Keystone's Midday Market Action 7/27/12

The GDP minutes ago is 1.5%, better than expected. It is unrealistic to see the Fed acting with full-fledged QE with this number, the GDP was not even under 1%, but the futures remain elevated, set for a solid start, as long traders continue the high off the Draghi crack cocaine promise. At the open, the NYA 40-week MA, one of Keystone's key cyclical indicators, is very important, only two points on the bear side at 7754.51.  If the bulls push the NYA above 7756.53 and it stays above, the bulls not only will enjoy an up day today but the path ahead will be paved with gold for the market bulls, and SPX 1380 will be realized in short order. The bears must keep the NYA under 7756 by the closing bell today, otherwise, the short players will have a tough road to hoe moving forward.

Also watch XLF 14.45 and SOX 375.30, both on the bullish side affecting the markets positively. Any change to the bear side will cause markets to weaken and sell off. For the SPX starting at 1360, the bulls only need three points, to punch up thru 1363 and an upside acceleration party will occur.  The futures show this to be on tap.  The bears are trying to hold back the upside momo and will accomplish that by keeping NYA under 7756, and moving XLF under 14.45, and SOX under 375.30. A move thru SPX 1340-1362 is sideways action.  The opening market bounce and subsequent reaction in the opening minutes will be interesting today.  A market pivot point will likely occur at 9:55 AM upon release of the Consumer Sentiment number. In a nutshell, NYA 7756.53, XLF 14.45 and SOX 375.30 will tell you everything you need to know about broad market direction today. SBUX is down 10% pre-market; Starbucks must be losing bucks.  FB is down 16%; performing another Faceplant. The opening bell is one-half hour away.

Note Added 7/27/12 at 9:40 AM:  The opening bounce occurs.  The SPX moves over 1363 so it then directly attacks the strong 1366 resistance level, punching up and thru. SPX 1366 is an important level so price may want to play around here for a while.  The NYA is over 7800 well above 7756 so the bulls are throwing confetti to start the day.  XLF remains over 14.45 and SOX remains over 375.30.  The bulls are off to a solid start today.  Watch for the market pivot in fifteen minutes. Keystone took profits on INVE exiting the trade, will look to reenter, INVE remains very attractive.

Note Added 7/27/12 at 10:04 AM:  Consumer Sentiment is a bit better than expected, the markets do not pivot on the news but instead remain elevated.  The SPX minute charts are developing negative divergence profiles currently with overbot conditions, thus, weakness should develop as the day moves along. With the NYA above the 40-week MA, the market bulls have no worries. SPX resistance above is 1370, 1370.58, 1375, 1378, then 1385. The VIX is under 17. Copper is the only major entity remaining in the bear camp, as measured by Keystone's algo. This is interesting considering that copper is always the leader in market direction. Bulls are feeling no pain and bears will not experience downside unless the NYA, XLF or SOX move lower.

Note Added 7/27/12 at 10:56 AM:  Keystone took profits, which only amount to enough to buy a pack of gum, on TECL, exiting the position.

Note Added 7/27/12 at 11:03 AM:  Here's the test of SPX 1375 R.  TICK just printed +900 numbers. Keystone bot TWM (ultrashort small caps) opening a new long position.

Note Added 7/27/12 at 11:11 AM:  Keystone bot SRS, the double inverse ETF for the real estate sector, opening a new long position.  It has been a long patient wait for the right entry. Ideally, 24.75-25.00 would be the ideal entry, but, considering that the daily chart has no gaps to fill underneath and the weekly chart is positively diverged, now appears to be a good time to start into the position.  Keystone looks for the housing/real estate sector to take another leg down, which is in disagreement with over 90% of the other traders and analysts on the Street. The utilities and retail sectors remain attractive shorts.

Note Added 7/27/12 at 11:27 AM:  SPX minute charts are overbot and negatively diverged, perhaps a market roll over may occur over the next couple hours. NYAD is printing uber high in the +2000-ish area two days in a row. This uber and excessive bullishness will need to take a rest so markets can reset.  Likewise the TRIN at the uber low in the low 0.6's representing everyone and his bro on the bullish side of the boat. As seen from the resistance levels listed above, punching thru 1375 would next lead to a test of 1378, but the SPX is struggling to move it up thru 1375 thus far today.

