Wednesday, July 18, 2012

Keystone's Midday Market Action 7/18/12

Housing Starts are a key economic indicator each month and minutes ago show a better number than expected.  Permits were down, however.  The data remains mixed. Futures are unaffected. Chairman Bernanke gets a do-over today at 10 AM so traders will once again listen for hints of easing. Geithner is about to speak shortly. Bernanke has managed to walk a tight rope thus far, perhaps today he will provide clarity. Traders firmly believe in QE3 coming and also believe measures will be taken at the Fed meeting in a couple weeks, at a minimum perhaps a statement that low rates will continue thru 2015 instead of 2014, and then a mention that QE3 is in the works over the next month or so. Traders are complacent and have no doubts that Bernanke will provide the crack cocaine as evidenced by the low CPC and low VIX. Therefore, the big shock to markets would occur on the downside, not the upside. Traders are expecting the markets to move sideways to sideways up and do not fear the downside. The stock market is a gambling casino where bets are simply based on whether or not the Bernanke sugar is provided. Fundamentals, schmudamentals. Earnings, schmernings. All traders care about is the crack cocaine. These are not your grandfather's markets.

Sticking to the technicals, so this macro economic mess can be properly calibrated, watch NYA 7749, JJC 44.20 and CRB 293.80. The dollar is up this morning which will create JJC and CRB negativity. A market pivot point should occur at 2 PM today upon release of the Beige Book. The SPX 1363.61 level is very important since this is the 2011 closing high.  Likewise, the 100-day MA at 1359.70 and 20-week MA at 1359.26.  Since price overcame these two important moving averages yesterday, it is important for bulls to maintain the SPX above 1360, and conversely, it is important for bears to stab back down thru these MA's. For the SPX today, bulls only need to punch a couple points higher. If the strong 1366 resistance fails, the 1370's will come quickly. Bears will try to prevent SPX 1366 with all their might while at the same time try to push the NYA under 7749 and CRB under 293.80 to start a sustainable down move.

Pay attention to the percentage gain of the SPX versus the Nasdaq. Tech did not lead the upside yesterday which places the rally into question.  Looking at the futures right now, tech and the broad market are down 0.2% and 0.3%, respectively, thus, tech is not leading the downside so the bears do not have much momo despite the weak futures.  If the COMPQ starts to lead the SPX lower, a market sell off would have legs.  Otherwise, markets will continue to stumble sideways.

Note Added 7/18/12 at 9:46 AM:  Perhaps sideways action into the 2 PM Beige Book.  The strong SPX 1366 resistance will lead to the 1370's so expect a big fight here.  SPX now printing at 1363.61 wrestling with the 2011 closing high. Bernanke will provide some drama shortly.

Note Added 7/18/12 at 1:08 PM: The bulls are running again today.  The 1366 R gave way at 10 AM so the party to the 1370's was on tap. The leap higher is impressive since it poked up thru the high for 2011 at SPX 1370.58; watch for more drama around this number. SPX resistance above is 1374, where price is at now, then 1378, the HOD thus far is 1375.26, then 1385, 1389, then very strong resistance at 1391. Tech is leading the broad markets higher adding bullish strength.  Note, however, that copper remains under the level of interest at JJC 44.20, which will serve to cap this market move. The dividend bubble continues to be pumped larger. The Beige Book in one hour may create a market pivot point.  Keystone opened a new position shorting RTH again. The chart is making a price high again with very attractive negative divergence on the daily and weekly charts. With copper, speak of the devil, look at JJC popping, now printing 44.10.  Ten more cents and another leg higher will occur for markets. If JJC stays under 44.20, the market upside should stall.

Note Added 7/18/12 at 2:06 PM: The Beige Book is uneventful, markets move sideways. SPX is between the 1372 support and 1374 resistance. Support below is 1372, 1370.58, 1370, 1366 and 1363.61. Keystone shorted more RTH. VIX tagged a 15 handle today.  Long volatility is a very attractive play; daily VIX chart is positively diverged (up VIX is coming which means down markets). Bulls need to see JJC 44.20 to take the next leg higher, without that (JJC now printing 44.03), the markets will drift sideways into the close.

Note Added 7/18/12 at 2:44 PM:  Keystone opened up a new position shorting XLU which is shorting the uitilities sector. Keystone is also holding the thinly-traded SDP which is an inverse ETF which is a short position against the utes. The XLU daily chart shows an attractive rising wedge, overbot stochastics and RSI, and negative divergence which should create a spank down at any time.

