Keystone's Midday Market Action 8/14/12

The Retail Sales data beat to the upside which was in line with the consensus estimates and reversing the three-month downtrend.  Watch the RTH closely at the open. HD earnings beat but the top line fell short, like most other companies, weaker sales than expected, but as long as you fire a few workers, you can keep sending the EPS higher. KORS and EL boost the retail happiness as well. Copper continues to place a lid on further upside. Watch JJC 43.70.  Watch the CRB Index as it fights for the 300 level. This mornings charts are gloomy pointing to a market pullback, but the markets continue to inch higher.

Watch the VIX, now at 13.70, multi-year lows, the tension is in the air, something important is about to happen. The SPX 1400 and VIX 14.00 numbers pair is worth remembering for the future. Yesterday, the SPX and Dow Industrials finished the day down and so did the VIX, this common direction move only occurs about 10% of the time so it verifies the special market conditions now occurring. Gold just dropped under 1600.  The 10-year yield popped over 1.7% when the retail sales number hit, use that as a gauge today. Equity markets will move up today if the yield stays over 1.7% and heads higher; stocks will sell off if the yield falls under 1.7% and heads lower. U.S. dollar is 82.5, keep watching the 50-day MA at 82.65; above is stronger dollar which means markets will sell off, below and the weaker dollar will drive equities higher.

The SPX is moving thru the sideways channel 1399-1406.  For the SPX today, the bulls need to move two points higher to print over 1406 and hold it there a few minutes, if so, an upside acceleration to 1410, perhaps 1413 will occur. The futures are pointing to this outcome. The bears need to push under 1398 to accelerate the downside.  A move thru 1399-1405 is sideways action today. Tech is leading the broad indexes higher this morning so this reinforces a bullish upside move. 

Watch for a market stutter step at 10 AM when Business Inventories are released.  Typically, during OpEx week, there is a period where the markets move from a Tuesday low to a Wednesday high so keep that in mind as the day proceeds. The bulls continue to steer the ship. Extreme caution is required.

Note Added 8/14/12 at 11:28 AM:  Utes are weak; UTIL is printing 482.37 and if the 482.01 50-day MA fails, that is a sign of broad market trouble. JJC, copper, is negative which maintains a lid on the market upside.  The dollar is 82.5, moving flat and remaining under the 50-day MA at 82.65 which favors market bulls.  TNX, the 10-year Treasury yield, is 1.72%, above 1.7%, bull favorable.  RTH is 43.7-ish which locks in solid negative divergence although the MACD line and RSI would favor another matching high after an initial spank down occurs. It is very likely that the retail sector top should occur in this RTH 43.6-43.8 area, and the retail sector is a very attractive short despite today's upbeat news. The volatility, VIX, is back above 14, now printing 14.30, continuing to signal trader complacency and a significant top occuring for the markets now. SPX jumped over 1406 at the open so the acceleration upwards occurred to test 1410 R, where the SPX fell on its sword, then traveling sideways thru a tight 1406-1408 range. Watch today to see if the SPX  moves lower to maintain the sideways 1399-1406 channel, or, if it chooses to bust up thru this channel range to establish a higher channel with 1406 as support. The European markets are closing now. Tech and the broad markets are moving up the same percentage thus far today, thus, since tech is not leading the upside, the bulls are having trouble pushing the markets higher. The TRIN is 1.07 which favors sellers today despite the markets running higher. Yet another contradictory indication which alerts a trader to stay attentive and nimble, and to expect the unexpected.

Note Added 8/14/12 at 1:35 PM:  The NYSE volume is running at only 57% of a days average volume, even lower than yesterday's paltry vapor volume.  Despite the sideways behavior ongoing, low volume can produce dramatic price movements if a catalyst hits the markets.  The SPX is printing 1406 at the top rail of the 1399-1406 sideways channel in place for several days. VIX is up 8% today and printing the HOD now at 14.77-ish. Tech is now lagging the broad market on the upside, remember a short time ago tech was moving coincidentally with the broad markets, thus, the lag in tech is acting as an anchor on the broad indexes, dragging them lower. Watch to see if any of the broad indexes turn red in the time ahead.

Note Added 8/14/12 at 3:33 PM: SPX slipped on a banana peel at 3 PM, wanting to stay in that sideways indecisive 1399-1406 trading range. Typically, during OpEx week, a Tuesday low leads to a Wednesday high. The 8 MA is curled over heading downwards on the 30-minuter chart so that may set up for a cross of the 34 MA tomorrow morning.

Note Added 8/14/12 at 3:41 PM:  The 10-year yield is 1.73% so it remained elevated all day long. Yields move with equities so the buoyancy in yield helps keep the equity markets buoyant. Bond yields up means the prices are down and that is due to traders moving money out of bonds and notes into stocks, most likely Ma and Pa, placing the last little bit of their nest egg savings into divvy stocks to pump the Dividend Stock Bubble with one more thrust of empty air.

Note Added 8/14/12 at 3:46 PM:  SPX:VIX ratio is well off the 100+ high, now printing 94. VIX is 14.92, see if it can print over 15 by the close. TRIN is printing 1.19, favoring the sell side since it is over one.  Remember earlier today it was over one with the broad indexes higher. The TRIN told you that under the surface the bears were favored and as the day continued along the markets weakened. Note how the SPX is down -0.1% while the COMPQ is down -0.3% so tech led the markets lower as the day played out. The tech weakness helped to pull the markets lower.