The FNDR IPO strikes a sour note; Fender now delaying the IPO offering citing concerns over economic conditions. Perhaps once they retune the guitars they will return to the stage in the future. GE, a major global bellwether, released earnings that were in line but traders wanted to see more, so GE is negative in the pre-market. GOOG and MSFT had a respectable showing last evening although both languish at the top rail of their multi-month sideways channels. SLB earnings, a proxy for the oil sector, were in line but the stock is leaking slightly pre-market. Vodaphone reported weak news so the telecom sector should be hit today. IR is a large nail in the bull coffin as earnings fall shy of expectations. IR is also a bellwether for the global economy. CMG continues to choke on last evening's burrito. Top line revenues continue to disappoint with the earnings releases indicating a weak overall economy. Thus, the GE, SLB and IR earnings are all contributing to the weak futures, and the futures continue to slowly leak lower.
Germany and Finland gave the okay for the Spanish bailout. Euro Finance Ministers should provide a blessing today. Now analysts can figure out over the weekend exactly what the bailout entails since the details are absent. Spain 10-year yield now rockets to 7.18% as this missive is typed; an increase of 17 basis points in the last couple hours. The Spain-Germany spread is now 597, call it 600, "Houston, we have a problem." No wonder futures are weakening, S&P's now approaching a ten point drop.
Today is OpEx Friday so the market direction in the afternoon is important since Monday morning the markets will tend to move the opposite way. The new moon weakness did not appear Wednesday or yesterday, but considering the new moon occurred only a few hours ago, the market weakness must have been running late. There is no other economic data today and no further excitement on the earnings front until next week, so today's action will be very news-driven, subject to Euro tape bombs (sudden news hitting the wires). China news concerning lowering the triple R's (easing) will also effect markets.
Copper is poised to give back much of yesterday's gains. Dr. Copper leads the markets so watch JJC 44.20 very closely at the opening bell. Now at 44.88, about 1.5% higher, a rupture of 44.20 will verify the broad market selling. If JJC loses 44.20 and stays under, the broad indexes will remain weak moving forward. Watch XLF 14.45 as well. Losing 14.45 will usher in a strong down leg for markets. Watch volatility, VIX, to note the extent of any spike higher today. For the SPX starting at 1376.51, the bulls need to move up over 1380 and it is all blue skies and confetti for long players. The bears need to drop under 1371 to create a downside acceleration. With a loss of 9 or 10 projected for the SPX, this will easily rupture 1371. A move thru 1372-1379 is sideways action. For the futures, the S&P's are down 0.67% while the Nasdaq is down 0.32% so tech is not leading the downside, therefore the bears should not become too excited about a sell off at the opening bell. Monitor the SPX versus COMPQ percentage relationship this morning. The 10-year yield is now 1.465% continuing to exhibit deflationary behavior.
SPX S/R is 1385, 1380 (today only), 1378, 1374, 1372, 1370.58, 1371 (today only), 1370, 1366, 1363.61, 1363, 1362, 1359.90 (20-week MA), 1359.86 (100-day MA) and 1358. Remember the gauntlet at 1358-1360 on the way up a couple days ago? The 1366 support and 1358-1360 support zone are the most important levels.
Note Added 7/20/12 at 9:18 AM: JJC is slated for a print of 43.90 at the open well under 44.20 which would verify the broad market weakness. XLF is on tap for a 14.49 print remaining a few pennies above 14.45. Spain 10-year yield has now blown out to 7.24%, the high 7.2's were the previous high. Italy 10-year yield is now at 6.15% running higher as well. The German 10-year yield is 1.17%. The Spain-Germany spread is now blown out to 607 points. Start boiling water, grab the bandages, is there a doctor in the house? The Euro tensions are increasing.
Note Added 7/20/12 at 9:55 AM: SPX failed 1371 leading lower, now testing the critical 1366 support. JJC failed 44.20 at the bell ushering in the market weakness. XLF lost 14.45 ushering in further market weakness. COMPQ is down 0.66% while SPX is down 0.63 % so tech is leading the broad indexes lower supplying bear street cred. Keystone took proifts on the TECS trade and will look to reenter. Also added more XLU shorts.
Note Added 7/20/12 at 10:02 AM: Watch NYA 7750 level, now at 7785, 35 points higher. If NYA 7750 fails, markets will tumble substantially lower. For now, the bulls need to push XLF higher to stop the downward market slide. Keystone bot TECS reopening this position.
Note Added 7/20/12 at 10:36 AM: SPX is now testing the critical 1366 support, bounce or die. XLF remains under 14.45, bearish. VIX at 16.50 is remaining relatively tame preventing the bears from gathering traction to the downside. NYA is at 7766 only 16 points above the critical 7750. A loss of SPX 1366 support would occur in concert with the NYA losing 7750 (the NYA 40-week MA) which creates serious market negativity moving forward. But, if the bulls can hang on keeping the SPX above 1366 and the NYA above 7750, they will be able to salvage a happy weekend. Keystone's proprietary algorithm, Keybot the Quant (see the left margin on this site), is on the verge of flipping short. If the NYA 7750 fails, the algo will likely flip to the bear side.
