of their business is overseas so the sad news means the China bubble popping sound is getting louder. China is becoming a greater concern with each passing day because of the collapse in copper. What happens when you allow a building boom to get out of hand with the final stage using copper as collateral on mortgage loans? The leaders are hoping for rural folks to magically pack up and come to the city immediately, to inhabit the 65 million living spaces available now. This is going to end badly. The China real estate bubble will make our housing bubble, which popped July 2005 and we continue to work thru currently, look like child's play. China has uninhabited brand new cities for gosh sakes!
Retail, RTH, closed above its critical level tracked by Keystone's algo on Thursday but this quickly gave way at the open today. The RTH did regain the 103.75-ish level once today trying to ignite the market bulls but that petered out quickly. Then, late day, SPX 1140 finally gave way, the 1139 handle opened up the drop down to the closing print at 1131. For Monday, retail and utilities will remain the key drivers of the broad markets; we can review the specific levels as the weekend continues. Utilities are the only major sector that is helping to support the bulls, everything else is whoopin' it up at the bear camp.
The University of Michigan Consumer Sentiment data shows something very interesting. From Keystone's archived data, this sentiment reading number at 59.4, in the 50's, only had four other consecutive numbers in the 50's back in February/March of 2009, the market bottom. Keystone tracks the preliminary and final numbers, so four numbers corresponds to two months of data. Today was the final monthly number. The sentiment posted a 57.3 on 3/27/09, then on 4/17/11, posted a 61.9, moving back into the 60's. This exact period is when the markets made the March 2009 bottom back then, and now we see the same two-month stretch of sentiment in the 50's again. Will a bottom happen again? Thus, something to simply log into the noggin.
The CRB, commodities index, losing the 300 level is a very big deal today. This reflects the drastic drop in copper as well as other commodities, corn, and most every commodity is hit since the global recovery is in stall speed and China has all appearances that their major real estate bubble is about to pop. Keystone's work shows that we are now in Disinflation, and with the lower CRB numbers coming, the path into Deflation is coming faster.
Add to all this the Euro situation that continues along. Next week the ECB meeting will be important on Thursday morning and the Jobs Report on Friday.
Friday, September 30, 2011
SPX Monthly Chart
For the chart in general, notice the 2000 dot-com bubble top in 2000, then the start of the Iraq war in March 2003 that marked the bottom, then the more recent October 2007 top that resulted in the Fall 2008 waterfall crash, then the March 2009 bottom that resulted from the announcement of quantitative easing, QE1, then the stutterstep in summer 2010 where the markets were collapsing but Bernanke's QE2 came to the rescue. Now we have rolled off the top and lost the MA's on the way down. The red circles show lower lows with all indicators so the downside from early 2009 more than likely needs retested.
The 1100 level is critical horizontal support and also the 38% Fibonacci retracement for the 666-1375 up move. 1101 is also the 8/9/11 LOD so it seems that fate requires a test of the 1100 level and it will most likely fail. If the market bulls cannot hold the SPX at 1100-1130, then they will lose control of the situation. Since price has now fallen under the 10, 12, 17 and 20 MA's, however, the broad markets already appear to be a lost cause; we are now in a secular bear market. Note how once the 17 and 20 MA's give way, price usually comes back to test them (black circles), thus, currently that area would be 1200-1215.
Projection is sideways to sideways down moving forward, 1100 level is critical, cannot rule a back kiss month during October back up to 1200-ish, but other than that lower prices are ahead for the months, perhaps year or years ahead. As sub 1100 occurs, Chairman Bernanke will probably step in to attempt QE3. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or on any site attatched to this site. Consult your financial advisor before making any investment decision.
Keystone's October Seasonality
The cool Autumn days of October are here; the notorious month that congers up images of crashes and panic, leading to the Wall Street adage, "The October Effect." This effect is simply the perception that the market tends to do poorly in October. Notable dates include The Panic of 1907 occurring in October, "Black Thursday" on 10/24/29, "Black Monday" on 10/28/29, "Black Tuesday" on 10/30/29 and "Black Monday" on 10/19/87, where the Dow Industrials dropped 23% in one day!
Returning to the seasonality aspects, the broad markets are up about 0.2% for the month of October, flatish, nothing to write home about but definitely not a large negative number which would be assumed considering the crashes and bad connotations with October.
Technology and biotechnology sectors typically do well in Q4 (October-November-December). The quarter, Q4, is typically up 4.3%. October is not typically a good month for small caps (RUT) stocks. Many traders try to position themselves in tech during September and October to take advantage of the seasonality. This year appears to be a crap shoot due to the weak economic conditions now circling the globe.
Gold is typically buoyant from August thru October with the India and China holiday events and marriage seasons but again, this year the anecdotal data shows this seasonality may not be holding water. The coming Diwali season of lights in India typically marks a pull back for gold mid October thru November.
Typically a peak in oil prices will occur in October. This is reasonable considering the coming global slowdown. The SPX is typically up the final couple days of the month. The results from the back-to-school sales help to project the holiday season sales. Anecdotal data so far on back-to-school sales is not encouraging for the holiday sales this year. October retail data will tell more.
Returning to the seasonality aspects, the broad markets are up about 0.2% for the month of October, flatish, nothing to write home about but definitely not a large negative number which would be assumed considering the crashes and bad connotations with October.
Technology and biotechnology sectors typically do well in Q4 (October-November-December). The quarter, Q4, is typically up 4.3%. October is not typically a good month for small caps (RUT) stocks. Many traders try to position themselves in tech during September and October to take advantage of the seasonality. This year appears to be a crap shoot due to the weak economic conditions now circling the globe.
Gold is typically buoyant from August thru October with the India and China holiday events and marriage seasons but again, this year the anecdotal data shows this seasonality may not be holding water. The coming Diwali season of lights in India typically marks a pull back for gold mid October thru November.
Typically a peak in oil prices will occur in October. This is reasonable considering the coming global slowdown. The SPX is typically up the final couple days of the month. The results from the back-to-school sales help to project the holiday season sales. Anecdotal data so far on back-to-school sales is not encouraging for the holiday sales this year. October retail data will tell more.
CRB Commodities Index Loses 300 Level
A short while ago the CRB Commodities Index lost the 300 level. This is important since it verifies the move towards Deflation.
The lower CRB pushes Keystone's Inflation Deflation Indicator closer to Deflation.
The indicator remains at Disinflation between 2.9 and 3.0. The current 2.93 number is the lowest seen in this current move down.
CRB/10-Year Price = 298.18/101.781 = 2.93
A few more points lower in the CRB will indicate that Deflation is here. Reference the prior post with the CRB chart as well as the prior posts concerning Keystone's Inflation Deflation Indicator.
The lower CRB pushes Keystone's Inflation Deflation Indicator closer to Deflation.
The indicator remains at Disinflation between 2.9 and 3.0. The current 2.93 number is the lowest seen in this current move down.
CRB/10-Year Price = 298.18/101.781 = 2.93
A few more points lower in the CRB will indicate that Deflation is here. Reference the prior post with the CRB chart as well as the prior posts concerning Keystone's Inflation Deflation Indicator.
Keystone's Morning Wake Up 9-30-11
The continuing smell of whipsaw markets in the morning. The erratic markets continue into Friday with futures negative. The "Sell Rosh Hashana" crowd must be up early. Today is EOM and EOQ3. Personal Income and Outlays data released minutes ago shows income down spending up and little reaction in the futures, they remain poised for a 10 point drop in the SPX and about 100 on the Dow. Chicago PMI is 15 minutes after the open and Uiversity of Michigan Consumer Sentiment at 9:55 AM. This sets up some wild action for the first half hour of trading. Typically, Friday's are buoyant in the afternoon since shorts pare back positions before the weekend, and this adds to or sometimes fuels a short-covering rally.
Talking sectors, the utilities and retail are the only major sectors perceived to be bullish by Keystone's algo, and as seen from yesterday's move in the last couple minutes, retail is a hair away from turning bearish again. Thus, for today, retail, RTH is the most important. If RTH drops under 103.90, now only pennies above, the markets will weaken again. By the look of the futures currently this appears a done deal, but, we will wait and see how the open goes. Once retail is back in the bear camp, the utes will be the lone wolf trying to hold up the broad markets. For today, watch UTIL 426.79, that is the signal line that will usher in strong selling. As long as UTIL stays above here today, and it is comfortably above currently, then the downside will be limited.
