VIX is a hair above the 50-day MA at 17.09, market bulls will run higher if the VIX fails down thru 17.09. The dollar remains a smidge red. Most of the market action is flat thus far. The 10-year yield is down to 1.91%, one basis point lower so a few pocket fulls of dough are finding their way towards Treasuries instead of stocks. SPX is sideways not yet choosing the bull side at 1403 or bear side at 1394. Note the early action around yesterday's 1397.30 level of interest.
SOX is weaker to start the day and now takes a wild spike higher. The bulls need semi's to cooperate to enable more market upside. JJC sits at 49 well above danger. XLF remains elevated. AAPL launched over the last few minutes so the Nasdaq is leading the SPX upwards, more bull-friendly stuff. The bulls have the slight advantage as the session gets underway. The big news is in fifteen minutes with the ISM Manufacturing Index at 10 AM. Markets will pivot thus even though the bulls appear to be taking charge today, you have to wait for the result at 10 AM to see how things shake out. Plenty of time for a coffee or tea before the excitement. VIX just tested the 17.09 and bounced so the bears breathe a sigh of relief, for now. Also SOX drifting lower again so bears breathe another sigh of relief.
Note Added 5/1/12 at 10:11 AM: Markets launch on the data at 10 AM, pivoting skyward. The SPX punched up thru 1403 so the bulls are running. Watch for a back kiss down to 1403.25. JJC and XLF are remaining bull friendly. SOX is the key since the bulls want to take markets higher. Watch SOX 418.25 which will lock in further bull upside for markets, now printing 415.63 less than three points away. Overhead resistance for the SPX is 1404, 1406, the Friday high was 1406.64, 1408, 1410 and sturdy R at 1413. Price moving thru 1406.64 will likely open the path to 1413. Today may act as a mirror image of yesterday. Monday saw down markets but copper, JJC, would not break down so the market down move was limited. Today we see up markets but, thus far, semi's, SOX are not yet punching up thru 418.25, so the upside action may be limited. The VIX dropped into the 16's clearly allowing the bulls to send markets higher. Here's a test of the SPX 1406.64.......... Watch SOX 418.25 and SPX 1406.64.
Note Added 5/1/12 at 10:23 AM: Look at that launch thru 1406.64 taking out the Friday high; price then jumped to within pennies of 1410. Thus, watch the interplay at 1408, 1410 and the strong 1413 R. SOX holds the fate of the bull move now. If 418.25 and higher is achieved, this upside move is real and another up leg is doable well into the 1410's and perhaps a move to fill that gap at 1425. If the SOX remains under 418.25, this upside market move will fade away like summer breeze, the bulls got nothing. SOX now printing 416.79, about a buck and one-half away. It's all about the semiconductors today.
Note Added 5/1/12 at 12:08 PM: Lots of high fives and excitement today everyone telling each other how smart they were to see the big rally coming, and the sky is the limit from here. Not so fast. If you are watching the SOX it is now printing 417.94, the HOD is 418.15. Keystone's algo continuously recalculates and now needs to see SOX 318.50 before the bulls can throw confetti. The bulls are almost there, about fifty cents away, but not there yet. The SPX took out the strong 1413 R which is impressive. SPX HOD is 1415.32 so jot that down and keep track of it moving forward. Support is now 1413 and next resistance is 1417 then strong resistance at 1419, the closing high thus far this year is 1419.04. Which by the way, makes you scratch your head since the cable television business channel CNBC is touting a new high not seen since December 2007. They need to look at a chart. Volume today is below average run rate but is higher than yesterday's volume. Thus, market bears take heart, if SOX 418.50 holds, you are still in biz. However, if SOX moves up thru 418.50 and does not look back, the SPX is likely headed to fill the gap at 1425. If SOX 418.50 holds the short side remains in play. SOX now printing 417.60..... the drama continues.....
Note Added 5/1/12 at 12:40 PM: About a half hour ago, as good ole Keystone pushed up off the lawn chair on another glorious summer-type day to come inside to check the markets, the Nasdaq was leading the SPX, albeit slightly, up 1.20% for Nas and 1.17% for SPX. The current print shows Nas up 1.07% and the SPX up 1.13%. Note that tech no longer leads today's rally. AAPL is five bucks off today's high. SOX is 417.02, now printing a 416 handle, whoopsies daisies, the bulls are going the wrong way. SOX 418.50 is key.
Note Added 5/1/12 at 3:11 PM: SOX is printing 416.33 remaining under the 418.50 level so the market bulls will have a difficult time gaining traction higher. Tomorrow will not change anything, this battle will continue until the semiconductors choose to continually weaken, or, chooses to bust up thru 418.50 signaling bull party time for one and all. AAPL drifted down to the flat line today so tech lags the broad market which also contributes to holding back the bulls from going higher. SPX has moved sideways thru 1360-1420, a 60 handle range for two months. For today, the SPX has moved thru 1410-1415 for the last five hours, a five handle range, price now heading lower to test the 1410 support, bounce or die. Watch SOX.
