Yesterday marked the low in the Dow Industrials at 40-ish 80 years ago to the day, 7/8/32, after the Great Depression market carnage. The Dow is now at 12700, not too shabby. That is what constantly replacing losing companies with winners in the index, year after year, will do for you. Earnings season kicks off after the bell with double A (Alcoa) today. Volume will return this week now that the July 4th Independence Day holiday is in the rear-view mirrow but overall volume will remain somewhat light as summer trading continues. China data is very important this week and started out on the weak side with lower than expected CPI and Wen Jiabo saying that China economic growth is slowing down. No use in repeating the information in the previous European Bond Yield Summary missive; suffice it to say that the Spain 10-year yield above 7% on its way to test the record highs in the 7.20%'s is trouble, Italy above 6% on its way to 6.5% is trouble, and the France-Germany spread increasing is trouble. The euro is under 1.23 continuing to explore two-year lows.
Traders are ramping up the QE3 talk again. Simply keep monitoring the CRB. If the CRB drops under 270 and heads lower that will tell you the Fed is ready to announce QE3 since deflation will be running rampant. Keystone's Inflation-Deflation Indicator is CRB/10-yr price = 286.92/102.078 = 2.81. Under 2.90 indicates that the U.S. is mired in DEFLATION, and has been for the last couple months.
Watching the technicals and keeping it simple, XLF 14.40, VIX 18.75 and NYA 7717 will tell the market story at the opening bell. All three are bullish to start the day, affecting the markets positively (remember, volatility moves inverse to markets). If the levels shown are lost, the markets will sell off. The extent of the selling is determined by how many of the three turn bearish, if any. Watch Keystoen's SPX:VIX Ratio Indicator. If the 68 level fails it is all smooth sailing for bears. If the ratio stays above 68, despite any market selling that may occur, the bulls will be fine. For the SPX today starting at 1355, the bulls need to touch 1367 to accelerate the upside, the bears need to move under 1348 to accelerate the downside. A move thru 1349-1365 is sideways action. The SPX 1337 level is a strong line in the sand, if violated, the SPX will likely want to move towards 1300. The Eurozone Finance Ministers are meeting to finalize the Spanish bailout so trader's will receive direction off the European tape bombs (news wires).
For AA earnings after the bell, the company has a reputation for disappointing. The daily and weekly charts are setting up with attractive positive divergence. Remaining stingy on entries, a long trade may be possible from the 7.60-7.90 area. Disappointing earnings would be perfect to set up this potential trade. If the earnings are okay and price starts to move up from here without providing a more attractive entry, so be it, there will be another bus that comes along.
Doesn't look like much going in the Futures (albeit above the recent down trending line looking to leed higher but its weak price action) As is everything else EUR, Metals and Ags it's like we are waiting on bad news perhaps lets see...
ReplyDeleteMade this chart up to keep me referenced to the KS metrics today catch up again after the open...
http://scharts.co/Nbc7Ca
Nice chart set-up to monitor the key metrics for today MCAP. Keep in mind, however, that the key sectors, and levels, will change continuously, the NYA is the 40-week MA so you can add that to the NYA chart as reference, that level has been hanging around 7717-7720.
ReplyDeleteThe XLF is 14.40, VIX 18.75. These indicators may be better suited for a 30 or 60-minute charts instead of daily (since a couple weeks form now the level of interest for XLF may be 14.20, or it may be 14.80, that type of thing. The VIX and XLF exact metrics have to remain proprietary, but the NYA level to watch is always hte 40-week MA, which is one of the key cyclical signals.