The IMF dumps in everyone's Cheerio's this morning by lowering global growth estimates and providing a gloomy outlook. Merkel visits Greece for a quickie six-hour trip, not even enough time to dip her toes in the Mediterranean Sea. The Greece protestors are creating turmoil, one group dresses in Nazi uniforms and parades down the street. The European debt crisis is escalating to where the member countries are starting to dislike each other, embracing negativity and fostering disagreements, rather than finding common ground and pulling together in unity. There is further pressure on Spain to request the bailout but that looks like it will not happen until the end of the month or later, and may be the major cause of the market weakness yesterday. The European debt crisis is a troubling mess. The markets continue to hold up, however, the S&P's are up a couple points ahead of the opening bell.
Today is a Bradley turn date so expect a market trend change to occur any time this week. The month started with four up days and two down days. Typically, when the month starts with three up days, two down days will follow. You can remember that trick for future trading. Earnings season kicks off today with AA after the bell. YUM earnings are an important proxy for China. If the activity for the KFC (Kentucky Fried Chicken) stores are lackluster it will indicate a weakening economy, and, visa versa. INTC is downgraded so chips will be hit today. AMD may be down in sympathy but in the pre-market it appears buoyant. AMD has been beaten to a pulp and appears to be basing and should receive the upcoming positive divergence launch so even with chip sector weakness, AMD may not be hit hard. INTC, however, shows plenty of room for downside. Today is the five-year anniversary of the market top that occurred with a closing high for the SPX at 1565.15 on 10/9/07. On 10/11/07, the intraday market top occurred at 1576.09.
The euro is weaker today but remains well above 129. The Nasdaq is down pre-market with the SPX flat to up. Tech is leading lower which is a trend change as compared to the whole year thus far and very ominious for markets moving forward. AAPL makes up 20% of the Nasdaq and its movement will greatly affect the broad indexes. When markets were going up, tech was leading, Apple was leading, the wine was flowing like water, but, when AAPL trails lower, this represents the hangover. Apple has a mountain of headaches to get over including the Foxconn labor issues, Mapgate, the skinny screen, the cover scratching, the purple haze from the camera, the need for new wire adapters, and an overall worry that the brand will be damaged by the, what appears to be, premature release. Samsung shows no mercy as it continues to gain market share and slap Apple around in television commercials. AAPL dropped under the 600 billion market cap yesterday and is under its 50-day MA. Watch for price to back kiss this important moving average at 657. As Apple goes, so goes the markets. Remember in the beginning of the year when this mantra was repeated over and over as markets ran higher? Apple knocked the cover off the ball in mid-January with earnings and the stock never looked back, until the last month. AAPL is now at prices equal to two months ago.
The utilities sector provided drama yesterday and will again today. UTIL 481.36 is the magic number for all this week. UTIL is below 481.36 so it creates market negativity, above and it will create market positivity. For the SPX today, the bulls need to touch and hold 1461 and the markets will scream higher. The bears need to push the SPX under 1453 to accelerate the downside. A move thru 1454-1460 is sideways action today. In a nutshell, if UTIL moves above 481.36, the market bulls rule and the broad indexes will climb higher. If UTIL stays under 481.36, and the SPX stays above 1453, the broad indexes will stagger sideways in paint-drying market action. If UTIL stays under 481.36, and the SPX fails 1453, the broad indexes will accelerate lower. This will also likely cause Keystone's algo, Keybot the Quant, to turn bearish. At that juncture, volatility and copper will likely become more important. The negative news on INTC will likely keep the semiconductors, SOX, weak, which helps the bears. The SPX 30-minute chart shows the 8 MA under the 34 MA so the bears are in charge for the very short time frame of hours and days ahead.
The CRB Commodities Index has decided not to post their intraday data. That is why CRB has looked odd the last few days. The end of day number remains available so the CRB will continue to be used for Keystone's Inflation-Deflation Indicator. You can use stockcharts.com to check the $CRB each evening. For intraday data, the $GTX (Goldman Sachs Commodity Index) may provide an attractive alternative. It correlates closely chart-wise with the $CRB, so the end of day print for CRB and the intraday action for $GTX can serve as a gauge for commodity action moving forward.
Note Added 10/9/12 at 9:42 PM: As the local beat cop will often say, "Move along, move along, nothing to see here." UTIL is 480. The SPX drops to test the 1453 after the open and bounces. AAPL is flat. The tech weakness discussed above is very important, do not take this lightly. Tech leading the markets lower is very negative moving forward. Price should come back down for another look at 1453. Perhaps there is time for a slice of pumpkin pie as the day begins in paint-drying mode.
Note Added 10/9/12 at 11:10 AM: Keystone's algo, Keybot the Quant flipped short at SPX 1452 at 10:42 AM. The bears are driving the bus now. Crash and burn baby, crash and burn.