The advance-decliners NYAD shows four extreme moves in the last six days, each extreme move indicates a reversal. Six days ago the NYAD was at -2500 indicating markets need to bounce, they did, then NYAD shot up to +2500 requiring a market reversal to the downside, it did, then NYAD prints a -2000 number, another strong low reading, thus, markets should bounce, they did, then yesterday up to near +2500 indicating a need for markets to sell off again, they did. This is interesting since these moves typically occur over a much longer time frame, the markets are compressing and the high volatility are launching the large point moves each day each way.
The Dow Industrials yesterday went from 11000 up to 11275, down to 10965, and then back up to 11154. This is a 175+310+189=674 point move in the Dow, an over 6% total move in the Dow yesterday! This is one of the reasons that when markets become erratic like this you want to trade small as we have discussed since the spring time. For the last two months the smart play was simply to reduce positions, and do a lot of sitting and waiting. The Europe situation will resolve itself one way or another during October-November and the clarity can provide the path forward, which is expected to be bearish. Others are now finally calling for a double dip recession but Keystone's work showed that was here from mid May on.
The request deadlines for redemptions from hedgies is today and Monday, so investors are pulling dough out of accounts. The major savior for many hedgies has been their gold holdings which provided balance to their portfolios this year. That bird has flown the coop. The redemptions are interesting since it will more than likely lead to further gold position liquidation in October. This means more supply so gold prices should continue to weaken moving forward. Indications in both China and India now, as their holiday and marriage seasons are in full swing, show that the enthusiasm for gold may be strong but the global slowdown is dampening the actual purchases.
Keystone's SPX:VIX Ratio Indicator continues to languish under 35 favoring bears. The ratio is at 29.88 so it has work to do before it moves up to cross 35 which will indicate bullish markets again. This is a lead weight hanging on the market. Keep an eye on the Nasdaq percentage move versus the SPX percentage move each day. Yesterday, despite the midday bounce, showed the Nasdaq percentage move lower than the SPX move, thus, if tech is weak and not leading, any bounce in the markets is questionable. Current print on the e-mini's is Nasdaq down a 0.8% and S&P down 1.0%. Thus, the Nasdaq is stronger than the S&P at this juncture which says the sell side should be limited. If Nasdaq was a higher percentage than the S&P, that makes market bears salivate, since it leads to a stonger down move for the broad markets.
If the CRB breaks the 300 level we are well on our way to deflation. Current print is 304, nope, let's call it a 303 handle now. Preannnouncements are not occurring, and companies are obligated to report worse news once they become aware, but, as we all saw in Q2 and Q3 of 2008, the companies were talking blue sky, all the way to where they were looking up and stepped off the cliff. Thus, the earnings season will be anticipated to be negative despite the lack of preannouncements, since the earnings numbers will likely be reported on the weak side. It is hard to believe that all companies are going to beat by several pennies and report gains in the top line revenue as well.
The Euro fun will continue thru next week. The ECB rate decision on 10/6/11 will be important but no lowering rates is anticipated, even though they all know they want to cut immediately. This is Trichet's farewell and they will not make him look like a doofus on his last day, raising rates since April, just like his mistake in July 2008.
The Fed talk was uneventful this week, same old stuff, but today, Bullard (St. Louis Fed) speaks at 11 AM so watch out for any sound bites around this time. In a nutshell today, the first half hour, even into Bullard's talk should be highly volatile markets. Watch RTH 103.90 to note market direction and it looks like it will fail at the open favoring market bears. If RTH fails, watch UTIL 426.79. If UTIL stays above, any selling will moderate. If UTIL fails the 426.79 then the markets will start falling substantially. SPX 1140 is key. If that holds, any selling damage should be minimal. If you see a 1139 handle appear, the markets will likely sell off large, especially dropping several additional handles quickly if the 1139 appears.
Talking sectors, the utilities and retail are the only major sectors perceived to be bullish by Keystone's algo, and as seen from yesterday's move in the last couple minutes, retail is a hair away from turning bearish again. Thus, for today, retail, RTH is the most important. If RTH drops under 103.90, now only pennies above, the markets will weaken again. By the look of the futures currently this appears a done deal, but, we will wait and see how the open goes. Once retail is back in the bear camp, the utes will be the lone wolf trying to hold up the broad markets. For today, watch UTIL 426.79, that is the signal line that will usher in strong selling. As long as UTIL stays above here today, and it is comfortably above currently, then the downside will be limited.
The advance-decliners NYAD shows four extreme moves in the last six days, each extreme move indicates a reversal. Six days ago the NYAD was at -2500 indicating markets need to bounce, they did, then NYAD shot up to +2500 requiring a market reversal to the downside, it did, then NYAD prints a -2000 number, another strong low reading, thus, markets should bounce, they did, then yesterday up to near +2500 indicating a need for markets to sell off again, they did. This is interesting since these moves typically occur over a much longer time frame, the markets are compressing and the high volatility are launching the large point moves each day each way.
The Dow Industrials yesterday went from 11000 up to 11275, down to 10965, and then back up to 11154. This is a 175+310+189=674 point move in the Dow, an over 6% total move in the Dow yesterday! This is one of the reasons that when markets become erratic like this you want to trade small as we have discussed since the spring time. For the last two months the smart play was simply to reduce positions, and do a lot of sitting and waiting. The Europe situation will resolve itself one way or another during October-November and the clarity can provide the path forward, which is expected to be bearish. Others are now finally calling for a double dip recession but Keystone's work showed that was here from mid May on.
The request deadlines for redemptions from hedgies is today and Monday, so investors are pulling dough out of accounts. The major savior for many hedgies has been their gold holdings which provided balance to their portfolios this year. That bird has flown the coop. The redemptions are interesting since it will more than likely lead to further gold position liquidation in October. This means more supply so gold prices should continue to weaken moving forward. Indications in both China and India now, as their holiday and marriage seasons are in full swing, show that the enthusiasm for gold may be strong but the global slowdown is dampening the actual purchases.
Keystone's SPX:VIX Ratio Indicator continues to languish under 35 favoring bears. The ratio is at 29.88 so it has work to do before it moves up to cross 35 which will indicate bullish markets again. This is a lead weight hanging on the market. Keep an eye on the Nasdaq percentage move versus the SPX percentage move each day. Yesterday, despite the midday bounce, showed the Nasdaq percentage move lower than the SPX move, thus, if tech is weak and not leading, any bounce in the markets is questionable. Current print on the e-mini's is Nasdaq down a 0.8% and S&P down 1.0%. Thus, the Nasdaq is stronger than the S&P at this juncture which says the sell side should be limited. If Nasdaq was a higher percentage than the S&P, that makes market bears salivate, since it leads to a stonger down move for the broad markets.
If the CRB breaks the 300 level we are well on our way to deflation. Current print is 304, nope, let's call it a 303 handle now. Preannnouncements are not occurring, and companies are obligated to report worse news once they become aware, but, as we all saw in Q2 and Q3 of 2008, the companies were talking blue sky, all the way to where they were looking up and stepped off the cliff. Thus, the earnings season will be anticipated to be negative despite the lack of preannouncements, since the earnings numbers will likely be reported on the weak side. It is hard to believe that all companies are going to beat by several pennies and report gains in the top line revenue as well.
The Euro fun will continue thru next week. The ECB rate decision on 10/6/11 will be important but no lowering rates is anticipated, even though they all know they want to cut immediately. This is Trichet's farewell and they will not make him look like a doofus on his last day, raising rates since April, just like his mistake in July 2008.
The Fed talk was uneventful this week, same old stuff, but today, Bullard (St. Louis Fed) speaks at 11 AM so watch out for any sound bites around this time. In a nutshell today, the first half hour, even into Bullard's talk should be highly volatile markets. Watch RTH 103.90 to note market direction and it looks like it will fail at the open favoring market bears. If RTH fails, watch UTIL 426.79. If UTIL stays above, any selling will moderate. If UTIL fails the 426.79 then the markets will start falling substantially. SPX 1140 is key. If that holds, any selling damage should be minimal. If you see a 1139 handle appear, the markets will likely sell off large, especially dropping several additional handles quickly if the 1139 appears.
Thursday, September 29, 2011
Keybot the Quant Turns Bullish in Final Two Minutes - Whipsaw Today (Edit for Program Modification - Keybot the Quant is Short)
Keystone's algo, Keybot the Quant, whipsawed in the final two minutes today, going long at 3:58 PM EST at SPX 1157. Thus, today amounted to a round trip. The algo program and actual trading each losing a percent on the short side play during the two-hour whipsaw. Retail managed to get back into the bull camp a hair before the bell, so the indexes popped into the close.
