The bulls are stretching their muscles again today. The AIG news is all the rage and this is helping lift the financials sector. The XLF is over 16 pre-market emboldening the bulls. Watch the SPX 50-day MA at 1416.86 and 20-week MA at 1419.39. The bulls need to touch 1422, and hold it a few minutes, to ignite an upside acceleration likely targeting 1429. The bears need to push the SPX under 1416 to accelerate the downside. VIX 15.79 is key today. If the markets launch higher, watch the VIX, since a move under 15.79 verifies the market rally and a test of 1433 will likely be on tap. If the markets bounce but the VIX does not drop under 15.79, the bulls got nothing. A move thru 1417-1421 is sideways action. If the VIX drops under 15.79 and/or the SPX moves above 1425.90, Keybot the Quant will likely flip to the long side. The markets are in a sideways funk with a deadline for the Fed's decision only a day away, and the fiscal cliff deadline only two maybe three days away. The two-day FOMC meeting begins today. Wholesale Trade at 10 AM may create a stutter step. Hang on to your hat.
Note Added 12/11/12 at 10:41 AM: The bulls are running higher. The VIX fell thru 15.79 which now verifies the strong bullish rally. The bears will not make any headway unless they push the VIX back above 15.79. The SPX punched thru 1429 R and likely wants to test the strong 1433 resistance. Keybot the Quant, Keystone's algo, finally committed to the long side after the four days of indecision. The 10 AM pivot provided a launch pad. The bulls are in firm control but stay alert for a whipsaw at any time. The light volume allows the bulls to continue squeezing the bears forcing them out of short positions which adds more upside. The euro is at 1.30. The 10-year yield is 1.65%.
Note Added 12/11/12 at 11:32 AM: There's the first test of 1433 resistance, punching violently up thru to a HOD at 1434.27, but quickly falling away. Watch to see if price can punch up thru 1433, and hold it as support, to signal further bullishness ahead. SPX 1433. VIX 15.60. Euro 1.299. TNX 1.65%.
Note Added 12/11/12 at 12:37 PM: Speaker Boehner spoke on the floor of the House stating the same old stuff. The SPX dropped a few handles but recovered, moving back up to test 1433 again, resulting in another push back. VIX remains under 15.79, bullish. Note that the TICK hit +1000 identifying the two attacks of 1433 R so far, the first at 11:20 AM and second at 12:20 PM. TRIN is 0.75 uber bullish.
Note Added 12/11/12 at 3:08 PM: Senator Reid lays an egg saying there will be no solution to the fiscal cliff before Christmas and the democrats have no plans to offer any spending cuts. The markets sell off. VIX moved above 15.79 at 2:59 PM; the bears are pushing back. The election day top was at SPX 1429 so President Obama circled the wagons and recovered all the last ground from the post-election selloff. SPX S/R is 1441, 1440.24, 1438 (where Bernanke announced QE3 Infinity in early September), 1435, 1433, 1431, 1429 (President Obama election day top), 1426.63, 1424, 1422 and 1419. The strength of the 1433 resistance level is apparent from today's action and now serves as a useful bull-bear gauge. The euro remains at 1.30 and the 10-year yield at 1.65%.
Note Added 12/12/12 at 3:44 AM: Volatility folded like a cheap suit late day dropping back under VIX 15.79 in the final minutes. VIX 15.79 is a key parameter to watch moving forward. Bulls are happy below VIX 15.79. Bears do not have a chance unless they push volatility higher moving the VIX back above 15.79.
Jehovah's Witnesses came to my door yesterday. First words out of the young woman's mouth: "I'm sure you're aware of the perilous times we live in, especially right now with the Fiscal Cliff!"
ReplyDeleteThe Fiscal Cliff is now officially part of Armageddon. Imagine if Ben had simply named it the Fiscal Change, or perhaps more accurately, the Fiscal Drop In The Bucket.
Maybe Jehovah's Witnesses are the only ones hiring new college grads ;-) ...I like somewhere between 1433 and 1443 to short.
ReplyDeleteHmm, VIX 15.70, so KeyBot will flip long. Expectations of QE-infinity are skyhigh, I suspect Ben will disappoint, ditto the politicos....
