China inflation came in lower than expected. TXN releases weaker guidance news, and they are deep into the wireless sector oddly enough. Jobs Report was a non-event. Interesting to see that construction jobs dropped while many pundits have been saying the warm weather is adding to this employment. The Greece debt swap is moving along without incident so far. This has been a wild week thus far, with Keystone's algorithm (at the left margin) flipping short on Tuesday only to recover and return long yesterday. Stay on guard for another move since the markets are not to be trusted.
The dollar is higher with gold and silver marginally lower, but copper is hanging in there for the bulls. If JJC, now printing 48.85, drops under 48.43, the broad markets will experience a strong move lower. But, as long as JJC remains above, the market bulls are favored. Keystone's SPX:VIX Ratio (see previous post) is over 80 now. The bulls are already popping the champagne corks into the weekend.
The bulls needed the SPX to touch 1369 to accelerate higher and that occurred shortly after the open. Price, however, barely moved up to test 1371 so the bulls do not have a lot of steam. AAPL is up again today so far, albeit by only three points, thus, place an apple slice in each one of those champagne-filled glasses. The Nasdaq and SPX both are up about 0.18% so without tech leading bullishly upwards, the upside is muted currently. See if COMPQ starts to lag the SPX which would be a signal that the markets will sell off. If COMPQ stays ahead of SPX, market buoyancy continues. Volatility is lower in the low 17's now, so if you reference the previous SPX:VIX ratio chart and technical analysis, a lower VIX makes the denominator smaller, so the ratio is larger, now over 80, well above the 68 danger level, so market bulls are feeling pretty good about themselves right now.
Note Added 3/9/12 at 2:37 PM: The bulls are enjoying a day of wine and roses. Copper remains green all day so the bears had to walk to the shed behind the garden and receive their beating today. AAPL remains up three bucks today so a happy Apple makes for happy markets. The AAPL buoyancy creates buoyancy in tech and the Nasdaq index which then leads the markets higher. COMPQ is up +0.76% versus the SPX up +0.58%. Tech leads the broad markets so the market are up all day long. Volatilty remains low and VIX had a 16 handle today. Although the bulls are having fun today, and the party has started ahead of the weekend, reference the SPX daily chart posted. If bullish, study that chart closely. The TRIN is 1.08 which actually favors the bears today and not the bulls. As long as AAPL remains elevated, the bulls pour more wine. But, bring up a daily chart of AAPL and note the same negative divergence in place as the SPX chart.
Note Added 3/9/12 at 3:00 PM: Dow Industrials drop about 30 points and SPX about 4 points as news hits that Greece has officially defaulted on tis sovereign debt. ISDA says the Greece restructuring triggers a credit event. This was all expected but the news is intense nonetheless. The euro is relatively unchanged. AAPL remains up so that means markets are up.
What do you make of the stronger dollar? It is not affecting the market in it's usual way.
ReplyDeleteThanks for all your comments.
I too am confused with the lack of correlation; all assets are rising. Is the liquidity trade going to make divergences obselete?
ReplyDeleteLeeAnn
keystone, I thoroughly enjoy reading your articles, and insights. Good stuff, teaching me a lot. This market is throwing everybody fits. I slept at the wheel when SPX 1340 was hit and was bouncing at that level for a while to almost fully retrace to the previous top in less than 3 days; that be E A S Y money... oh well, you snooze you loose (well in this case I didn't loose anything, but neither made any money... aaarghhh). Now waiting for a better entry as at current levels I ain't going long.
ReplyDeleteHello Anon, yes, very observant, that behavior occurs now and then. Perhaps due to low volume. Will have to see if the main asset relationship is beginning to change, or not. Give it a few days. Ideally you would like to see a stronger dollar with a stronger stock market, but with all the quantitative easing in recent years the relationship is the opposite with the dollar receiving a knock down and commodities and equities rallying.
ReplyDeleteHello LeeAnn, maybe the other deal is that the markets have been in this topping action for two or three weeks now and this would be the time when you see cross currents in markets. We'll see if next week the regular asset realtionship returns with dollar up and commodities and equities down rather than up like today.
Hello Arnie, danke. Looks like things are rolling over but all you can do is take it day to day. Keystone posted an SPX chart and the nasty negative divergence tells the story. Sure price can sneak up a hair more, but that chart is ugly. All long positions should be reviewed to decide if you really want to keep them, or not. Everyone may run for the exit at once.