Note Added 7/18/12 at 2:58 PM:  SPX is now testing 1370 support, if it is lost, price will move back to 1366, the breakout point from this morning.

Note Added 7/18/12 at 3:53 PM: Keystone added to the SPXS position.

Note Added 7/18/12 at 4:05 PM:  The bulls flexed their muscles today.  SPX went out sideways since copper, JJC, could not regain 44.20. But look at how the bulls ran at the end, the JJC closing only a hair away at 44.14.  Thus, at tomorrow's opening bell, JJC 44.20 will immediately tell you market direction. It will be interesting to see if the utes now do a swan dive off the cliff. NYSE volume was at a regular days pace. Watch the dollar since stronger dollar is weaker copper and bear friendly while weaker dollar (as QE rumors persist in the market and traders expect QE) is stronger copper and bull friendly. QCOM is light on earnings with lowered guidance so this pokes a hole in the tech euphoria balloon. IBM is light on revenue but beats on the bottom line and guidance is raised. Note how many companies are missing on the top line. This tells you that overall sales are weak; this is not a sign of a robust recovery. Guidance also drifts lower over time. But, alas, the markets move higher. Stay on your toes, stay hedged, have a finger in a few different pies.  Speaking of which, it is time for Keystone to sample a slice of blueberry pie on the side porch. The final CPC print will be interesting tonight.

25 comments:

  1. KS, SPX basically kissed the upper boundary of your megaphone pattern from a couple posts ago (1371.62) just as you outlined. That is also near the July 3 top.
    I notice there is a huge block of July 16 calls on the SDS (2X inverse SPX) in play. Traders seem to have fully hedged themselves against a sharp decline going into the end of OEX.
    I may be early but I have bought some SDS in the evnt Bernanke and the Beige Book disappoint. As you note, complacency is running high.

    ReplyDelete
    Replies
    1. Maybe Charlie but CPC and VIX say that traders are not worried.

      Delete
  2. hey KS and others. I've been AWOL for a while and just been looking at the markets. Laughing. Why? daily SPX:VIX almost at 85 now. CPC at 0.84, TLT up, etc. Total complacency, whereas treasuries are up, which normally are down in a true bull run. I waiting for a SERIOUS spank down to happen. From an EWT perspective either wave (ii) of [i] of Minor 3 down, or Minor 2 double zigzag with an SPX price high above the previous 1374 pivot is coming. My guess would be the double zigzag, and that provides the market with a 1385-1390 target to close the June 5 gap down at open. By then at those levels there will be TOTAL complacency; the SPX:VIX may very well touch 100 again. CPC in the 0.70s, no bears left, etc etc and BOOOM the market snaps down. This is the hall mark of a wave II: bring everybody to the wrong side of the trade. That said, I am not going long at these levels: the upside reward (15-30 points) is much lower than the downside reward (100s of points). Instead; just adding to my shorts at key levels.

    ReplyDelete
  3. This comment has been removed by the author.

    ReplyDelete
  4. KS, regarding your megaphone; I think it is still in play, but I'd draw the phone's upper and lower trend lines through the tops of daily wicks instead of the open/close prices. Doing so, will give a higher cross with the ascending current trend channel. That cross is then at ~1390... (exactly where EWT would project wave II to finish... hmmmm.... beautiful isn't it!?). Then also the drop will even be more: ~200 points; bringing the SPX to upper 1100s, which is in line with the length of a wave 3 decline: wave 1 was 140 points. Wave 2 up to 1390s. Wave 3 is 1390 - 140 x 1.6 = 1160s.

    ReplyDelete
  5. Arnie, thanks for sharing the EWT projections. I've seen others project 1388/1390 as well. Do we get there today or do we backtest some lower support first? That's possible... or maybe we roll over from 1372.
    CRB kissed its 100-day MA, That would be a good reversal point. Dr. Copper (JJC) has failed to confirm the bull party....

    ReplyDelete
  6. Charles, no we won't get to 1390s today. IF this count happens (SPX has to get above 1375 first, and it's awfully close, so I'd give it a high probability that it happens) then that will be in a week or two or so IMHO.

    So keep watching the July 3 high, if it breaks SPX probably goes to fill the May 4 gap IMHO (sorry I said June 5 in my earlier post...). Which is then only 20 points away from current levels...