ReplyDeleteOMG... what's with that green volcano on SPX ? i need the daily chart (not the 60 min chart) to protect my (ex-bearish @ 1422) eyes .... I was lucky to get out before this started!
ReplyDeleteThe problem is that I'm in cash (not on longs) and I don't have a single clue where this bullish thing might stop ....
Assuming that the FED with enlarge the monthly limit to 85 bln where do you think it might stop ?
V.
I got out of the last of my shorts yesterday. Sitting in cash until tomorrow afternoon at the earliest. Don't really think it's a good idea to chase the bull run. Plan to get short again once the bulls are good and drunk.
ReplyDelete...starting with 20 december .... just an opinion :) ...until 10-12 january '13
Delete;)
V.
The VIX dropping under 15.79 is key and provides the bulls the firm upper hand. Bears do not have a chance unless the VIX moves back above 15.79, that would be the first signal that markets would weaken, barring that, the bulls are going to keep squeezing the bears and creating upside. The uber strong 1433 resistance is also important to see how price reacts when it bumps up against this level.
ReplyDeletelooks like a topping zone to me; haven't stopped my shorts out yet though.
ReplyDeleteso either this is a b-wave up with the c-wave followinh; targeting 1385-1395. Or this is i of 3 up, with ii down following targeting 1405-1410. iii of 3 up should target the high 1400s...
arnie
What stop(s) are you using for your shorts? I am still short also, but I will need to give up on them if we don't turn down soon.
DeletePaul, I originally had my stops at 1425 (short at 1420), but I instead moved the stops up. Adding shorts in fact.
ReplyDeletearnie
If one pulls up the daily chart from the INDU and plots the BBs, 50d sma, SSTO 5,1; 13,1; and 21,1, MACD and RSI(5) then you'll see a striking similarity between the up wave from the June 4 low and the current one from the Nov 16 low. Note how now and then, the INDU launched from the 50d SMA, touched the upper BBs and then topped to roll over for a decent retrace.
ReplyDeleteSSTO's show on all time frames same behaviour just at a slightly varying degree, both all are now in nosebleed overbought (as is the RSI 5). MACD is long and strong, suggesting that any pull pack will be minor and a BTFD opportunity and not really a LT short IMHO.
Note also that the SSTOs are now all starting to show topping. When all 3 do that, often it's close to decent tradeble market top.
That June wave, was a wave 1, and given the similarities I most likely expect this also to be a wave 1.
What we just experienced today was IMHO an extended wave 3, it's now working on a wave 4 (all the sideways since 11:30-12:00ish, and then a final pop for the 5th wave. This would then either finish a b-wave, with a c-wave down to 1385-1395 to come. Or it will finish a wave i of 3, with wave 2 probably only going to 1400-1410 before the bull run continous.
Last alternative is that this is a larger degree 2nd wave, which is possible, but only confirmed when price is below the 1343 low... Right now I don't see that at all happening.
arnie
Arnie, just wanted to thank you for the latest posts. And to Zig for his update. And, of course, Merry Christmas to Keystone and to all of us. I added to shorts at 1433. Pretty brave on the eve of Bernanke, I know. But they'll work out eventually. As KS points out, this is just a low-volume melt-up. The hedge funds and others are determined to have a Santa Claus Rally and improve their annual returns before the politicians ruin everything. And they will ruin everything. When did we traders start putting so much faith in politicians? I had to laugh after Carney's comments from the White House today. The two sides can't even agree on whether Obama has released his plans for spending cuts. Some negotiation they've got going.
DeleteSenator Harry Reid laid an egg. Note the VIX is back above 15.79 so the bears have now received fuel for their tank and are using it to push back. VIX 16.00.
ReplyDeleteBut let's be real. If they can't get a deal before Christmas, it's highly unlikely that they're able to get a deal in the 5 remaining days before Year End. Best Case Scenario: An Emergency Patch, kicking the can down the road a little ways.
ReplyDeleteYou TA BEARS are really lol hysterical. where is the rollover? where is the APPL braking below 520? please
ReplyDeleteTo handle the administrative and legislative needs to prepare the fiscal cliff package for approval, the plan has to be agreed upon by Thursday or Friday. So the clock is running out fast. Lots of fireworks on tap Wednesday with the Fed.
ReplyDelete