Thus, tomorrow begins where today began. Watch RTH 103.90 level, now at 104.07, only a measley 17 cents higher that is keeping the broad markets buoyant. If 103.90 fails tomorrow then the indexes will weaken and sell off just like today, so stay tuned. If RTH stays above 103.90, then the broad indexes will remain buoyant. Retail is the key.
More details at keybot's site:
http://www.keybotthequant.blogspot.com
Thus, tomorrow begins where today began. Watch RTH 103.90 level, now at 104.07, only a measley 17 cents higher that is keeping the broad markets buoyant. If 103.90 fails tomorrow then the indexes will weaken and sell off just like today, so stay tuned. If RTH stays above 103.90, then the broad indexes will remain buoyant. Retail is the key.
More details at keybot's site:
http://www.keybotthequant.blogspot.com
Alert; Note Added 9/30/11:
Adjustments Made; Return to SPX 1146.
9/29/11; 9:30 AM EST = -56; Program Modification; Algorithm Remains Short; Whipsaw Nullified; Program Adjusted and Credited from 9/29/11 at 2:10 PM EST; Printout Adjusted from 9/29/11 Forward; See Keybot's Site for Further Information.
Keybot the Quant Turns Bearish
Keybot, Keystone's proprietary trading algorithm, turned bearish at 2:10 PM at SPX 1146. The retail sector failed today but anyone reading this mornings missive was watching RTH closely and saw this happen in real time after 1:30 PM today, knowing this was a signal for weakness in the indexes. RTH is now at 102.64 last print. As long as RTH stays under 103.70, a number continuously calculated by Keybot the Quant, the weak broad markets will continue.
The utilities are the only major sector that is now bullish, as measured by the quant. Watch UTIL, now at 434.75. If the 426.79 level fails, the broad markets will be in serious trouble, if the utes can maintain their buoyancy above 426.79, then the downside selling will be minimized. As always when a turn occurs, watch for a potential whipsaw.
More information at Keybot the Quant's site:
http://www.keybotthequant.blogspot.com
The utilities are the only major sector that is now bullish, as measured by the quant. Watch UTIL, now at 434.75. If the 426.79 level fails, the broad markets will be in serious trouble, if the utes can maintain their buoyancy above 426.79, then the downside selling will be minimized. As always when a turn occurs, watch for a potential whipsaw.
More information at Keybot the Quant's site:
http://www.keybotthequant.blogspot.com
Keystone's Morning Wake Up 9-29-11
Despite the sell off yesterday, the retail sector held its ground. The retail and utility sectors remain bullish as measured by Keystone's algo. All other major sectors are bearish. If the RTH, now at 104.50, stays above 104.00, then the market bulls are fine. Similarly, if UTIL, now at 431.81, stays above 426.79, then the market bulls are fine. Should either of these levels fail, then the markets are in trouble. If both levels fail, the markets are huge trouble and will already be tumbling.
The futures are up due to the happy German vote that occurred about an hour ago. The market bulls can accelerate the upside if the socks (semiconductors) cooperate. If the SOX, now at 355.36, moves above 363.40, then the broad market bulls will be having a party. Back to the bear side, Keystone's SPX:VIX Ratio Indicator remains below 35 at 28 so the market bears still have a strong hold on the markets in the background. Should the ratio move above 35, that would confirm a bull recovery rally. If it stays below 35, bears are favored moving forward.
Put/Call ratio CPC popped to 1.46. This is important and fully consistent with a strong move to the upside coming. The negative sentiment is building, and especially after yesterday's bear action ahead of the German vote, the put/call spiked higher. Once the ratio is over 1.2, the selling is becoming overdone, it is approaching 1.5 now, thus, Keystone would expect a strong move back up in the markets solely based on the CPC metric.
Advancers and decliners NYAD printed an intraday spike low four days ago at -2500. Remember when good ole Keystone told you to watch for a move back up in the markets, since this is such a low number, and that brief recovery market rally occurred, and the NYAD spiked to +2500. Oy vey! From one extreme at the bottom (-2500) forecasting a large bounce to occur, it did, then immediately to an extreme high value (+2500) to forecast a market sell off, which occurred, now a spike back down to another low reading of -2001. Do you see the pattern? Negative 2000 is not as low as negative 2500 but it is down there consistent with a reversal back up for the indexes. Thus, the CPC and NYAD both indicate bounce time for the markets.
GDP and Jobless Claims are out in a short while and they should impact futures. Pending Home Sales at 10 AM serves as a potential market pivot point. The ole Wall Street adage says, "Sell Rosh Hashanah and buy Yom Kippur (10/8/11)," but the comical aspect is you will find others telling you the opposite, so do not put much credence in this ole adage. The markets are taking on a sideways look moving forward. In summary, simply watch the behavior of RTH, UTIL and SOX as described above and these will dictate broad market direction today. Tomorrow is EOM (end of the month) and EOQ3 (end of the third quarter of 2011; Jul-Aug-Sept).
The futures are up due to the happy German vote that occurred about an hour ago. The market bulls can accelerate the upside if the socks (semiconductors) cooperate. If the SOX, now at 355.36, moves above 363.40, then the broad market bulls will be having a party. Back to the bear side, Keystone's SPX:VIX Ratio Indicator remains below 35 at 28 so the market bears still have a strong hold on the markets in the background. Should the ratio move above 35, that would confirm a bull recovery rally. If it stays below 35, bears are favored moving forward.
Put/Call ratio CPC popped to 1.46. This is important and fully consistent with a strong move to the upside coming. The negative sentiment is building, and especially after yesterday's bear action ahead of the German vote, the put/call spiked higher. Once the ratio is over 1.2, the selling is becoming overdone, it is approaching 1.5 now, thus, Keystone would expect a strong move back up in the markets solely based on the CPC metric.
Advancers and decliners NYAD printed an intraday spike low four days ago at -2500. Remember when good ole Keystone told you to watch for a move back up in the markets, since this is such a low number, and that brief recovery market rally occurred, and the NYAD spiked to +2500. Oy vey! From one extreme at the bottom (-2500) forecasting a large bounce to occur, it did, then immediately to an extreme high value (+2500) to forecast a market sell off, which occurred, now a spike back down to another low reading of -2001. Do you see the pattern? Negative 2000 is not as low as negative 2500 but it is down there consistent with a reversal back up for the indexes. Thus, the CPC and NYAD both indicate bounce time for the markets.
GDP and Jobless Claims are out in a short while and they should impact futures. Pending Home Sales at 10 AM serves as a potential market pivot point. The ole Wall Street adage says, "Sell Rosh Hashanah and buy Yom Kippur (10/8/11)," but the comical aspect is you will find others telling you the opposite, so do not put much credence in this ole adage. The markets are taking on a sideways look moving forward. In summary, simply watch the behavior of RTH, UTIL and SOX as described above and these will dictate broad market direction today. Tomorrow is EOM (end of the month) and EOQ3 (end of the third quarter of 2011; Jul-Aug-Sept).
Wednesday, September 28, 2011
CRB Commodities Index Weekly Chart Targets QE3 Announcement
Note the positive divergence in late 2008 into 2009 that bounced the CRB, along with QE1. The blue lines show a textbook long term C&H, the bottom at 200, breakout at 280-ish, which targets 360+. Also, note the bull flag in red, first leg 200 to 295-ish, then consolidation flag, then second leg starts at 250, thus 250+95=345+ target. This year the pink lines show an H&S, head at 370-ish (note the top is identified by a hanging man candle), neck line at 325-ish which failed last week, thus 280-ish target (pink box). The H&S target is the C&H breakout area and flag consoidation area which ties it all up in a pretty bow.
Note the current fight is at the 200 week MA at 307, this should fail. Keystone's work shows we are entering Disinflation now. When the CRB hits the pink box in the days or weeks ahead we will be in Deflation, and then Chairman Bernanke will step in with QE3. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your finanical advisor before making any investment decision.
Tuesday, September 27, 2011
Keystone's Evening Nightcap 9-27-11
European news continues to flick the markets to and fro. The morning started out in a happy mood on news that the EFSF fund will be expanded and well-funded and a solution to the Euro problems are close at hand. Further, Germany's Merkel is taking a much more conciliatory stance with Greece stating that they will offer all aid possible. As today's session played out, however, the mixed messages out of Europe continue, any sound bite one minute is contradicted an hour later. In the afternoon word hit that the Eurozone members were debating the extent of the coming Greece haircut. Indications show that a 50% haircut is in order but Greece would rather have a trim instead of a razor cut and prefers just a little off the top at 20%. Markets started to sell off on the news realizing the solution may not be as near as first thought. Greece actually needs a full Brazilian, slapped on the behind, and told to put the bon bons down and get back to work.
