The FDX bad news pounded futures overnight, the spoo's down nearly ten handles but Draghi says his plan pledges unlimited sterilized bond-buying. The sterilization aspect attempts to minimize future inflation problems due to the easing. The futures immediately recovered so the Pavlovian traders, addicted to crack, respond quickly when more stimulus is waved in front of their noses. Copper was red overnight but now green.
Today picks up where yesterday left off. Watch the 8 and 34 MA cross on the SPX 30-minute chart, now favoring the bears for the hours and days ahead. The key parameters that are dictating market direction now are VIX 18.40, UTIL 467.35, SOX 391 and JJC 43.70, all bullish. Any move by one of these to the bear side (remember that the VIX moves inversely), will result in market selling. If they all remain on the bull side, the markets will float along sideways to sideways higher today. Considering that Draghi is only about 23 hours away, and that the markets have been trending thru 1399-1413, the sideways behavior may continue today as traders await the ECB's decision.
For the SPX today starting at 1405, the bulls need to push up over 1409 which will launch price to 1413 and then 1419. The bears need to push under 1397, escaping the sideways 1399-1413 channel, which will accelerate a downside move to 1391. A move thru 1398-1408 is sideways action today ahead of the ECB's Draghi and Pony show tomorrow. Start watching Keystone's SPX:VIX Ratio Indicator where a drop thru 68 indicates a huge market down day occurring and further market bearishness ahead. If the ratio stays above 68, the bulls have no worries.
Note Added 9/5/12 at 10:39 AM: AMD laid an egg so the semiconductors were beaten out of the gate today. This caused a failure of SOX 391 but the bulls quickly repaired the damage. Note how the utilities, UTIL came down to test the 467.35 level and bounced. It is amazing that Keystone's algo identifies these levels ahead of time. Thus, the bulls remain in control of the four important parameters listed above. SPX has now poked above the strong 1406 resistance. The 20-day MA is 1408.24 so watch this resistance closely in the minutes ahead. The 8 MA pierced the 34 MA to the upside on the 30-minute chart so the bulls are driving the market bus for the hours and days ahead. Lots of continuous drama in the markets, but in the final analysis, markets continue sideways ahead of Draghi in the morning. Watch UTIL 467.35. The SPX (broad market proxy) and COMPQ (tech proxy) are up the same percentage currently so tech is not showing a preference to bulls or bears. When it does, tech will dictate the broad market direction. It is shaping up to be a lazy, hazy day of summer, and the garden has now developed into a jungle that requires taming with pruning shears.
Note Added 9/5/12 at 12:06 PM: SOX teased 391 and recovered again. UTIL is now at 467.44 only nine pennies above the trouble line at 467.35. HPQ feeling some love today receiving the positive divergence bounce.
Note Added 9/5/12 at 12:49 PM: Markets are bumping along sideways. Keystone bot UVXY opening a new long position.
Note Added 9/5/12 at 12:54 PM: Keystone took profits on HPQ exiting the trade, it received the pop expected, will look to reenter. Also bot more UVXY.
Note Added 9/5/12 at 1:45 PM: Both SOX 391 and UTIL 467.35 have failed. Keystone took profits on UVXY exiting the position and using it is as a day trade, will look to reload, always better to be lucky than good, UVXY remains long and strong on the minute charts.
Note Added 9/5/12 at 1:55 PM: Keystone's algo, Keybot the Quant, has a timer that expires at 2:13 PM, and it appears, that if the SPX would print sub 1397, the algo may want to try the short side again. UTIL and SOX remain in failure position. The SPX is printing 1403 wrestling with this important S/R level. Despite the sideways nature of the broad indexes, there is lots of drama under the surface. SPX is down -0.16% and COMPQ -0.18%, so tech is leading the broad market lower by a hair, so place that tiny canary feather in the bear's cap.
Note Added 9/5/12 at 2:03 PM: Watch to see if the 8 MA stabs back down thru the 34 MA on the SPX 30-minute chart. This action is one big soap opera. Keystone bot UVXY opening up a new long position.