Note Added 5/1/12 at 3:45 PM: Bulls could not push the SOX higher so the markets are falling back. Keystone took profits on KGC long but it will only amount to a hot dog and a coke of profits. KGC remains an attractive long play and will look to reenter. Also tried to short RTH but brokers cannot find the shares. Also shorted HD, a new position. Natty enjoying another nice day.
Note Added 5/1/12 at 4:15 PM: The markets faded into the close. Interesting how the SOX ran up to test within a dime of the 418.25 at 11:50 AM but failed to punch up thru. Keystone's algo then raised that threshold to 418.50 for the afternoon session but the SOX was already staggering lower, and the broad markets followed behind, frittering away their lofty numbers, peaking just before lunch time. The Dow Industrials punched out an intraday high that went back to December 2007 but none of the other major indexes followed. The RUT, small caps, actually finished one buck in the red today. The semiconductors are key and will be tomorrow again. The financials, XLF, and copper, JJC, remain firmly in the bull camp. Commodities, CRB, moved up today so SOX and CRB will be key for Wednesday. SPX 1406 was strong S/R and this evenings close is a hair under at 1405.82. The market upside exploded into a full fledged orgy today once Friday's HOD at 1406.64 was taken out but note that price did not close above this level. The dollar behavior will be very important tomorrow since it will move JJC and CRB inversely (up dollar is down JJC and CRB and down broad markets; down dollar is up JJC and CRB and up broad markets).
I guess that pretty much clears that up...
ReplyDeleteYep, went long when 1406.64 broke. should be low risk imho.
ReplyDeleteWatch the SOX Arnie, if SOX does not take out 418.25 today the markets will likely reverse back down. if 418.25 is taken out and the semi's continue higher from there, the market long trade will be in clover.
ReplyDeletethanks for the heads up KS. I've got tight stops and aiming for the intermediate term (few weeks) instead of intra day.
ReplyDeleteWould love to know where the new money flows came from on *sell in May and go away* day.
ReplyDeleteHello Unknown, typically every month, new money tends to flow into funds so the first day or two of each month tends to have a bullish bias.
DeleteWith Arnie's courage I could make some serious profits. I have been buying ES all night on weakness but selling it on pops for and 1 and 2 handles. Was flat on this move I should of market ordered it like I did on Apples earning report but I simply didn't realize the magnitude of the melt up. Nasty head fake right before the news hit too what a drama you must be at your best to make this work.
ReplyDeleteIt's all about the semiconductors? No it's all about the news, and then all your meters and bells and whistle go "oh yeah" we are Bulls in charge now. Obiviously JCC is above 49.22 well over 48.40. Duh. VIX don now, as Bull parade. Readers should see that other factors influence and JCC VIX SOX follow. Your like a fortune teller, who says that things go one way because they can read the leaves, and also we must see if things change after a day, a week, maybe 2 years? When things go the other way you blame the unconscious motives and that the the numbers and signals were head fakes and that they are not really "in control" by Bulls or Bears,
ReplyDeletebut in control by Bulls i mean bears. From the tone of your analysis, you are an anti market shorter, a gas and gold Bernarke hater that has no insight into the way the new markets work. I appreciate your free work and your "SPECULATION" but it's so comical that I can't stop reading it for fun.
ted
[Troll ID 20120413]
DeleteTed, what does the *new market* mean?
ReplyDeleteA market like it or not built upon dollar printing and stimulus beyond imagination that defy all the older ideas and traditional understanding of what makes governments and markets stable. Yes they can keep giving steriods and crack to the markets, Bernarke can stimulate past our wildest dreams, it's not basic fundamental economics anymore. Look we just hit DOW all time high, major correction was supposed to happen when Apple was at 526. Everything is illusion and the illusion is the new reality.
ReplyDeleteted
ted, news is noise 9 out of 10 times. always has always will be. I agree that all the liquidity sloshing around since pretty much the bottom of 2009 has distorted the markets. but markets still work/respond as normal, e.g. negative divergence etc. once the QE tap dries up will see the true markets' intend. All the FED can do is correct, nothing else.
ReplyDeleteFed is the market obviously and the news is not noise to the masses. Maybe to you and more tech savy and "experienced" investors, but news rules everything. Whether you pay attention to it or not. We live in a 100 percent coverage era, where we are completely controlled by it, how else can say a CNBC push a stock such as APPLE down with its shorting crew and still live the next day aas though nothing happened? As they said nothing negative or wrong about it. Why? because news rules and it doesn't have to be right or wrong just smeared in favor of whatever funds or in the case of this year, what government insiders want. You have never seen a game like this one before because all the old rules have been tossed. Negative divergence actually is working less and less as is all tech analysis. That's why back in Feb all indicators, transports, tech, were way over bought and said correction. I sat in a room with some major traders and speakers at a conference and when the major speaker asked who thinks we are overbought and a major correction is around corner, only one older women raised her hand and said it's not, market is underbought, and when speaker and room sighed, speaker said who would dare buy apple at 526. not one person except she rose hera hand among 400 people. Why? Cause this is not your indicator, index, negative divergence market anymore. Sure you can grab some winners, but in the end this thing is stating to shake the tech analysis and becomign strictly a news driven insane illsuion machine with the whim of the media and govt in the sterring wheel for better or worse.