Talking technicals, continue to watch Keystone's SPX:VIX ratio, now at 31.17, about four points below the 35 bull signal. The market bulls will not receive confirmation on an extended rally unless the ratio moves above 35. The retail sector initialized the current rally and the semiconductors added more go juice this morning. Thus, focus on these two sectors and any sign of weakness in semi's, or retail, is a sign of trouble for the broad markets. If both weaken, then the recovery rally will be no more.
Use these levels to gauge broad market direction in Wednesday's session. The SOX, now at 366.01, needs to stay above 365.40 for the market bulls to remain happy. Bears want this level to fail. For retail, RTH, now at 105.24, watch the 104.11 level. The market bulls need to stay above here to keep the party going. Bears got game if you see 104.11 fail.
For the SPX, the bulls gave up the ghost into the close. The SPX begins at 1175. Bulls need to touch 1196 to start the big block buying and regain upside momo. Bears need to touch 1163 for the sellers to enter in force and drive the markets lower in quick order. A move thru 1164-1194 is sideways slop.
The end of quarter window dressing was playing a large part in the rally, just like the end of June, and expect that to continue this week. The Fed's Rosengren speaks overnight tonight so his comments will be available when you rise and shine to check the futures. Durable Goods Orders are 8:30 AM, then Oil Inventories at 10:30 AM, then the 5-Year Auction at 1 PM. Of more interest will be DRI earnings to see if folks continue to dine out, or if they are staying home eating franks and beans, and, FDO numbers where we find out if the dollar stores continue to eat WMT's lunch. The markets continue to be under the effects of a Bradley turn date from Monday, so expect the unexpected. Obviously, the European Keystone Cops, no relation to good ole Keystone, are keeping market volatilty high with their antics.
Today, NYAD spiked intraday to +2500, a signal that a reversal to favor bears is preferred, and the markets did leak into the close. Similarly, the TRIN spiked to 13 three days ago indicating that the selling was overdone, thus, a reversal occurred which created the bull rally, but today the TRIN spiked downward to print a 0.25 which indicates that the bullishness was getting way overdone. A TRIN of 1.0 is considered neutral with the bulls and bears in a standoff. Steady eddy strength in markets is signaled by a TRIN of 0.7 to 1.0 while steady eddy weakness in markets is signaled by a TRIN of 1.0-1.5. Extreme readings indicate reversals are at hand.
Keystone's Inflatin Deflation Indicator has moved back into Neutral territory but only a smidge out of the Disinflation zone. A move back into Disinflation would be expected in the days ahead. There are no major pre-announcements by companies yet which is somewhat surprising. Either companies are all dead set on making their numbers come heck or high water, or they simply plan to take the medicine when the releases occur. Thus, the bullish nature of retail and semi's, window dressing for Q3, lack of pre-announcements and happy Eurozone talk are encouraging for the market bulls. Conversely, the SPX:VIX ratio remaining under 35, the NYAD spike to +2500, TRIN spike downward to 0.25 and sad Eurozone talk are encouraging for bears. If you had to watch one single item after the open tomorrow, that would be the socks, SOX, as described above, which will dictate broad market direction.
Talking technicals, continue to watch Keystone's SPX:VIX ratio, now at 31.17, about four points below the 35 bull signal. The market bulls will not receive confirmation on an extended rally unless the ratio moves above 35. The retail sector initialized the current rally and the semiconductors added more go juice this morning. Thus, focus on these two sectors and any sign of weakness in semi's, or retail, is a sign of trouble for the broad markets. If both weaken, then the recovery rally will be no more.
Use these levels to gauge broad market direction in Wednesday's session. The SOX, now at 366.01, needs to stay above 365.40 for the market bulls to remain happy. Bears want this level to fail. For retail, RTH, now at 105.24, watch the 104.11 level. The market bulls need to stay above here to keep the party going. Bears got game if you see 104.11 fail.
For the SPX, the bulls gave up the ghost into the close. The SPX begins at 1175. Bulls need to touch 1196 to start the big block buying and regain upside momo. Bears need to touch 1163 for the sellers to enter in force and drive the markets lower in quick order. A move thru 1164-1194 is sideways slop.
The end of quarter window dressing was playing a large part in the rally, just like the end of June, and expect that to continue this week. The Fed's Rosengren speaks overnight tonight so his comments will be available when you rise and shine to check the futures. Durable Goods Orders are 8:30 AM, then Oil Inventories at 10:30 AM, then the 5-Year Auction at 1 PM. Of more interest will be DRI earnings to see if folks continue to dine out, or if they are staying home eating franks and beans, and, FDO numbers where we find out if the dollar stores continue to eat WMT's lunch. The markets continue to be under the effects of a Bradley turn date from Monday, so expect the unexpected. Obviously, the European Keystone Cops, no relation to good ole Keystone, are keeping market volatilty high with their antics.
Today, NYAD spiked intraday to +2500, a signal that a reversal to favor bears is preferred, and the markets did leak into the close. Similarly, the TRIN spiked to 13 three days ago indicating that the selling was overdone, thus, a reversal occurred which created the bull rally, but today the TRIN spiked downward to print a 0.25 which indicates that the bullishness was getting way overdone. A TRIN of 1.0 is considered neutral with the bulls and bears in a standoff. Steady eddy strength in markets is signaled by a TRIN of 0.7 to 1.0 while steady eddy weakness in markets is signaled by a TRIN of 1.0-1.5. Extreme readings indicate reversals are at hand.
Keystone's Inflatin Deflation Indicator has moved back into Neutral territory but only a smidge out of the Disinflation zone. A move back into Disinflation would be expected in the days ahead. There are no major pre-announcements by companies yet which is somewhat surprising. Either companies are all dead set on making their numbers come heck or high water, or they simply plan to take the medicine when the releases occur. Thus, the bullish nature of retail and semi's, window dressing for Q3, lack of pre-announcements and happy Eurozone talk are encouraging for the market bulls. Conversely, the SPX:VIX ratio remaining under 35, the NYAD spike to +2500, TRIN spike downward to 0.25 and sad Eurozone talk are encouraging for bears. If you had to watch one single item after the open tomorrow, that would be the socks, SOX, as described above, which will dictate broad market direction.
USD Dollar Index Daily Chart Inverted H&S
Note the ADX at 37 indicates that the trend upwards is a strong trend as well. Over the last couple weeks, price high to price high, note the negative divergence with RSI, MACD histogram and stochastics, but the MACD and ADX remain long and strong. The negative divergence is creating the current pull back. The chart remains favorable to the upside. The 76-79 range should hold solid for a while. Over time, we will see if the inverted H&S shown by the red lines plays out to the target of 81 (for the baseline). Projection is sideways to sideways up until Chairman Bernanke announces QE3 which should cause dollar weakness to reappear. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any other site associated with this site. Consult your financial advisor before making any investment decision.
Keystone's SPX:VIX Indicator Remains Under 35
Note the failure of 35 on 21Sep, last Wednesday, and this occurred ahead of Chairman Bernanke's afternoon annoucement that tanked the markets Wednesday afternoon, Thursday, into Friday. The ratio losing 35 was the tell of trouble coming and Keystone highlighted this that day. Since then the ratio remains under 35, and despite this two-day bull run, the ratio is not yet above 35 to signal a huge market up day on tap as well as confirming that this bull recovery rally is the real deal. Last print at noon today, 9/27/11, at this writing, is 33.39.
The market bulls cannot count their chickens until they move above the 35 level. Since the ratio is not yet there, stay on guard if bullish since the bull rally is not yet confirmed. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or on any link associated with this site. Consult your finanical advisor before making any investment decision.
Keystone's Inflation Deflation Indicator Back to Neutral
The indicator fell into Disinflation last week and as a result of today's buoyancy in commodities, and 10-year yields recovering, the indicator moved back into Neutral territory, albeit by a smidge. This is nothing to get excited about for inflation believers as inflation remains world's away. Keystone views this as simply a temporary recovery and the indicator should re-signal Disinflation in the days ahead, then ultimately work down towards Deflation which will trigger Chairman Bernnake to act with QE3.