Note Added 10/9/12 at 12:05 PM: The TICK machine prints -1200 thru the 11 AM time which corresponds to the market lows today. The weakness in tech is driving the markets lower. The action today hightlights why the COMPQ versus SPX is watched every day on this site. The COMPQ and QQQ both lost the 50-day MA today following AAPL's lead from a couple days ago. Remember last week we were watching the euro, the 128.30-128.80 range, where under 128.30 will usher in large selling while staying above 128.80 keeps the bulls in biz? The euro, XEU, is now printing 128.77. The SPX is printing 1444 with a LOD at 1442.23. SPX S/R is 1446, 1444, 1441, 1440, 1438, 1435 and 1433. The 200 EMA on the 60-minute chart is 1440.75. Price came down for a look with the LOD but recovered. If SPX fails the 1440.75, Katy bar the door, you will see a strong acceleration in the selling. YUM is down one percent today as the earnings due to KFC in China are lackluster indicating a weak economy. Perhaps the Colonel needs to wave a sign on the street corner to help bring in more business.
Note Added 10/9/12 at 1:30 PM: The euro remains weak at 128.69. As would be expected, the dollar is strong and the following asset relationship is in play; down euro = up dollar = down gold = down equities. UTIL is 479.39, bearish. VIX remains above 16. Oil jumps on Syria-Turkey trouble. SPX 1446 is strong resistance; see how price reacts in this area, if rejected, price will move back down to test 1444, then lower. AAPL price pays a lot of respect to the 20-week MA so watch 624.84 as a guide for Apple (price bounced from here today). Also, AAPL has not yet back kissed the 50-day MA after it failed on Friday so a move up to 658 could occur in a heartbeat. The weekly chart is weak, however, so a back test of the 50-day would likely provide another nice short entry for AAPL. ITW was downgraded today, another bellwether company biting the dust. Weakness in ITW says that manufacturing, engineering and construction industries, large movers of economic activity, are in the duldrums. This means lots of folks are likely worried about their jobs and folks worried about their jobs do not tend to spend a lot of money. This is disinflationary behavior. Bad news from OC (insulation) hurts the housing and construction industries today.
Note Added 10/9/12 at 4:15 PM: The SPX came up to test 1446 this afternoon but could not punch up thru the strong resistance. Price came down to tease the 200 EMA on the 60-minute at 1440.84, printing a LOD at 1441.18. The SPX was only 34 pennies away from certain death. Place the 1440.84 on the top of your list for things to watch tomorrow; a failure will open the door to Hades. The bulls stopped this failure but they only receive a short reprieve for one night. The 8 MA is under the 34 MA for the 30-minute chart, bearish. UTIL is 479.58 under the 481.36, bearish. VIX is under the important 16.90 level, bullish. For Wednesday, if you are bullish, you want to see UTIL move above 481.36 to be happy. If bearish, you want to see the VIX move above 16.90 to be happy. Watch copper. The JJC is at 47.12, if 46.35 fails, the markets will take another strong leg lower. If copper is red overnight that is very bear friendly for tomorrow, if green, that will help the bulls try to recover. Note the TRIN was under 1.0, extremely odd behavior since a down day today should see prints over 1.0 not under; the bulls were favored today despite all the selling. Perhaps dip buyers do not believe the market drop and folks are anxious to buy. AA earnings beat so the stock pops one percent. YUM beats on the bottom line but top line revenue falls short. Stay out on the curb waving that sign Colonel Sanders, KFC needs more Chinese customers. Check $BPSPX this evening as explained in this morning's chart. The market bears are flexing their muscles.
Wow tech is being taken out and shot--the NAZ is down to the 50-day MA and the Lower Bollinger, AAPL and INTC both punched thru the Bollinger, this looks a bit like panic selling. Is this the end of the Bull run? Just based on my "headline" indicator (how many headline stories are bullish/bearish), a lot of people are expecting an October decline. The Wall of Worry is high and slippery. But somehow this doesn't feel like a trend reversal, more like another mini-correction where weak hands get shaken out and shorts pile in. Just my gut feeling, could be wrong. AMD is priced to go out of business; is that really the case?
ReplyDeleteNote UTIL now has a 478 handle so this will create firm market negativity moving forward. VIX is up over 16. A VIX over 16.90 will lock extended bearishness in place. With the AAPL and QQQ charts you can see the H&S and AAPL was leading QQQ crossing its 50-day first, now the QQ follows. Tech leading the downside would constitute a trend change. Copper and volatility are important now. On AMD, usually all the beaten down spec stocks will receive the proclamation about going out of biz, some do, but perhaps it is the paid bangers that are trying to drive it lower so the institutions can pile in at good prices. You never know until it all plays out.
ReplyDeleteThanks, KS, for the context that enables us to spot trend changes. I suspect institutions might be buyers of tech. Interesting to see how deep this dive goes. There are a number of open gaps now in the NAZ, let's see if "surprising" earnings create a pop or add to the downward momo.
ReplyDeleteKeystone,
ReplyDeleteI have support on the SPY at 144.
This is a market maker level, and there is a 68% chance that it will be defended.
It's too late to get short here - just my 2 cents!
And... there is also the weekly S1 pivot at 144.26, which the SPY kissed.
DeleteThe 144 is attractive horizontal support for SPY, but, so is 143.50, 143.30, 143.20 and 143.00. Interestingly, price is following a bear flag lower, first leg 147 to 145.50, so 1.5 to 2.0 difference. The second leg starts from 145.50-146.00 so target is 143.50-144.00. All that can be done is taking things minute by minute. The markets may get hit by a tape bomb, good or bad, from Europe at anytime.