ReplyDeleteted
Hard to argue your points Ted...give the facts in our face. Charts are simply tools to lure in bears. How about all those neg. divergences on the monthly's. Perfect shorting area...not.
DeleteHello all, it's all about the semi's. Note that with the market run-up the SOX has not exceeded 418.50 yet (this morning the number was 418.25 but it has moved higher). SOX is now printing 417.69, so it is only about 80 cents away and note the HOD was 418.15 where price came up to take a look but it does not have the strength to move up thru, yet. If SOX 418.50 is taken out the bulls have a real rally going and SPX 1425 gap fill will be in play. But, if SOX cannot move thru 418.50 today, this rally should fritter away.
ReplyDeleteAre you saying because 418.15 was the high today in SOX and not your 418.25 that Bulls weren't in charge? And are you saying if 418.50 is broken upside that the sell off and profit taking won't be considered a major "fritter" but if that 416.64 or a bit higher is stroked and then market profit taking occurs that the rally "frittered" away. LOL. Come on. Cognitive dissonance my friend.
ReplyDeleteKS, so besically bulls have it both ways - rally on unsustainable good news, but no QE3 and on bad news Bernanke will save the market with the QE3...
ReplyDeleteBears will be defeated both ways
doug
We are probably 5 weeks out from the "waterfall" so the mkt will zigzag around for a while...yes I like the zigs ;-)
ReplyDeleteHello Doug and Zig, Doug, the bulls do not have it both ways, neither do the bears, the action over the last couple months is this rolling top bull-bear struggle ongoing. The SPX has moved thru the 1340-1420 range, 80 handles from early February and we are now in May. So the beat goes on. Chairman Bernanke will likely not announce QE3 until we see disinflation, then deflation, so use the CRB sub 300, then sub 280 levels as when the news will occur for QE3, that is a ways away still yet, CRB is now at 308. Watch for a move to 300 as a first step towards QE3 so you can take that off the table right now.
ReplyDeleteThis odd scenario with traders buying on bad news since QE is anticipated is definitely occurring but this type of behavior will not last. It is akin to the bigger fool theory, or musical chairs. Everyone is happy until there is no fools remaining or the music ends. A lot of this market action is professional traders typically playing the trend and they have no allegiance, they will disappear faster than the last slice of pizza.
Europe will continue to affect markets, also China, and watch for events out of left field like a downgrade of Japan debt. SOX and CRB are two bear-friendly sectors remaining. Bulls need to win these over to take markets higher so pay close attention to them. Continued weakness in SOX adn CRB will indicate the bulls are running out of gas. The markets appear shaky and very well could have placed or is placing its second top now.
Zig, you have the right idea, ups and downs, zigs and zags as the momo energy is burned off and the markets roll over. The strong utilities, however, is very bullish, as well as copper. Thus, markets may behave erratically, dropping sharply only to recover just as sharp once again, until you see weakness come in to the utes and copper, and then the roll over will have a more substantial and extended downside strength that will move markets lower and towards the QE3 announcement.
Key,
ReplyDeleteWhen do you think is the likely time window for QE to be announced?
What yardstick do we use to check for confirmation of disinflation and deflation.
Tay
Hello Tay, Keystone keeps mentioning the same criteria. He posts the 'Inflatin-Deflation Indicator' so you can find the latest message by typing those words in the search box above.
ReplyDeleteBut simply, watch the commodities. When the U.S. drifts lower into disinflation and deflation, this is marked by lower commodities, copper, oil and equities. Thus, watch the commodities index, CRB. It is 308 now. When/if it drops under 300 that will signal disinflation and Chairman Bernanke will start to lose sleep. As the markets continue to sell off and the CRB drops under 280 and lower that will be when Bernanke announces QE3, say around CRB 250-270. This will be in concert with equities selling off, the SPX will be at 1300-ish or lower more than likely. Of course if markets continue higher, and the CRB stays at 308 or higher, QE3 will be a long ways off.
The dollar moves invese to CRB and copper, so if you are market bearish you want to see a strong dollar printing in the morning (CRB will move down). If you are market bullish, you want to see a weak dollar printing in the morning (CRB will move up).
While I understand the frustration of many, I do agree that some of the technical indicators are not working as well such as negative divergence. The presence of manipulation and HFT has led to unpredictable moves for the last 4 months. Even a February top did not create much downside in the tech sector. Bullish set ups have worked well and run . Bearish setups are hit and run for the most part. However KS takes a great deal of time to post detailed analysis which is very informative. I find the daily information pertinent and helpful. And i appreciate that KS takes the time to answer questions. I for one, think the news can move the markets but generally, that news has been known to the real movers and shakers long before I will know it.
ReplyDeleteLeeAnn