Keystone's Midday Market Action 3/13/12

Retail Sales turn out to be a non-event as the numbers come in as expected.  Bulls can select pieces of the data to wave as a banner to state their case, and likewise bears.  Futures were up overnight and the bullishness continued into the open. The SPX touched 1373 so the acceleration move kicked in with another five points added in the opening minutes; the HOD thus far 1378.75. The sectors are all bullish today, copper is up. Business Inventories, however, ticked up a bit, indicating that the products are being made but are they sitting in a warehouse now and not moving into a consumer's hands fast enough?

The dollar is up with commodities lower but copper and equities are up which represents a potential asset relationship change. The jury is out, however, especially since we are sitting directly on top of a market inflection point now. If the markets reverse, even as early as this afternoon, perhaps on Chairman Bernanke's lack of mentioning quantitative easing, the typical relationship of dollar up = commodiites down = copper down = equities down, may reestablish itself.  A few days need to play out to see how this story is written.

Volatilty drops again today. Reference last evening's VIX chart, 15.2 led down to the 14.8 area, VIX now printing 14.72, testing multi-year lows. If volatility bounces, and the charts are positively diverged to hint at this outcome, this is the place for it to occur. The Nasdaq is leading the SPX to the upside today, due to AAPL's continued buoyancy, so this favors the bulls today. Apple continues to support the entire broad market. Negative divergence remains on the daily AAPL chart as well as the broad index charts which points to a spank down for prices at any time. SPX price is almost at the upper BB as discussed in this mornings chart.  The SPX upper BB is at 1381.43 so keep this in mind as today's session plays out.

The seasonality factors, as discussed last evening, say that the March FOMC meeting is typically an up day for markets. SPX support and resistance is at 1386, 1378, 1376, 1375, 1374.09 closing high thus far this year, 1372, 1371, 1370, 1368, 1366. The 10-day MA is at 1365.52.

Keybot the Quant (left-hand margin) continues along on the bull side. The CRB is a major focus currently. Keystone's shorts that are entered recently and ongoing, as a top is projected right now for the markets, are receiving a slap in the face today.  The FOMC is on deck this afternoon with 2:15 PM EST a potential, make that almost guaranteed, pivot point, considering the unstable nature of the markets currently. Watch SPX 1381.37 (upper BB) and 1378.75 (HOD).

Note Added 3/13/12 at 10:37 AM:  SPX prints a higher high for today. The VIX dropped thru its lower BB this morning which is remarkable and further points to a recovery move higher for volatility. When a candle drops below the lower BB then closes the day above the lower BB, this is a bullish signal (bullish volatilty = bearish markets).  SPX continues to print highs, note that the next resistance is at 1386, once price stays above 1378.

Note Added 3/13/12 at 11:50 AM: Big jump higher in the markets occurs after President Obama spoke. SPX is making its way up to test the 1386 R and has now tagged the upper BB. The Dow Industrials and Nasdaq have pierced their upper BB's on the daily charts as well.  Check the candlesticks this evening since a close back inside the BB will signal a market sell off at hand.  Keystone's 80/20 rule says that typically when an 80 price level is reached the stock or index moves to the 20 level.  Note the important level for the SPX now in the 1380's. If SPX closes above 1380 today that foretells a visit up to the 1420's, and likely the 1425 gap fill, at some point in the future.  If the markets are going to sell off, this is the time.  What does Chairman Bernnake have on tap for this afternoon at 2:15 PM? AAPL continues to support the markets today keeping tech as the leader and thus creating the market buoyancy. VIX is steady as she goes at 14.86.

Note Added 3/13/12 at 3:21 PM: The equities markets are bouncing up and down since the Fed announcement, which provided no great surprises, and a short time ago JPM announces a divvy increase, thus, traders are encouraged for upcoming bank stress test results, and the markets enjoy a large bounce, moving thru 1386 R like a hot knife thru butter.  SPX moves up next to test 1389, then 1391. Over the last four minutes, the 1389 R was ruptured.  VIX at 15.81, a close in this area is a volatilty bullish signal (market bearish). Natty gas is jumping higher, perhaps some legislation in Washington may finally receive some support? The volume run rate today is only two-thirds of the average daily volume over the last 10 days.  Thus, markets move up on vapor, tumbleweeds roll thru trading floors and crickets are heard in the background, but the low volume exacerbates the jump higher. The dollar is up and so is commodities, copper and equities so the asset relationship continues to hint at a change.  SPX strong overhead resistance is at 1389 and 1391, then 1399. SPX already printing 1393 now in a melt-up. BAC passes the Fed stress tests this news causing another market pop.

Note Added 3/13/12 at 3:43 PM:  XLF jumping large on the JPM and BAC news, from 15.05 to over 15.40 in a half hour, almost a 3% move.  XLF is up 3.6% on the day right now sitting at 15.39. A huge 200 point Dow Industrials move--and the VIX is green! NYHL at 319, wow, but remains under prior highs (negativelydiverged). NYAD at +1800 near the +2000 level and higher that indicates uber bullish buying. TRIN in the basement at 0.36, uber bullish which verifies the market action. A TRIN this low will need the pressure relieved by markets snapping back to the sell side. Fed will release all the stress tests at 4:30 PM EST.