Note Added 9/5/12 at 3:19 PM: Lots of drama into the close, SOX had recovered above 391 but then failed again. UTIL came up to back kiss the 467.35 from the underside, successfully, and price collapsed, now at 466.70, a bearish indication. The 8 MA remains above the 34 MA on the SPX 30-minute chart which is bull-friendly.
This is good for ERY I'm looking to deploy a little covered call action when oil futures run up a little higher today or tomorrow.
ReplyDeletehttp://scharts.co/SjGWMa
wow another velch rip pimp heavy hand spank down on oil futures this morning again it rises to fail every time huge specs dumping en-mas contracts by the thousands falling as the 30 min bar turns long and red ouch... Was going step in front of block of ERY for 2c but the math didn't add up late need to be in before not after the move.
ReplyDeleteonly to buy it back at the of day and break it out after the regular session.... Insanity at its finest.
DeleteMarket behaving strangely even for Mr. Market. Dailies on the ES are now pointed up. Breakout to the upside coming soon.
ReplyDeleteHey all, probably just sideways since we are at the eve of Draghi, now only about 21 hours away.
ReplyDeleteKommander Keystone, what time (EST) does Draghi open his yap?
ReplyDeleteIt just looks like the Toots are waiting, but the money does seem to be slipping back into the market. I guess the Fed's job now is to just prop the market up until the boys are convinced to jump in.
Draghi is typically around 7:45 AM EST (1:45 CET, central European, which is six hours), and the press conference at 8:30 AM. It will be a circus. So from 7:30 AM into the U.S, opening bell, the carnival will be in full force.
ReplyDeletemore side ways slop, can hardly bare it... UVXY not doing as I thought it would. sold for .25c loss. oh well, sometime you win, sometimes you loose. eyeing FB now.
ReplyDeleteThis is a circus Arnie, Keystone just moved into UVXY, the minute charts appear attractive. It's all a coin flip until Draghi tomorrow.
ReplyDeletenice work KS! I'll buy again when it hits $5, want to see that level broken first.
ReplyDeleteHey guys, just a reminder UVXY will have a reverse split 10:1 Thursday after closing bell. Sure, it looks very attractive, $4.95, but if VIX furthur drop...and if market gap up tomorrow, then not easy to get out of it. Stay out for your safety! kf
ReplyDeletekf, thanks for the heads up. I am aware of this. Gap up tomorrow wouldn't affect the UVXY reverse split as that won't go into effect until after close tomorrow.
Deletebot UVXY again at 5.00 as said
ReplyDeleteThat is a good reminder kf. It should not be effected. A lot of it depends on the overall positions held and whether or not any type of hedging may be prudent. UVXY remains attracitve with long and strong profiles on the minute charts, so that is a siren song singing to market participants to enter the trade. Perhaps it can come back to 5 again, maybe 4.96-5.00, then ride to 5.10 or so, probably higher.
ReplyDeleteKS, would it not make sense to close out as many positions as possible this afternoon and start fresh tomorrow? Meaning that since we cannot guess the ECB outcome or the market's reaction to it, would it not be better to just "ride the reaction"? Any index or commodity moves tomorrow are liable to be large ones, right?
ReplyDeletewe all know already what Dracul will do! That has been "leaked" from "closed-doors"... sterilized bond buying.
ReplyDeletehttp://online.wsj.com/article/SB10000872396390443819404577633610472667438.html?mod=googlenews_wsj
The euphoria will indeed be short lived IMHO
What I keep thinking is how resilient the market is despite all the evidence of global recession. Is the Fed already intervening? Maybe. Technically, the bollingers are really squeezed on the SPX, there will be a major move soon. One last blow-off top and then a crash, or a crash right away? The resilience makes me think the blow-off top to 1450-1470 is more likely than a crash.... but who knows? The suspense is high, tiring to watch paint dry and apples brown....
ReplyDeleteWeaver, it may be a 20 or 30 handle move but that can be riden out, especially holding positions on both sides of the fence.
ReplyDeleteThat tight BB on the daily SPX chart is really something, holy schmolies. The table is set for tomorrow morning, huge move coming, the tight BB iwll have to be shown on a chart. The tightness of that BB has not been seen for the daily SPX chart in over three years.
got have a look at that now...
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