Happy Veteran's Day (Observed). Thank you to all the veterans and current forces. Monday's have been weak in recent weeks but this trend is diminishing over the last month. However, OpEx Monday's are typically buoyant. Tomorrow evening is the new moon and the solar eclipse, where the folks in Australia will have the best view. Markets are typically weak into the new moon. During OpEx weeks there is usually a bull run from a Tuesday low into a Wednesday high. Next week the markets are typically positive going into the Thanksgiving holiday. A Bradley turn is Wednesday, 11/14/12, so the markets are in a window to perform a trend change this week.
Looking at the technical metrics for today, SPX 1391, 1373, 1369 and NYA 8001 and XLF 15.73 are all in play and will have the greatest impact on trading. First the bear case. If the SPX falls under 1373, the markets are in serious trouble. This will initiate a downward acceleration that will likey cut thru the important 1369 line in the sand. This level is Keystone's 12-Month MA Cross Indicator. Once 1369 fails, the markets will likely go into free fall. Two outcomes would happen. First a waterfall crash like August 2011. Second, a false breakdown, as discussed on the weekend, scroll back a couple pages to study the SPX S/R missive, where price will drop hard but bounce off of one of the support levels and immediately recover higher. This scenario would only alllow a few minutes to bring on long positions that is why it is important to have a long shopping list ready. Keystone updated his Positions and Picks page and also posted several charts this weekend which all are candidates to ride for a relief rally.
If NYA falls thru 8001, that signal is the same as the SPX 1369, all the same bad stuff will happen. For confirmation of the bear scenario's, look for both of these to fail and you know that we are already over the waterfall. For the bullish case today, the bulls need to punch up thru 1391 to ignite an upside acceleration and show that the upside rally is the real deal. If the bulls cannot take out 1391, they got nothing. Bears will try to prevent 1391 with all their might since this would mean bearishness will continue for the foreseeable future. If the SPX moves above 1391 and the XLF moves above 15.73, then the SPX will easily be on the path to regain 1400. A move thru SPX 1374-1390 is sideways action.
European drama is front and center again especially the ongoing Greek Tragedy. Low volume is expected today with the bond guys and gals enjoying a day off. The higher volatility may create some wild action, start getting used to more wild swings daily and intraday, a trader's heaven moving into the end of the year. The futures show the S&P's up about five, that would be short of the 1391 once the SPX starts trading. The Nasdaq is up 0.5% while the S&P's are up 0.3% so tech is leading higher and that is a feather in the bulls cap as the new week of trading is about to begin. The housing sector, retail sector and overseas shipping areas are important this week. Biotech's are hopping this morning.
Note Added 11/12/12 at 11:13 AM: The status is quo. All's quiet on the eastern front. SPX is moving sideways thru 1374-1390, now printing 1377.84, at the lows. The LOD is 1377.62; see if this is taken out, or not. The 150-day MA is 1384.60. The HOD is 1384.64 testing this important moving average, and failing. The 200-day MA is 1381.28. The 20-week MA is 1365.89. The minute and 1-hour and 2-hour charts hint that the 1373-1377 area may develop as a bounce point around lunch time. The euro is 1.2711. Keystone bot ZNGA opening a new long position, this is a very dangerous and speculative trade, the daily and weekly charts are set up with attractive positive divergence.
Note Added 11/12/12 at 1:07 PM: All's quiet on the western front. The low was taken out by a few pennies; the LOD is 1377.19. Bears do not have the juice today since the Nasdaq is leading the broad markets higher (COMPQ is up more percentage-wise than SPX). The SPX recovers and moves higher back up towards the highs and the 150-day MA at 1384.63, which deserves a lot of respect considering the failed test this morning. Bulls win above 1384.63 which will lead directly to the 1391 as described this morning. Bears win if price cannot punch thru 1384.63, a collapse down to the bottom of today's range would occur. The VIX is down 9%, at 17, a drastic move lower which allows the bulls to breathe easy today, probably reflective of a continued bullish sentiment and an outlier considering the low volume action. The VIX 20-day MA is 17.28 so market bears need the VIX to move back above here so watch this into the close for hints on market direction. Utilities continue to collapse, a very negative market indication.
Note Added 11/12/12 at 1:24 PM: The SPX came up to test the 150-day MA printing a new HOD at 1384.87, but could not punch thru, the market bears spanked her back down. The 150-day MA carries clout today. Another test coming......
