Keystone's Midday Market Action 8/16/12

Overnight, China's Wen says the easing inflation allows more room to move with easing measures. More talk. Markets will bite for a while, copper is higher, but as China continues to promise, but delivers nothing, the markets will run out of patience.  European inflation data is flatish which also provides a more freindly backdrop for the ECB to act with stimulus. But, just like China, markets continue to hear talk but see no action.  The retail bellwether WMT reports disappointing earnings, down over 3% pre-market. More retail earnings are to be released today including ARO, BONT, DLTR, GPS, ROST, SHLD and BKE. Retail continues to be a major focus as the back-to-school sales continue along. FB's lock-up period expires today so folks may cash in and abandon the stock.  FB is down over 3% pre-market and should not be considered as a long until 17-18 or lower.  Housing Starts, one of Keystone's key monthly numbers to watch, show well over a 1% drop but futures remain up 2 or 3 S&P's.  A market pivot may occur at 10 AM with the Philly Fed. Natty Inventories are at 10:30 AM.

The CPC put/call signals a major market top right now.  The VIX starts the day with a 14 handle, the recent lows verify the complacency shown by the put/call. Volatility tends to bottom in August, and considering that the VIX has dropped strongly, and we are at mid-month, a move up in the VIX is the likely outcome.  The SPX is moving thru a sideways channel of 1394-1407, and more tightly, 1399-1406, thus, any price move out of these ranges is a significant development.  The tight BB's discussed this morning with the SPX 30-minute chart shows that a violent multi-handle move for the SPX is at our doorstep.  For the SPX for today, starting at 1406, the bulls need to touch 1408 to ignite an upside acceleration that will send price to 1413 in quick order.  The bears need to push under 1402 to ignite a downside move.  A move thru 1403-1407 is sideways action and not likely today considering the tight BB's that forecast a drastic move at any time.

Note Added 8/16/12 at 11:02 AM: SPX punched up thru the upper BB on the 30-minute chart, then failed, moving down to then tap the lower BB, now back up thru the upper BB; wild market action.  The 8 MA came down to kiss the 34 MA but the up move in the markets a short time ago has moved the 8 back above the 34. So the strong move out of the tight BB appears to be to the upside. SPX 1408 should lead to 1413, the SPX now testing 1410 R.  Utilities are weak, UTIL teasing a break thru the 480 level, this action is bearish for markets. Trannies continue to break up thru the sideways triangle highlighted yesterday which would be bullish for markets. The dollar is 82.35 back under the 50-day MA so a weaker dollar boosts copper and commodities, and equities. CRB is printing 302 which favors the bull case. TRIN is 0.70 which is very bullish. VIX printed over 15 today but has since pulled back to 14.91. The COMPQ is up 0.5% and the SPX is up 0.3% so tech is leading the broad markets higher, and this supplies the bullish strength in trading today. The 10-year is 1.81%. The Energizer Bunny market keeps moving higher; the SPX 1410 and 1413 levels are in play as potential tops.

Note Added 8/16/12 at 11:44 AM: SPX wants to try for 1413 since 1410 resistance gave way.  The move above the Bollinger Bands on the SPX 30-minute chart is spectacular this morning, three candles printing up above the upper BB showing that this price action is extremely rare for markets. The tight BB squeezed out an upside move, which was not the higher percentage bet, starting from the 1404 low at the bottom BB, the squeeze move is now nine handles higher. A +1000 TICK clicks off a minute ago with the SPX pushing above 1412. Another +1000 TICK when the SPX tests 1413 R will be interesting to see as time moves along. Hang on to your hat.

Note Added 8/16/12 at 11:57 AM:  SPX moves up to test 1413 resistance. The TICK prints two +1000 TICK's in the last twelve minutes. VIX is printing at the lows at 14.60-ish, watch to see if it recovers or if the market bulls continue to push it lower. Keystone bot ERY opening up a new long position (which is short energy, a dangerous triple X ETF). Holders of Faceplant are dumping the stock, like rats leaving a sinking ship, FB down over 6% today printing new lows.

Note Added 8/16/12 at 12:17 PM:  The bulls keep pushing higher, SPX up above 1413 now. Note that the spike high in May this year occurred at 1415.32 on 5/1/12. SPX S/R is 1403, 1406, 1410, 1413, 1415.32, 1417, 1419.04 (closing high this year 4/2/12), 1422.38 (intraday high this year 4/2/12) and 1424. The SPX 30-minute chart is now printing four candles above the upper BB, a move above the standard deviations that you do not see everyday. The excitement, and tension, in the markets is palpable, requiring vigilence, cutting into Keystone's hammock time.

Note Added 8/16/12 at 1:36 PM:  The bulls keep pushing, the SPX HOD is 1414.79, only 53 pennies away from the 5/1/12 high. The 30-minute candles finally moved back inside the BB's after spending the first half of the day on the upper side; a move back to the middle BB, at a minimum would be expected, this number is 1407.97, call is 1408. Trannies remain at elevated levels but no where near confirming the Dow Industrials as per Dow Theory.  Small caps continue to lag.  The utilities are negative. Tech is leading the broad market higher so this provides the bullish buoyancy all day long. The RSI on the SPX daily chart squeezes out a slightly higher high compared to a few days ago so price will want to revisit the current levels after a pull back occurs (reference the SPX daily chart a few posts back).

Note Added 8/16/12 at 2:12 PM:  The SPX is now testing the 1415.32 May high. The move out of the tight BB is eleven handles. You can use the tight BB's for any of your ongoing trades and in any time frame, minute charts, daily, weekly, etc... Whenever you see the BB's coming in tight, a sharp violent move occurs, today the tight BB's on the SPX 30-minute chart resolved as a sharp up move.

Note Added 8/16/12 at 2:39 PM:  The SPX takes a large spike higher, wild frenzied buying, SPX punches thru the 1415.32 resistance, now sets its sights on 1417, which is not printing as this message is typed. SPX 1419.04 is the closing high for this year. The TICK is printing +800 on this thrust higher. TRIN is very low at 0.65 which confirms the uber bullishness. SPX is testing 1417 as support. The Energizer Bunny keeps thrusting higher.  Note that over the last half hour, the SPX printed the higher high but the VIX did not print a lower low.

Note Added 8/16/12 at 3:41 PM:  The resistance at SPX 1417 is holding, for now, 1419.04 remains in play.

Note Added 8/16/12 at 3:51 PM:  The SPX is fighting to hold the May high as support at 1415.32.

Note Added 8/16/12 at 4:07 PM:  SPX falls back thru the 1415.32, but recovers in the final minute to close at 1415.51, above the May high. At these levels with a high over 1417, the closing and high-of-day highs for this year at 1419 and 1422, respectively, are only a handful of points away, setting up an interesting day of trading for tomorrow. WTIC oil is over 95. The 10-year yield is at 1.84% and as high as 1.86% today. UTIL closes with a 479 handle which is a bearish signal in the midst of this bullish euphoria. The light volume action continues. The VIX closed at the lows for the day.  Markets continue to trade oddly. Perhaps a catalyst will occur overnight tonight.