CRB/10-yr Price = 309.78/101.297 = 3.06
Over 4 = Inflation
Between 3 and 4 = Neutral territory; inflationists and deflationists fight it out
Between 2.9 and 3.0 = Disinflation
Below 2.9 = Deflation
CRB/10-yr Price = 309.78/101.297 = 3.06
Over 4 = Inflation
Between 3 and 4 = Neutral territory; inflationists and deflationists fight it out
Between 2.9 and 3.0 = Disinflation
Below 2.9 = Deflation
MUB Municipal Bond Fund Weekly Chart Rising Wedge Overbot Negative Divergence
At the start of this year with the 94 print, the only indicator in the short term that was agreeable to a bounce was the money flow (green line and arrow). The red circles show how lower lows were made by the indicators and price never even got down to the summer 2009 lows; this is nasty and ominous. It simply means there is unfinshed business in the 90's, even 80's. 2012 and 2013 will be very interesting.
Looking at the last few months, note the rising wedge, overbot RSI and stochastics, and firm across-the-board negative divergence. It's over. Support levels are highlighted as price falls. Meredith will be vindicated from here on out and now the punching bag will find it very effortless to punch back for the weeks and months to come. Projection is lower prices, sideways to sideways down, for the months ahead. This is a significant top. This information is for educational and entertainment purposes only. Do not trade based on this information. Consult your financial advisor before making any investment decision.
Note Added 9/27/11 at 1:27 PM EST: Interesting development today. Keystone posted the muni charts this morning and as fate would have it, CNBC TV had a segment at lunch time by Gary Kaminski and Alexandra Lebenthal doing a vicory lap on muni's and taking another opportunity to use Meredith Whitney as a punching bag. Markets are always fascinating to watch and if the MUB charts play out as projected, with this now a significant long term top now in place, Kaminski/Lebenthal just unknowingly called the top in the muni market. Time will tell.
MUB Municipal Bond Fund Daily Chart Rising Wedge Overbot Negative Divergence
A talking head appeared on Bloomberg this morning saying to not worry about muni's, Meredith Whitney was wrong. This chart says he should rethink his words and Meredith will be proven correct as the weeks move along into 2012. Initial projection is the gap fill at 106.50-107.00, then lower to 105.50, then 105.00, then much lower. Pay attention to the 20 MA at 106.36 since once that is lost increased negativity will accelerate. Also note that money flow has now lost the 50% level, bearish. Watch the RSI and stochastics lose their 50% levels to indicate continued bearishness. This information is for educational and entertainment purposes only. Do not trade based on this information. Consult your financial advisor before making any investment decision.
Note Added 10/3/11 at 11:53 AM EST: Note how price dropped to fill the gap under the island top. Currently there is a fight at the 20 day MA. Price is now printing 106.51 and the 20 day MA is 106.47. Failure here will flush price lower. If you have any hope for muni's at all, you need to hold the 20 MA. The projection is that it will fail.
Monday, September 26, 2011
Keystone's Evening Nightcap 9-26-11
Odd day of trading today. Markets ebb and flow depending on whether Merkel picks her nose or if Sarkozy combs his hair. The rumor mill is getting ridiculous but that is what happens when the news flow out of Europe is disjointed and unclear. Today, word came that the ECB anticipates a 50 bip raise at the 10/6/11 meeting. No sooner did the refresh button on the Twitter feed display that soundbite when a different official rebukes the statement and says no raise is planned. The 10/6/11 ECB meeting is the swan song for Trichet, the wrong-time rate-raiser, simply reference July 2008 and this year, and on his last day, it is highly doubtful that his tenure will end on such a sour note as to raise rates to prove he is, to borrow a word from Carol Bartz, a doofus. Draghi, the new ECB guy, however, will raise rates at the following meeting if not sooner, perhaps during October?
Do not read too much into the market bounce today. There remains a lot to be bearish about. The news flow out of Europe will continue to impact the markets. That's why technical tools lead the way, all the shenanigans are constantly priced into the charts in real time.
Keystone's SPX:VIX Ratio Indicator closed at 29.80 well under the critical 35 level that will confirm a recovery rally. Keystone's Inflation Deflation Indicator prints 303.15/102.031=2.97 which says the country is currently in Disinflation. Use the search box on this site to find information on these indicators if you are new here.
Copper was flat today but the collapse of this fearless leader tells you to put away the champagne for a while, if the doctor is sick, everyone is sick. The slightly elevated inflation this past few months, especially the food inflation that everyone notices, was transient in nature, just as Chairman Bernanke said it was, at least he got that correct. But, he was one of the reasons for the inflationary move, due to his easy money pumping that went straight into emerging markets, silver, gold, copper and other commodities creating the latest asset bubbles that popped. The other culprit was Mother Nature that created supply shortages driving up prices and also throw in the Arab spring since a dose of fear had everyone buying a few extra gold bars. All this is so yesterday.
Last week gold had its worst week since 1983. Perhaps the hedgies, that benefited greatly with their silver and gold holdings this year are now throwing them overboard to cover losses. That, as well as countries now raising cash by selling gold holdings, creates higher supplies. India consumes one-third of the world's gold supply and it is now marriage season, but the enthusiasm appears to be on a milk carton. Perhaps cubic zirconia will satisfy their sweethearts this year? The current indications are that we are moving into deflation and once that is realized, the shock and awe QE3 will surface, more than likely global intervention this time, just another attempt to stop fate, a few more steps down the Primrose Path.
The retail sector bounced today and took out the 103.80-ish level that Keystone called out on the weekend. This provided the up thrust for the broad markets and Keystone's algo turned bullish in the 11 o'clock hour this morning. Tomorrow we find out if this move has legs, or not. The market bulls must keep retail, RTH, above 104.25 and it is in good shape closing at 106. Semi's may help the bulls further. The SOX, now at 359.50, needs to move above 364, if so, that will accelerate the broad market rally. Similarly, if financials, the XLF, now at 12.20, can move above 12.80, that will add further bull fuel.
For the SPX, the market bulls only need to see a couple green points in the futures overnight to move up and over 1164 after the open and that will ignite large block buying. The bears need to push down to SPX 1131 to regain the momo but since this is such a formidable goal, the bears will simply try to stall the up move by pushing RTH under 104.25. A move thru SPX 1132-1162 is sideways slop.
One of Keystone's key monthly economic indicators hit tomorrow, Consumer Confidence. Look for a market pivot point at 10 AM. Before the open, Case-Shiller will deliver gloomy housing news so guard your Cheerio's closely. The Bradley turn is in full effect now so stay on guard for a market turn. If the markets decide to tumble, you will see it in the RTH first as outlined above. Window dressing thru Friday helps the bull case.
Do not read too much into the market bounce today. There remains a lot to be bearish about. The news flow out of Europe will continue to impact the markets. That's why technical tools lead the way, all the shenanigans are constantly priced into the charts in real time.
Keystone's SPX:VIX Ratio Indicator closed at 29.80 well under the critical 35 level that will confirm a recovery rally. Keystone's Inflation Deflation Indicator prints 303.15/102.031=2.97 which says the country is currently in Disinflation. Use the search box on this site to find information on these indicators if you are new here.
Copper was flat today but the collapse of this fearless leader tells you to put away the champagne for a while, if the doctor is sick, everyone is sick. The slightly elevated inflation this past few months, especially the food inflation that everyone notices, was transient in nature, just as Chairman Bernanke said it was, at least he got that correct. But, he was one of the reasons for the inflationary move, due to his easy money pumping that went straight into emerging markets, silver, gold, copper and other commodities creating the latest asset bubbles that popped. The other culprit was Mother Nature that created supply shortages driving up prices and also throw in the Arab spring since a dose of fear had everyone buying a few extra gold bars. All this is so yesterday.
Last week gold had its worst week since 1983. Perhaps the hedgies, that benefited greatly with their silver and gold holdings this year are now throwing them overboard to cover losses. That, as well as countries now raising cash by selling gold holdings, creates higher supplies. India consumes one-third of the world's gold supply and it is now marriage season, but the enthusiasm appears to be on a milk carton. Perhaps cubic zirconia will satisfy their sweethearts this year? The current indications are that we are moving into deflation and once that is realized, the shock and awe QE3 will surface, more than likely global intervention this time, just another attempt to stop fate, a few more steps down the Primrose Path.
The retail sector bounced today and took out the 103.80-ish level that Keystone called out on the weekend. This provided the up thrust for the broad markets and Keystone's algo turned bullish in the 11 o'clock hour this morning. Tomorrow we find out if this move has legs, or not. The market bulls must keep retail, RTH, above 104.25 and it is in good shape closing at 106. Semi's may help the bulls further. The SOX, now at 359.50, needs to move above 364, if so, that will accelerate the broad market rally. Similarly, if financials, the XLF, now at 12.20, can move above 12.80, that will add further bull fuel.