    ReplyDelete
  7. Bingo: wave (ii) of [i] of Minor 3 down, is now officially of the table and Minor 2 double zigzag with an SPX price of ~1390s is most likely coming.

    ReplyDelete
  8. Whats up ladies OooOoo that's right EVERYTHING... watching ride today not feeling well from the heat (two day migraine) but my longs bring my best performer of the day is NVDA. I'm getting ready for bunker mentality once we get a little higher I'm going truck up on TZA UVXY YCS (TMV maybe)basically short everything and go fishing in Montauk.

    ReplyDelete
  9. Great thought all. The SPX resistance above is 1374, where it is now lingering, then 1378, 1385, 1389 and very strong R at 1391. So the 1385, 1389, and 1391 may be important levels to jive with the discussion above.

    For the megaphone, price can overshoot, as long as it comes back in a short time frame that is really no big deal. Like channels, and following other trend lines, once in a while price overshoots, or undershoots. Typically the best trend lines are the lines that have the maximum amount of price touches and it is always helpful to use candles so you can see the close, highs and lows.

    Beige Book in a short while so markets may pivot. JJC 44.20, markets will stall here without the JJC moving above 44.20, if JJC moves higher, then the resistance levels listed will be next ones on tap.

    ReplyDelete
  10. KS, an overshoot of the megaphone would be ideal, that would trap "everybody" on the wrong side of the trade. Just like last Wednesday and Thursday when the DOW (at least) closed below the ascending lower trend channel line, and then BOOOM on Friday it whipped right back in, trapping all the shorts.

    I really like it when different TA techniques and R levels coincide. That strengthens the case for a similar outcome.

    ReplyDelete
    Replies
    1. Agree, if a stock is a go with different TA methods, plus on the fundamental side, it's a winner.

      Delete
  11. Once again I'm probably into my shorts a little early, but am cheered by the analysis here. I'll know when to add more. I'm also cheered by the fact Spanish 10-year bond yields are almost to seven percent again. (On the same day that STOXX 50 was up a percentage-and-a-half, or so. Crazy.)

    ReplyDelete
    Replies
    1. If JJC (copper) stays under 44.20 you will be a happy camper. Boy, 7% again, that is ominous, maybe some overnight event is on tap, trapping longs as discussed above.

      Delete
  12. Beige Book: More Fed districts report slowdown.
    Weakness concentrated in East, Mid-Atlantic

    http://www.marketwatch.com/story/more-fed-districts-report-slowdown-beige-book-2012-07-18?link=MW_pulse

    ReplyDelete
  13. Yep, Beige Book is a pig in a poke, sounds like all the same old stuff. SPX moving between 1372 S and 1374 R.

    ReplyDelete
    Replies
    1. utter bull complacency, exactly what we need for that top to happen. Keep on going ya bulls, this GRAND finale will be great. Growth is slowing, and even slowing now in more regions, so major rally time... LMAO

      Delete
  14. KS, if you have time, can you look at the natty chart please? It fell back quickly last time it got to three dollars. I believe we're still headed for an overflow in storage by the fall.

    ReplyDelete
  15. the spank down to 1100s will only happen if vix moves higher, I am really underwater on uvxy. Thanks All for the info.

    ReplyDelete
    Replies
    1. agree, but before that happens, the vix has to go down deep. currently the vix' stochastics are showing positive divergence on the daily charts: VIX lower now than early July low, but SSTO bottoms are higher...same story for VIX' MACD, whereas the RSI is pretty much flat.

      We need utter complacency first before it can be spanked down.

      Delete
  16. KS, can you comments on oil, runs around 90 now, will it get above 100? Thanks!

    ReplyDelete
  17. VIX is likely closer to a pop than folks think. That 15 handle is a magic number. Once that prints, like it did today, it will be time for the wild rocket ride. Markets will probably be subject to some type of event. Never a dull moment. JJC 44.20 will tell you the story immediately at tomorrows bell. Keystone can take a look at natty and oil but slices of pie are much more important at the moment.

    ReplyDelete
  18. ks last post is Gospel spot on... hurry up wait

    ReplyDelete
  19. KS, enjoy the pie--that is more important by far, also a glass of relaxing beverage.

    I notice AUD surged to the upper Bollinger while DXY stochastics are bottoming. Both are ready to reverse.... ditto VIX, which as KS noted is at levels where market rolled over in May and July.

    ReplyDelete

Note: Only a member of this blog may post a comment.