Note Added 7/20/12 at 11:19 AM: The utilities continue to hold up; if/when they roll over it will be very ominous for the broad markets. Fitch downgrades three major Japanese banks. VIX is moving up towards the highs for the day above 16.50. SPX is coming down for another look at 1366 support. NYA is 7770 only 20 points above danger. The tension mounts.....
Note Added 7/20/12 at 12:27 PM: SPX loses the 1366; it will likely want to back kiss. XLF remains weak. VIX printing highs for the day at 16.88. NYA is at 7762 only twelve points away from 7750 that will drive the broad indexes much lower. By the same token, if NYA 7750 holds, the broad markets will recover today. Keystone took profits on TECS closing out the trade, will look to reenter.
Note Added 7/20/12 at 12:32 PM: NYA is at 7758, now only eight points away. This is uber importante. A loss of NYA 7750 and markets will remain weak for the days ahead. The day is being decided now......7757 handle......
Note Added 7/20/12 at 12:59 PM: SPX is coming up for that back test of 1366. NYA bounced off of 7753, the bears were within three points of claiming substantial victory and a big flush downward in the markets but the bulls recovered, for now. Another test will likely come. Keystone bot TECS reopening this long position.
Note Added 7/20/12 at 1:22 PM: NYA is at 7755, this is big, the bears need five more points and they lock in strong market negativity. Here we go.... 7752.50 ....
Note Added 7/20/12 at 3:28 PM: The bulls continue to prevent NYA 7750 from failing. The volume on the NYSE appears to be lighter than Wednesday and Thursday's volume, which is not particularly bearish for this down move today. The utilities, UTIL, are positive today. XLU is positive but only by seven pennies, no, six pennies; it will be interesting to see if XLU rolls over, or not, into the close. The SPX is moving thru 1362-1365 since noon time, a three point range.
Note Added 7/20/12 at 3:38 PM: Note how the SPX is wrestling with the all-important 1363.61 S/R as listed above. The NYA would not fall thru 7750 today, yet, now at 7765, only fifteen points away, enough to add some late day drama. There were two low TICK's this afternoon in the -800 area, one at 2:30 PM-ish and the other at 3:30 PM-ish which correspond to the market low points.
Note Added 7/20/12 at 3:57 PM: Keystone took profits on TECS performing another round trip on this one, closing out the trade. Took that dough and bot TECL for a mini tech long trade into Monday.
Note Added 7/20/12 at 4:02 PM: JJC and XLF, copper and financials, respectively, caused the market weakness today. The utiilities remain elevated which helped the bulls stop the downward slide. The NYA would not break thru the 40-week MA at 7750, so the bulls live to fight another day. NYA 7750 will tell the story at Monday's opening bell.
TZA maybe maybe not!
ReplyDeleteMaybe not 30 min hostgram flattening throw back and throw up....
ReplyDeleteMay I inquire as to the source or derivation of the key 1366 SPX support?
ReplyDeleteThanks
Have been watching Keybot several months. Just started following this blog this week.
Hello Rich, the support/resistance levels for the SPX are all from historical data of the opens, closes, highs and lows, on daily, weekly and a monthly basis, as well as where key trend lines cross from the charts, as well as other key levels such as intermediate term tops and bottoms. SPX 1366 is simply a level that has been highly favored over time, thus the direction that price moves away from 1366, higher or lower, takes on strong significance.
ReplyDeleteSPX very strong S/R levels inclcude 1413, 1406, 1403, 1391, 1370, 1366, 1364,1358, 1344, 1343 and 1341. 1366 and 1341 are extremely strong levels and very key.
ks, how did you get your target/measured move for the megaphone spx pattern? h&s targets are easymto see, wedges and megaphones i dont quite underdtand. thanks if you arent in the hammock for today already.
ReplyDeleteAnon, there is finally some rain so the hammock is wet, Keystone will have to wit for a sunny day. Plus all the pie is eaten so Keystone has to do some computer work. The megaphone targets are very easy. Once you see a megaphone strat to form, which is an expansion of price, making higher highs, but also making lower lows, you then simply use the upper and lower trend lines that form the megahone pattern as the price targets. Price will simply move from one side to the other. As the pattern expands, price has to make more and more drastic moves from side to side.
ReplyDeletePicture yourself walking into a large funnel from the small opening side. As you walk in touch the top of the funnel, then take a step and tap the bottom of the funnel with your foot, then take another step and touch the top of the funnel, etc... You can appreciate the expansive nature of price as time moves forward.
The key for trend lines is to draw them with the maximum amount of price touches possible, the more price touches to the trend line the greater credibility the trend line has. As you identify trend lines, they will lead you to the megaphones, or rising or falling wedges, or ascending or descending triangles, or bull or bear flags.
For your original question, as the megaphone pattern expands, and since price is now at the top of the megaphone for the SPX, the trip back to the bottom side is a long ways down. For the time factor, simply look back at the price action over the last weeks and project that forward, and that will supply the time and target. If the SPX moves up higher from here, however, the megaphone pattern may become nullified. Keystone will try to post an updated chart over the next day or two.