For the SPX, the market bulls only need to see a couple green points in the futures overnight to move up and over 1164 after the open and that will ignite large block buying. The bears need to push down to SPX 1131 to regain the momo but since this is such a formidable goal, the bears will simply try to stall the up move by pushing RTH under 104.25. A move thru SPX 1132-1162 is sideways slop.
One of Keystone's key monthly economic indicators hit tomorrow, Consumer Confidence. Look for a market pivot point at 10 AM. Before the open, Case-Shiller will deliver gloomy housing news so guard your Cheerio's closely. The Bradley turn is in full effect now so stay on guard for a market turn. If the markets decide to tumble, you will see it in the RTH first as outlined above. Window dressing thru Friday helps the bull case.
Keybot the Quant Turns Bullish
Keystone's proprietary algo, Keybot the Quant, flipped to the bull side at 11:41 AM EST at 1148. The broad markets are very much in a churn pattern, subject to the Euro news. The retail sector is boosting the broad markets today. Charts are supportive of financials as well. Tech is weak. Typically the indexes should be weak considering the behavior of the Nasdaq today but that is not the case.
Extreme caution is warranted since this sideways nature of the indexes currently can easily whipsaw Keybot today or tomorrow. The algo is currently identifying SPX 1136 as a whipsaw area, if the SPX moves to this handle within 24 hours, Keybot will probably go back to the short side. Continue to watch retail. The algo now scanning RTH 103.90 and the last print is 104.20, this favors market bulls. Watch that 103.90 level the rest of the day as a gauge for the broad markets.
More information at Keybot's site,
http://www.keybotthequant.blogspot.com
Extreme caution is warranted since this sideways nature of the indexes currently can easily whipsaw Keybot today or tomorrow. The algo is currently identifying SPX 1136 as a whipsaw area, if the SPX moves to this handle within 24 hours, Keybot will probably go back to the short side. Continue to watch retail. The algo now scanning RTH 103.90 and the last print is 104.20, this favors market bulls. Watch that 103.90 level the rest of the day as a gauge for the broad markets.
More information at Keybot's site,
http://www.keybotthequant.blogspot.com
Keystone's Morning Wake Up 9-26-11
Europe does not feel the urgency of their situation; Geithner continues to apply pressure. The G-20 promises action before the 11/3/11 meeting in Cannes. European leaders are content with developing a plan over 5 or 6 weeks time but they may not have that much time. The trade-off is delaying a solution to the point that traders lose complete confidence and start selling vesus pushing a Europe plan out asap that is not well thought out that disappoints traders and starts the selling. Quite a pickle.
Trillions are needed, probably at least $3 trillion to put the Italy and Spain fears to rest. Everyone agrees that Greece is going into default, no surprise there. The problem is the contagion and the effects the Greece default has concerning Italy and Spain. Rich Uncle China's money is needed to help bail out Europe. Perhaps the 5 or 6 week time frame is required to build a global quantitative easing shock and awe program, with all major countries involved, a last ditch effort to save the planet from its profligate spending over the last few decades.
Futures were up strongly last night, then tumbled as Asia sold off strong, now futures have recoverd again in front of today's open to start the new trading week. Gold weakness continues, as well as copper and silver; the CME raised margin requirements after markets closed on Friday.
Keeping it simple for a Monday morning, the SPX is moving thru a two-day range of 1119-1142. The move out of this range is important. Obviously, market bulls will be happy to see 1143 and higher and bears 1118 and lower. The key sector to watch for confirmation of each case is retail for the bulls and utilities for the bears. If RTH moves above 103.85, that signals that the market bulls are running, and if the SPX is not already over 1142, it will be in short order. If you see the SPX over 1142 in early trading but RTH remains under 103.85, that upside price move in the SPX will not hold.
For market bears, they want to see the utilities, UTIL, fail the 426.79 level. This number is important all week long and will not change. The RTH number above will fluctuate slightly since it is calculated by Keystone's proprietary algo, Keybot the Quant, continuously. If UTIL loses 426.79 at any time this week the indexes will be in trouble. If the SPX loses 1119, but UTIL is above 426.79, the move to the down side for the broad markets will not last.
Thus, market bulls need to see SPX over 1142 with RTH over 103.85 for confirmation of strength. Market bars need to see 1119 with UTIL under 426.79 for confirmation of weakness. A move thru 1122-1140 is sideways mumbo jumbo with no resolution. At this writing, referencing the futures, SPX 1142 appears to be key for the open, watch it closely.
Trillions are needed, probably at least $3 trillion to put the Italy and Spain fears to rest. Everyone agrees that Greece is going into default, no surprise there. The problem is the contagion and the effects the Greece default has concerning Italy and Spain. Rich Uncle China's money is needed to help bail out Europe. Perhaps the 5 or 6 week time frame is required to build a global quantitative easing shock and awe program, with all major countries involved, a last ditch effort to save the planet from its profligate spending over the last few decades.
Futures were up strongly last night, then tumbled as Asia sold off strong, now futures have recoverd again in front of today's open to start the new trading week. Gold weakness continues, as well as copper and silver; the CME raised margin requirements after markets closed on Friday.
Keeping it simple for a Monday morning, the SPX is moving thru a two-day range of 1119-1142. The move out of this range is important. Obviously, market bulls will be happy to see 1143 and higher and bears 1118 and lower. The key sector to watch for confirmation of each case is retail for the bulls and utilities for the bears. If RTH moves above 103.85, that signals that the market bulls are running, and if the SPX is not already over 1142, it will be in short order. If you see the SPX over 1142 in early trading but RTH remains under 103.85, that upside price move in the SPX will not hold.
For market bears, they want to see the utilities, UTIL, fail the 426.79 level. This number is important all week long and will not change. The RTH number above will fluctuate slightly since it is calculated by Keystone's proprietary algo, Keybot the Quant, continuously. If UTIL loses 426.79 at any time this week the indexes will be in trouble. If the SPX loses 1119, but UTIL is above 426.79, the move to the down side for the broad markets will not last.
Thus, market bulls need to see SPX over 1142 with RTH over 103.85 for confirmation of strength. Market bars need to see 1119 with UTIL under 426.79 for confirmation of weakness. A move thru 1122-1140 is sideways mumbo jumbo with no resolution. At this writing, referencing the futures, SPX 1142 appears to be key for the open, watch it closely.
Sunday, September 25, 2011
Keystone's Key Events and Market Movers Week of 9-26-11
Keystone presents the following underlying market currents, sometimes subtle sometimes turbulent, that move global markets in real time. The key dates and times below typically correspond to market pivot points.
Right on cue last week, the week after September OPEX is down 80% of the time or more and this seasonality played out again. Mark your calendar for next year. Markets remain at the mercy of the European crisis. If the Eurozone waits any long to structure the Greece default, they risk contagion, if they act too quickly without a good plan for the default, they risk contagion. A hefty bailout would at leas cheer markets in a shot term move, euro higher=equities higher. Further deterioration in the Euro woes and euro down=equities down.
Economic data and meetings this week show the Fed heads out in full force all week long, bookended by the St. Louis’s Fed Bullard on each end. Bullard’s talk late Friday morning probably the most impactful since the Personal Income and Outlays data will be public. On Monday, Bullard speaks before the open, then New Home Sales at 10 AM provides a market pivot point. Fed data on manufacturing will move markets as well. On Tuesday, Case-Shiller will provide a gloomy house report. A market pivot point will occur at 10 AM with Consumer Confidence data. 2-Year Note auction at 1 PM. Wednesday morning sees Durable Goods Orders and Oil Inventories data. On Thursday, the tone will be set with GDP and jobless claims. Friday will be very active in the morning. Personal Income and Outlays data, Chicago PMI and Consumer Sentiment all hit before 10 AM so look for a market pivot point just before 10 AM Friday morning. Friday also brings the end of the month, EOM, and the quarter, EOQ3. Some window dressing will occur this week.
Earnings dwindling now as most companies have already reported. Some notables include JBL, PAYX and WAG on Tuesday. On Wednesday, DRI and FDO. Thus, we see if the consumer has enough money to keep dining out and also if the dollar stores continue to eat WMT’s lunch. On Thursday, MU reports which will effect tech. The more important news concerning earnings is the preannouncement season which kicks off this week. If any companies feel a need to visit the confessional and come clean ahead of time, this week is the week to start the announcements. Thus, keep an ear open, if only one or two companies lower expectations, no biggie, but if several companies start pre-announcing worse guidance, that will be a market negative weight.