Note Added 11/12/12 at 1:38 PM: Bulls are having difficulty poking up thru the 150-day MA at 1384.62. Keystone took profits on DNDN closing out this long trade, it remains attractive, will look to reenter. Also added more EGLE, TLAB and ZNGA ongoing long trades.
Note Added 11/12/12 at 1:59 PM: Note that Nasdaq lost its leadership today. Tech is no longer leading the broad markets higher so the bulls no longer have that wind at their back, it is now in their face. VIX is up and over 17. SPX is struggling with the 150-day MA resistance. The 200-day MA is 1381.30 so the bears will gather momo if this is lost.
Note Added 11/12/12 at 3:40 PM: All is quiet on the eastern and western fronts. The SPX is now printing 1381.28; the 200-day MA is 1381.29. The volume is super light today, fumes and vapor. VIX is at 16.85 well under 17.
Note Added 11/12/12 at 4:00 PM: The SPX closes at 1380 once again unable to punch thru the 150-day and 200-day MA's and hold them. Thus, the bears are given a feather for their caps. No great shakes today, tomorrow everyone will be back. The bears continue to drive the bus. VIX goes out at 16.79. The CPC put/call will be interesting this evening. Utilities are getting beaten, the UTIL has collapsed from 488 to 444, -9.0%, in only 15 days.
how's the volume today? Love your blog KS! Thanks for sharing your knowledge and wisdom.
ReplyDeleteSteve
Volume is pure vapor today, there is nothing going on with the bond market closed. Things will pick up tomorrow.
ReplyDeleteWow VIX really did fall off a cliff today. Complacency back already?
ReplyDeleteWith today's price action complete, my preferred scenario now is a re-test of the 1403 area (to complete the C of (2) of the white count for anyone who looked at my chart posted Friday), and then collapse.
Was really hoping the action would support "basing" for a run up deeper into the 1400s, but it just doesn't look like it will happen, this market is far too weak and the count to make it happen is way too crazy (blue from Friday) vs the simpler one that collapses after the next pop.
If price does not run essentially straight to this target from here (could be complete overnight and collapse at the open) the outlook will likely change since it would invalidate the expected pattern.
Interestingly, this should test should be complete by tomorrow, setting up the collapse for the day the Fed MBS intervention settles in a typical buy the rumor sell the news type of contrarian thing since many seem to expect the market to be buoyant once this "liquidity" is available.
I plan to re-enter most shorts on this test, leaving a little room to add if it does manage to go higher, and I will possibly chase after it breaks lower post-test, but it is not worth risking missing the collapse trying to get in a few points higher. Stupid move to jump out in the first place. I told myself I wouldn't try to play these dumb little swings for exactly this reason.
KS, my two cents, CPC saying we're not done shorting quite yet. Does that look right to you?
ReplyDelete- Ande
Yep, the bears continue in control of the markets. Use 1391 as an important level, if bulls cannot get above there they got nothing, if they can, they are putting together a stronger rally. Also, on the VIX, watch 16, bears are fine if VIX stays above 16 but if it falls under, the rally will appear and run markets higher. Also XLF 15.73. The overnight futures are in the cellar, were down 11 S&P's now down about 9.
ReplyDeleteThe line in the sand, Keystone's 12-month MA is 1469, if that holds, bulls are fine and will rally the markests for a recovery rally. If 1469 breaks, the two scenarios are in play from the weekend notes. Either a waterfall crash, or simply a strong spike lower with an immediate recovery and rally (a false breakdown). Today, Tuesday, will be interesting. CPC is 0.99, so yes, traders are not worried or panicked by everything, the consensus is that markets will be fine moving forward (consensus is typically wrong). The CPC touched Keystone's magical 1.2 and higher number to indicate time to nibble and bring on longs, but it was very quick. The indicators show that a spike above 1.2 should occur, and that will identify fear and panic, perhaps today? Thus, for now, the bears are in firm control driving the bus, but nibbling and starting in on some longs is likely prudent.
Should be 1369 not 1469. SPX 1369 is the edge of the cliff, or waterfall if you prefer that analogy, once markets drop past this point, the markets are damaged severely technically and should remain weak for the forseeable future. Thus, lots of drama on tap in this area, 1369 is for all the marbles.
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