Time to assess the markets now that the smoke has cleared from yesterday's banking orgy. To recap, the Fed planned on releasing the bank stress test results on Thursday at 4:30 PM EST after market hours. JPM received their passing grade and immediately announced a divvy increase and buyback at 3 PM EST catapulting markets higher. BAC then announced they had passed as well and were increasing the divvy. At that point the champagne corks were popping, the wine was flowing, and the dancing girls had just arrived. The late session party spiked the SPX into the 1390's by the time the closing bell rang, closing at the highs.
This morning, the banks in Europe are following the lead in the States with strong upward moves. The rally yesterday simply pulled forward a rally that would have occurred on Friday. As presented on the weekend in the Key Events missive, the seasonality factors are very bull favorable this week. OpEx Monday would be expected to be up, check. The March FOMC meeting day is typically up and it was up big, check. The period from OpEx Tuesday to Wednesday should be bullish, that will be found out today but there will likely be a spike at least at the open if only for a few minutes which will verify this factor. Seasonality also says that this OpEx week in March is typically up about 80% of the time so keep this in mind as the next three days play out. Markets can easily receive a large spank down over the next couple days only to recover Friday to satisfy this seasonality factor so different paths are possible.
Keystone's algorithm, Keybot the Quant, remains long, the robots are always smarter than the humans. The daily charts for the broad indexes, and AAPL, and others, remain negtively diverged wanting to see a smack down and move lower. Wild action yesterday considering the overall back drop with the charts and other technical analysis. The VIX printed multi-year lows testing the 14.5-15.0 support area. 15.2 failed leading to 14.80 (Keystone's 80/20 rule), and today we will see if a bottom is in place and the positive divergence will bounce volatility higher. The outer limits on Bollinger Bands were violated yesterday also indicating that a snap back from this current market direction is in order.
The low volatility continues to show the complete complacency in the markets, there is no fear and traders are riding along on the bull side not worried about downside protection. The CPC put/call printed 0.86, more indication of no fear, the CPC has not moved higher than 1.1-ish since mid-December. The NYAD printed 1927 back up near the +2000 and higher level to indicate that the extreme bullishness is out of hand. It is surprising that such a strong rally yesterday did not print above +2000, perhaps another indication that despite all appearances, the markets have a sick funk in place under the surface. NYHL printed an uber high 333 but despite the NYA printing higher highs in price compared to early February, the NYHL was higher back then creatign an unhealthy divergence.
One odd thing yesterday was seeing the Dow Industrials up over 200 points, and, before the close, the VIX was actually green! This type of behavior tells you that all is not right. The dollar, commodities, copper, gold, Treasury, equity relationship is receiving cross currents right now as well. The inflationists are chomping at the bit seeing a bump in the U.S. 10-year yield to 2.18% matching the start of the year levels. Much of this action may simply be a blip as the days forward play out.
The bulls are in full control currently. Watch CRB 313 but at 318 now, the bulls are happily above. The utilties bounced yesterday as well, and UTIL is at 461 well above this weeks danger level of 444. For the SPX today starting at 1396, the bulls only need to see green futures (which are currently showing) to accelerate a further move higher, likely punching thru 1400. The market bears are simply trying to stop the upside momo since they would need to retrace yesterday's move to restart negativity, a formidable task. A move thru 1373-1395 is sideways action. The S&P futures are up +0.18% and the Nasdaq is up +0.12% so market bears take heart. At least at this early juncture, tech is not leading the upside today so any move higher should be limited and muted.
HELLO K S ;
ReplyDeleteI ENJOYED READING YOUR COMMENTS AND THINK YOUR RIGHT THIS MARKET MOVING HIGHER .
I EXPECTED A SHORT TERM PULL BACK NOT LONG AGO, AND IT WAS MUCH SHORTER THAN I EXPECTED .
I AM LOOKING FOR 1450 IN THE S&P , WITH A POSSIBLE MOVE TO 1550'S TO MATCH THE PREVIOUS HIGH'S .
THE PERIOD OF 2000 AND 2007 , SAW THE MARKET HAVE A PULL BACK BEFORE MAKING THE HIGHER HIGH'S LATER IN THE YEAR . A ROLLING TOP FORMATION IN THE WEEKLY CHARTS BACK THEN , THAT ARE SO FAR ACTING AS THEY DID IN THE CHART FORMATION AS IN THE PAST .
AT THIS POINT IN TIME , WHAT WERE THE PULL BACK DOWN TO THE 1040'S AND 1100 AREA , MIGHT WELL HAVE BEEN THE ACTING FORMATION , THAT ONE VIEWS IN THE 2000 AND 2007 PERIOD WITH THOSE PULL BACKS.
THE MOVEMENT NOW , MIGHT BE THE FINALLY MOVEMENT TO THE HIGHS , BEFORE THE MAJOR BEAR MARKET UNFOLDS IN THIS PERIOD OF 2012 AND POSSIBLE 2013 , THEN BEGINS THE FINAL BREAK DOWN THAT MOVES THE MAJOR STOCK INDEX'S TO LOWS THAT ARE AT THIS POINT IN TIME , UNTHINKABLE .
ALL THE VERY TO YOU AND YOUR VIEWERSHIP . D-KNOX .
Hello D-Knox, that is interesting. The 18-year cycle is the most important cycle in trading. This took us from the 1960's into the 1982 bottom. Then the bull run from 1982 to 2000, now bear from 2000 to 2018. Thus, we may have a few more years lower as you allude to near the end, then likely all the hyperinflation will kick in with equities and commdoidtes catapulting higher in the late 20-teen's.
ReplyDeleteShort term now, it seems like a strong pull back is actually needed now, sharp spike down, which may lead to a sharp spike back up to the 1425 gap fill, then roll over, but these markets can only be taken an hour at a time due to their current instabilty.
KS, I think the market gave a clear indication of its direction: wave 5 (the final wave) is here, I also expect mid 1400s first before we see any 1300s.
ReplyDeleteHello Arnie, you may be correct, but due to the negative divergence in place, and continued complacency,as well as a parabolic AAPL that will likely fail as early as tomorrow, the path seems lower from here. 1425 is definitely in play now but not so sure it happens right away, perhaps the path to 1425 is thru 1350 first. The next two or three days will tell a lot. Keybot remains long, watch for weakness in UTIL, JJC or CRB to indicate market trouble.
ReplyDelete