Monday, 9/26/11, is a Bradley turn date so a Bradley window is opened between now and 10/1/11 for a market trend change. Especially watch for a market turn now thru Thursday, 9/29/11. Interestingly, we have watched this turn window already produce last week’s trend change to the downside so this week we see if a meltdown occurs, or if the Bradley influence wants to send markets back up. Expect continued high volatility and wild large point swings. The move out of the SPX 1119-1142 range will tell the tale.
Last week good ole Keystone said that the trading week would be epic for gold and it did not disappoint, gold falling 10%, copper down 10% and silver off a whopping 26%. Both the daily and weekly charts were in negative divergence across the board so this sealed gold’s fate. We watched the charts play out over the last few weeks. At the Friday close, the CME raises gold, silver and copper margins so we will see how much of this was already priced in and how musch lower these commodities will drift. If there was ever any time for an ETF event to occur, it would be now with GLD or SLV, so those are worth watching closely this week.
Keystone’s Inflation Deflation Indicator shows that we have fallen into Disinflation as of last week. Chairman Bernanke will not step in with forceful QE3, perhaps a unified global qe approach, until deflation is here. Watch CRB, if that loses 300 then Bernanke will have many sleepless nights here forward. As commodities drop and the dollar rises, pushing us into deflation, Bernanke will step in.
Yen intervention by the BOJ remains highly likely. Swiss intervention in the franc will continue. Continue to watch for the dollar to rise as the weeks move along. A rise in the dollar will place further pressure on oil, gold, silver and other commodities.
Keystone’s ‘Short Term’ Key Dates and Market Movers Week of 9/26/11 and on:
· Monday, 9/26/11: Markets remain at the mercy of Europe news moving forward. Chicago Fed Activity Index 8:30 AM. Bullard (St. Louis Fed) speaks 9:30 AM. New Home Sales 10 AM. Dallas Fed Mfg Survey 10:30 AM. 3-Month and 6-Month Bill Auctions 11:30 AM. Kocherlakota (Minneapolis Fed) speaks 3 PM. Bradley turn window has been in effect for the last five days and will continue thru Monday, 10/1/11, where a market trend change should occur. Interestingly, the indexes were in an uptrend for five straight days, and reversed last week at the start of the Bradley window opening. But, with the window remaining open, and the actual turn date is tomorrow, 9/26/11, look for further wild moves, especially now thru Thursday, 9/29/11, since the market turns typically occur closer to the actual turn date. The indexes could very well reverse again to the upside. The Bradley model does not predict direction, only heightened activity, the break out of either SPX 1142 on the top side, or 1119 on the bottom side will tell the tale. Q3 window dressing this week so the successful plays during September may receive additional juice in front of EOM and EOQ3. Funding vote headaches this week by the Congress clowns will negatively impact markets.
· Tuesday, 9/27/11: Case-Shiller Housing Price Index 9 AM. Consumer Confidence 10 AM. Richmond Fed Mfg Index and State Street Confidence Index also at 10 AM. 4-Week Bill Auction 11:30 AM. Lockhart speaks 12:30 PM. 2-Year note Auction 1 PM. Earnings: JBL, PAYX, WAG.
· Wednesday, 9/28/11: Rosengren (Boston Fed) speaks 2:40 AM. Mortgage Purchase Applications 7 AM. Durable Goods Orders 8:30 AM. Oil Inventories 10:30 AM. 5-Year Note Auction 1 PM. Earnings: DRI, FDO.
· Thursday, 9/29/11: Corporate Profits, GDP and Jobless Claims 8:30 AM. Rosengren and Plosser (Philly Fed) speak 8:30 AM. Pending Home Sales 10 AM. Natty Inventories 10:30 AM. Kansas City Fed 11 AM. 7-Year Note Auction 1 PM. Farm Prices 3 PM. Fed Balance Sheet and Money Supply 4:30 PM. “Sell Rosh Hashanah and buy Yom Kippur (10/8/11),” although approach this ole Wall Street adage with skepticism, simply be aware. Earnings: LBIX, MU, XRTX.
· Friday, 9/30/11: Personal Income and Outlays 8:30 AM. Chicago PMI 9:45 AM. U of M Consumer Sentiment 9:55 AM. Bullard speaks 11 AM. EOM; EOQ3.
· September: Congress in session with budget talks and the super committee front and center, a market negative.
· Now into early October: Pre-announcement season. Keep your ears open.
· Thursday, 10/6/11: ECB rate decision and conference. Critical day for the euro.
· Wednesday, 10/12/11: Bradley turn date, watch 10/5/11 thru 10/19/11 window for a market turn, especially 10/10/7/11 thru 10/17/11.
· Friday, 10/28/11: Bradley turn date, watch 10/21/11 thru 11/4/11 window for a market turn, especially 10/25/11 thru 11/2/11.
· Tuesday and Wednesday, 11/1/11 and 11/2/11: FOMC rate decision and meeting. Note how the meeting coincides with Keystone’s Eclipse Indicator.
· Thursday, 11/3/11: Keystone’s Eclipse Technique targets the back half of October thru the first half of November as a potential major market selloff area.
Keystone’s Short Term to ‘Intermediate Term’ Key Dates and Market Movers for September, October and on:
· Earnings: The majority of companies have reported for Q2. Many companies are ratcheting down guidance as the numbers are released. The confessional season is now, and this week in fact will kick off the pre-announcements. If you hear only a company or two lowering the bar, that is not a big deal, as the day’s move along, however, if you hear a steady drum beat of companies lowering estimates, this will be market negative for October, as the global recovery continues to stagnate.
· QE3: Quantitative easing two (QE2) ended 6/30/11. Chairman Bernanke took away the punch bowl that elevated equities markets like clockwork with POMO pumps between 10:00 and 11:30 AM each session. Tentative projection for QE3 announcement is October-December. The Fed announced Operation Twist last week and that resulted in a selloff. Deflation must raise its ugly face before Bernanke moves towards a more shock and awe type QE3. Keystone’s Inflation Deflation Indicator signals Disinflation now so we are moving towards Deflation but not there yet. When that occurs in the weeks ahead, perhaps the first global quantitative easing program for planet Earth will commence, the Fed joining forces with other countries to coordinate their efforts in trying to save a banking system already lost. The key things to watch which will trigger Bernanke to act with QE3 will be the dollar rising (now occurring), commodities falling with CRB working down towards 300 and lower (now occurring) and the Treasury prices moving up, yields down (now occurring). If the CRB loses the 300 handle, Bernanke will be having sleepless nights.
· FOMC Meetings and Rate Decisions: 11/1/11-11/2/11 (note this coincides with Keystone’s Eclipse Indicator); 12/13/11. Fed announced that the Zero Interest Rate Policy (ZIRP) will remain in place until mid-2013. Operation Twist is ongoing. QE3 announcement is anticipated for the October-November time frame. Deflation needs to occur first (we are now in Disinflation).
· U.S. Downgrades: S&P announces a downgrade of U.S. debt from AAA to AA+. Moody’s and Fitch have not downgraded as yet. Therefore, 2 of 3 rating agencies have not downgraded so the affects of the S&P downgrade should be muted. A downgrade from either Moody’s or Fitch will seriously impact equity markets to the negative side, which Keystone projects to potentially occur before 10/15/11. Fitch announced that it will retain its AAA on the U.S. S&P is on hold until the end of the year when they will reassess the U.S. S&P says there is a one in three chance of a further downgrade. Perhaps the politico’s will downgrade other AAA countries as a way to bring them down to the U.S.’s new level rather than expecting the U.S. to move back up. Moody’s and S&P now in progress of downgrading European banks; down euro=down equities. Downgrade talk is a market negative and if any additional downgrade occurs from any of the three rating agencies, the equities markets will sell off large.
· Congress In or Out of Session: Market bullish when not in session, market bearish when in session. The children are playing their political games again with drama playing out this week on the vote to keep the government open. Further budgets fights will continue in September. Each negative sound bite form the President and Congress continues to negatively impact the broad markets.