Note Added 7/27/12 at 2:20 PM:  Markets receive an upside push at 1:20 PM due to Bloomberg reporting that ECB's Draghi are working to reach consensus on new measures to ease the Eurozone's debt woes.  Bond purchases, an interest rate cut and long-term financing operations all appear on the table.  At the same time, Germany appears on board with all this happy stimulus talk by the central bankers which encourages the long traders. Many shorts were holding on but now threw in the towel adding short-covering fuel.  SPX punches out a higher high compared to about seven days ago, and once thru 1378, as listed above, 1385 is the next key resistance, and price is already there. The higher high in price on the daily chart is met with negative divergence across all indicators.  The minute charts are setting up with negative divergence again after this latest bounce higher.  HOD is 1388.42 so a move back up to 1385-1391 would likely seal the negative divergence in and start a move lower--unless the news wires announce more happy talk. Markets are trading off the European news flow and talk of stimulus.  Further resistance above 1385 is 1388, 1389 and very strong R at 1391.

Note Added 7/27/12 at 2:36 PM:  Note the TICK printing an obscene +1464 as the happy Euro news occurred and shorts ran for the exits at 1:30 PM. That is a phenomenal print.  Watch the TICK, if the SPX comes back up to lock in the negative divergence at 1288-1391, along with a +1000 TICK or higher, that would provide an attractive place to add shorts. A +1500 TICK occurred in May and one in June.  For May, that resulted in a move down from 1330 to 1295, 35 handles, which was from one day into the next. For June, that resulted in a move down from 1330 to 1313, 17 handles, which was an intraday move.  Thus, the obscene TICK at 1:30 PM hints at the same behavior coming. This scenario will require nimble trading if it follows the previous script.  Based on the other two +1500 TICK's, SPX should take a move down that would last a few hours and from 15 to 35 handles of downside, either intraday, or one day into the next, and then recover for a potentially higher high once again. After the drop from the high TICK's in May and June, the SPX came back up for another higher high in both instances.  Hence, nimbleness. Jack be nimble, Jack be quick, keep an eye on the candlesticks.

Note Added 7/27/12 at 3:04 PM:  SPX is trying to punch out that matching or higher high compared to the 1:30 PM spike. TICK printed a +600 a couple minutes ago.  Keystone bot more TWM.

Note Added 7/27/12 at 3:08 PM:  TICK +941.

Note Added 7/27/12 at 3:10 PM:  There it is, the near +1000 TICK and SPX places the higher high, now displaying attractive negative divergence (for shorts) on the SPX minute charts. Thus, things have tracked as anticipated--so far.  What happens next?  Well, Keystone is going to see if there is any pie remaining in the frige.

Note Added 7/27/12 at 3:40 PM:  The SPX punched up thru 1388 R, now testing 1389 R, above that is the strong R at 1391. TICK prints +800 a few minutes ago.  NYAD is printing over +2000.  Whoa, TRIN at an obscene low now, at 0.28, holy schomolies, those numbers do not occur everyday, this is extreme bullishness, over-the-top, maybe traders started happy hour at noon time today and are caught up in the party atmosphere.

Note Added 7/27/12 at 3:45 PM:  TICK +830. The bulls are dancing on the tabletops. This will be an interesting final fifteen minutes.

Note Added 7/27/12 at 3:54 PM:  Look at that TICK, -900 (huge spike to the bear side). SPX drops a few.  Crazy markets, no wonder why Ma and Pa investor are pictured on a milk carton.

Note Added 7/27/12 at 4:03 PM:  The bulls took no prisoners this week.  The SPX low this week occurred at 2:30 PM on Tuesday at 1329.  High today is at 1389.  A 60 handle move.  That is a 4.5% move upwards in about 20 hours of trading.  The SPX is moving up at a pace of 3 points per hour, or a quarter percent each hour of trading. Bernanke and Draghi, the Fed and ECB, respectively, promised two ponies, one to be delivered at about 2 PM on 8/1/12 and the other about 7 AM EST 8/3/12. The markets are pricing in stallions and the central bankers may show up with donkey's. From these levels, it will be interesting to see if the broad market action follows a scenario similar to the previous uber TICK's at +1500 as discussed above.