ReplyDeleteKnowing the way that Keybot is programmed, if UTIL stays under 481.36 this week, the markets should remain bearish moving forward. UTIL is now printing 478.57, about three points under now.
The 200 EMA on the 60-minute is very importante. Thus, let's take a look for SPY. 143.95. So 144 is truly a make or break number. If SPY loses 143.95 she is going far lower. Bulls must hold 143.95 with all their might.
Hello KS or Arnie, do you think AA earning after the bell already priced in or not? Can AA keeps the bears moving forward? Thanks for your opinion!
ReplyDeleteTransports and AAPL just about done correcting. Maybe one more push down tonight.
ReplyDeleteAA chart is meandering sideways, perhaps it will be an uninspiring earnings release, not too hot, not too cold. AA looks like it wants to move thru the 9.00-9.38 range. Note the inverted H&S vibe on the charts in various time frames, that is a sign of bottoming. AA appears to want to move sidewasy to sideways up moving forward but sideways will likely play a big part. It provides no excitement.
ReplyDeleteZig, you and Charlie do not appear too concerned about the downside today, perhaps yunz may be correct. Keystone is in the bear camp allowing the harmonica to echo thru the valley, just like the night at the encamplment before the Gettysburg battle. Two key's are the semiconductors and utiltities. SOX is very weak and cooked on the INTC news today, so that is bad. UTIL is staying under 481.36, very bearish. Remember in the spring when the markets rolled over Keystone said they would come back up. That was because the utes did not provide the downside leadership. But now they are which is very ominous. The CPC gave those uber complacent readings. Low VIX. Weak trannies. For $TRAN the 20 MA's are under the 50 MA's on both the daily and weekly chart, very bearish. AAPL should have the back kiss at 458 on the 50-day MA but be very wary moving forward. The markets actually look very good for further downside. Keep watching UTIL 481.36 upoon which Keystone will desert the bears and run to the bull camp. If VIX moves above 16.85-ish, now at 16.07, with a high today at 16.30, that would strongly confirm the downside and the bear raft will be flowing strongly downstream as that occurs. Also the SPX 200 EMA on the one-hour chart now at 1440.82. 1441 is only four measley points away. If 1440.82 fails, it will get very bloody very fast. Let's see what the bears got.
Well either way, the boys are going to take it right to the edge and see who blinks. If we crack ES 1430 to the downside I just might change my mind. Till then, I am assuming we go back to 1500+.
ReplyDeleteIt has been a stalemate since 11:20 AM. Who's going to step up and bid outside the lines already? Hmmmm, looks like a bull heard me.
ReplyDeleteIf AAPL closes back inside the bollinger it's not good news for the shorts.
ReplyDeleteAAPl did close back inside it's lower BB. I bought AAPl at 635 (the lower BB level), and am looking for the bounce to 650ish, possible even 675 (20d sma).
Delete5, 14, and 21 day SSTO are all in oversold now, and if they start to point up tomorrow, and preferably back over 20 level, than today was a great level to buy.
I am not following AA...
A good gauge for tomorrow will be if UTIL moves above 481.36, bulls will rule. If the SPX drops under 1440.82-ish, and/or the VIX moves above 16.90, the bears will rule. If things stay the same, markets go sideways. The TRIN printed under 1.0 today, very odd behavior, almost as if it would be a bad print. The buyers were favored today and yet the markets sold off strongly.
ReplyDeleteHi KS, having been burned many times on the short side over the past 4 years (I had puts on GM and Fannie Mae in 2008 which expired worthless, as those two dogs clung on for months before finally expiring) I am expecting a real dump but probably not before the election. I would prefer to see market weakness when all the good news has been priced in, now it feels like all the bad news is priced in. I would prefer to go short after there is a decline like now, a pop back up to a double top or right shoulder or new high. There is chart floating around my hard drive of election years that start in a secular bear. They have tended to drive higher to year-end, so I am wary of jumping the gun here. I have done OK trading both sides, right now am neutral on the indices and long the beaten-up techs like AMD and HPQ on the theory that the next pop higher should bring them up. Just as tech led up so it has led down. But now these tickers have been so trashed I kinda see them as turning around and leading the market higher into the election (who does Ben work for?) If I miss the big dump here, there will be a pop back up and then the C leg down should occur. These are just gut feelings....
ReplyDeleteKS, in your words: " ... as the NYMO drops, and moves to -30 and lower, it is time to lighten up on short positions and bring on longs in preparation for a rally move higher." Tuesday's closing $NYMO print was -37.03.
ReplyDeleteWeaver, I use nymo readings below -40 and a sharp reversal the day after as a buy signal and vice versa (+40) for sell. Works really well in identifying major market turning points. Yes, one misses a few buy/sell occasions but no system is always right. but these 2 levels get it pretty darn often. IMHO tomorrow will be a reversal day, probably a little red to get the NYMO below -40 and then Thursday we're going up. Or something alike. So two good buying days.
ReplyDeleteArnie