· Europe Debt Crisis Continues (Five little piggies; PIIGS): Portugal, Ireland, Italy, Greece and Spain. Greece on the verge of default with contagion now a major worry. Italy in major trouble as well. Moody’s to decide on potential Italy downgrade in October. Italy is the third largest debtor nation in the World, only trailing the U.S. and Japan. Greece paper probably worth 30 cents on the dollar, Ireland 50 cents, Portugal 85 cents but no one knows for sure. The Spain and U.K. high unemployment for young people is a major concern, leading to riots, the U.S. sees the preview of coming attractions. Italy and Spain are too big to fail, too big to bail. Solutions are limited. Europe may consolidate all member debt into a single Eurobond issue. Germany says ‘nein’ to this idea but has softened their rhetoric as the Eurozone crumbles. Rich Uncle China needs to save the day but they appear hesitant. Europe now running the risk that they are taking too long to decide how Greece defaults and the markets may end u deciding for them. Weaker euro=stronger dollar=weaker commodities=weaker U.S. equities, and visa versa.
· ECB Rate Hikes: ECB announces next rate decisions 10/6/11, 11/3/11, 12/8/11, 1/12/12. Past decisions are no hike on 9/8/11 (although the door is now cracked open for lower rates), no hike 8/4/11 followed by a confusing press conference where Trichet spoke gibberish-he realizes the rate hikes from April were a mistake. 25 bip hike 7/7/11. No change occurred 6/9/11 or 5/5/11. 25 bip hike on 4/7/11 that began Trichet’s mistake like July 2008 when he raised at the peak in the commodities market, exactly the wrong time. Trichet is now replaced with Draghi. The euro buoyancy in 2011 was caused by Trichet’s hawkish talk, now that will reverse, thus, euro down=dollar up=equities down. Equities move in the same direction as the euro.
· Ongoing Wars: Libya, Iraq and Afghanistan. Libya oil production coming back on line as Colonel Gaddafi appears cornered, although the news flow is less than reliable. Wars and M.E. problems will always provide a bid underneath oil, gold and silver, thus as tensions escalate, so do the prices on these commodities, as tensions ease, the premium in price works itself out.
· Continuing Geopolitical Events other than Ongoing Wars: Egypt, Syria, Saudi Arabia, Bahrain, Yemen, N. Korea: Dollar bullish and equity bearish. Tensions provide a premium to oil, gold and silver prices. Bahrain is the big worry since unrest will impact oil supply. Yemen is important since it is a southern Saudi border. Syria news on unrest and riots keeps a fear premium built up for the Middle East. News wires impact commodities in real time. Any bad news=higher oil, gold and silver prices, or, visa versa.
· State and Muni Crisis; Union Busting: Muni’s should experience pain first. Muni’s rely on State funds. Many State fiscal budgets turn over NOW. State funding of local municipality projects will be impacted. Muni and State layoffs increasing. Colleges relied on State funds and tuition increases are already hitting cash-strapped students. Lingering unemployment lessens government tax inflows. U.S. will probably see an increase in the cash society since folks will find ways to avoid higher taxes, hurting government coffers rather than helping. Multiple U.S. cities now experiencing budget fights and protests. Governments trying to reduce burden of high union costs. Watch to see if California financial decisions spook the country. State and Muni problems are an H2-2011 and 2012 story. MUB daily and weekly charts are in negative divergence now marking this as a significant price top. A spank down and lower prices are ahead. Meredith Whitney should be vindicated moving forward.
· College Debt Bubble: Students continue to take on mountains of debt and cannot get a job after education. One poll cited 80% of college graduates moving back home to live with parents. No effect near term but in the months forward the loan defaults will develop into a big problem. Now that State funding is being lost to colleges, tuition hikes are occurring, students now have to pay more for an education that no longer leads to a well-paying job.
· China Property Bubble and China Contagion: When it pops, anytime now, it will be extremely negative on global markets causing contagion in Asia and elsewhere. There are signs of growth slowing and bad real estate loan paper and fraudulent accounting by companies is now surfacing as well. Copper was used as collateral for some construction loans and the collapse in copper price may provide the catalyst for the China real estate collapse. 65 million homes are unoccupied in China, a glut of capacity of epic proportions. Europe is China’s major customer so the Euro woes will only accelerate China’s problems. China has built uninhabited cities to fuel their explosive growth during this century. China growth rates are trailing off, there are only so many empty cities that you can build. This is going to end very badly. Keystone agrees with Jim Chanos’ view on China. Watch the copper price to gauge China moving forward. China has to decide if they want to play a larger role in the world and help prop up the global mess. China bubble pops=global markets down.
· PBOC; China Rate Hikes: First hike 25 bps on 10/19/10; second hike 25 bps Christmas 12/25/10; third hike 25 bps China New Years on 2/8/11; fourth hike 25 bps on 4/5/11; fifth hike 25 bips 7/7/11. China said in 2010 that it will project about five hikes into June 2011. Hikes have occurred October, December, February, April and now July, so China should hold steady for the weeks and months ahead. Bank reserve requirements are now ratcheting up continuously to slow down inflation but these appear to have less of an effect now.
· China New Premier: Chosen in 2012, will it be a smooth transition?
· India, Brazil, Taiwan, South Korea and other Emerging Market Rate Hikes: Same effects as China rate hikes; commodities will sell off. China, India and Brazil hikes are most important to global markets. Watch India closely moving forward since they are still raising rates in conflict with their Asian peers. Each emerging country lowering rates here forward will escalate trade wars. Chairman Bernanke’s hot easy QE2 money pumped up emerging markets and commodities from August 2010 thru May 2011 creating new asset bubbles. India is now experiencing civil unrest as citizens demonstrate against corruption at all levels of government. India directly supports one-third of the global gold market and we are entering the marriage season now where gold buoyancy typically occurs. This year has been far from normal, however, and the negatively diverged gold charts and CME margin hikes should trump all. Moving forward, watch India as a proxy for gold price. China consumes 40% or more of the world’s copper production. Watch China as a proxy for copper price, and visa versa.
· Japan Disaster; Yen Currency Intervention: The negative affects to the auto industry and technology are subsiding substantially, and, perhaps, Japan’s renewed growth in the months ahead may actually aid the global ecnomy. Japan is performing policy manipulation and coordinated currency intervention to target the 85-86 dollar/yen area. This could not be maintained so far, or 83, or 81, or 80, and now dollar/yen has fallen well into the 70’s. The 76.5 current level will more than likely be defended so expect currency intervention moving forward. BOJ participated with other central banks on 8/15/11 to support Europe. Dollar/yen up=dollar up=euro down=commodities down=equities down.
· Oil; OPEC; Strategic Petroleum Reserve (SPR); Hurricane Season: SPR oil release talk is no longer an issue as oil price dropped under $80. The hurricane season remains in play, however. OPEC meeting 6/8/11 ended in mass confusion with lack of unified agreement on production, the producers will do whatever they want as they always have. Hurricane season now so that may help keep oil price buoyant. Hurricane’s coming=lower oil supply=higher oil price=good for construction material companies like HD and LOW.
· GSE (Government-Secured Enterprises): A decision will need to be made on extending the GSE limit of 730K; is it time to end this or will the limit be extended over and over again? This should hurt the market since the GSE’s back 9 of every 10 mortgages. Now folks will have to go elsewhere to seek financing where the down payments are 25 to 30% down. In essence, the demand will be reduced, thus, the market will tighten and house prices will continue lower moving forward. Keystone’s proprietary algorithm shows that housing has already fallen back into a double dip as of mid-May 2011. This is deflationary behavior giving Chairman Bernanke many sleepless nights. Keystone considers real estate to be a key investment over the next year or two but prices have much lower to fall first. Low rates do not help housing since folks do not have jobs, if they do have a job, they may not have a good credit score, if they do have a good credit score, then they cannot come up with the 25% and higher down payments. Perhaps the washout in housing will occur in 2012.
· Eclipse Selloff Target Areas: Allow plus or minus a week or two on each side of the following dates as potential areas of major market selloffs. Note how the May and July targets were spot on. This technique next targets the late October thru early November area as a potential large market selloff area. Targets this year; 5/15/11 (large sell off occurred May-June); 7/15/11 (large sell off occurred 7/8 thru 7/18 then the crash the week of 8/1/11); 11/3/11 area is next; then 1/3/12.
· Bradley Turn Dates: 9/26/11 (turn window 9/19 thru 10/3/11, more specifically 9/22/11 thru 9/28/11); 10/12/11; 10/28/11 (this date matches up with the eclipse sell off projection); 11/22/11-11/23/11; 12/28/11 (major turn area); 1/11/12. Typically allow a +/- 7 day window with actual turns usually occurring in closer to the actual date, say +/- 3 day window. Markets more than likely change their trends, if headed up, they reverse down, or if they have been moving down, they reverse up. Every now and then, however, the markets will melt up or down in an acceleration move of the current trend. Dates are courtesy of Donald Bradley, Peter Eliades and Arch Crawford; reference their web sites for additional information.