Keystone's Midday Market Action 12/12/12: FOMC Rate Decision and Press Conference

The VIX just moved above 15.79 so the bears are happy and should flex their muscles. See if the VIX stays above 15.79, or not. The 10-year is at 1.66% so only a tinge on the equity market bull side. The euro remains above 1.30 pumping the bull case although it was at 1.3040 and higher an hour ago, now off those levels.  The SPX attacked the 1433 resistance but was turned away on the first try. JOY beat on earnings but the 2013 guidance is very weak.  FDX was downgraded. The Baltic Dry Index takes a hit. If the global economy was doing well the shipping industry would not be receiving such negative news. Oil Inventories are in one-half hour, the Fed decision at 12:30 PM and most importantly, Chairman Bernanke's comments on the new program after 2 PM.

Note Added 12/12/12 at 10:06 AM:  Speaker Boehner says the 'president is slow-walking'. Representative Cantor piles on.  The SPX drops a couple handles now at 1430.  The VIX is at 16, bearish for markets.  XLF remains elevated now at 15.16. RTH is 44.77. The bears will likely target the retail sector now to try and push it under 44.35 to acquire more downside fuel.  The bulls need to drop the VIX under 15.79 to regain upside fuel. Gold and silver are positive and are typically up on the Fed days due to the dollar debasement that always occurs. The markets are a circus.

Note Added 12/12/12 at 12:08 PM:  Markets on standby awaiting the Fed.  WMT is down -2.3% which brings the RTH lower. VIX 15.79 will tell you the story as soon as the market moves.

Note Added 12/12/12 at 12:53 PM:  The Fed delivers on its promise and the markets drift higher. The Fed will continue easing until the unemployment rate drops under 6.5%.  That's easy, at the rate that people are giving up looking for work, the rate will be there in no time, no one is counted anymore.  The SPX breaks up thru the important 1433 level opening the door to 1441. The SPX is at 1438, exactly where it was when QE3 Infinity was announced in early September. How do you like that? VIX is 15.60, now back in the bull camp under 15.79, verifying the bullish run higher. The 10-year yield is 1.68% so higher yield favors equity bulls.  The euro is 1.3093 closing in on 1.31, very bullish. Gold and silver is higher.  The Fed causes the market push higher but the move is somewhat muted so far, definitely not yet the rocket ship ride of 20, 30 or more S&P handles like the previous QE days, at least not yet.  Use VIX 15.79 as the guide, if the bears cannot move the VIX back above 15.79, they got nothing. Bulls rule with VIX under 15.79. Note that the COMPQ is up 0.27% but the SPX is up 0.66% so tech is not leading higher, this hints that the bulls do not have oomph. AAPL is flatter than Keystone's singing. TRIN is 0.68 uber bullish continuing the multi-day uber bullishness. The TICK only hit +800 on the Fed news.

Note Added 12/12/12 at 1:29 PM:  The 10-year yield hits 1.70%. The VIX is printing the LOD at 15.56, firmly bullish now. SPX is 1438, now at the prior QE3 announcement level.  SPX 1441 and 1446 are the next two strong levels of resistance above. The euro is 1.3080, some wind leaks out of its sail. Oil is up 2%. The next round of excitement is 2 PM with the Fed Forecasts, then Chairman Bernanke's Press, er rather Desk, Conference at 2:15 PM. 

Note Added 12/12/12 at 2:53 PM:  Chairman Bernanke is holding court behind his mahogany desk. Things must be going well since he is not hiding under the desk. The SPX is leaking about four handles since he started talking. The SPX is back testing the 1433-1434 so the action here is important. The VIX sits at 15.50 and just tested the low from noon yesterday, if you take a look at the 10-minute chart, and the matching price low is met with positive divergence in all the indicators so perhaps the bears will push volatility higher and the markets lower into the close. The 1433 S/R is important.

Note Added 12/12/12 at 3:08 PM:  Harry, quick, grab the hook, get this guy off the stage, the SPX keeps losing altitude the more he speaks. The RUT is red, now the Nasdaq is red. Small caps and tech leading lower is not a healthy market sign, it should be the other way around. Where's that hook! The positive divergence is lifting the volatility higher, the VIX now at 15.58.... 15.59 ....

Note Added 12/12/12 at 3:13 PM:  Geithner is probably frantically calling Bernanke now but Ben cannot hear the phone since it was tucked in a desk drawer.  Harry, where's that hook, get him off the stage!  The SPX now has a 1430 handle, check that, 1429 handle.    VIX is in the 15.60's, now 15.68.... whoa ... 15.73 ..... she's getting close now.....  Other Fed heads may rush the stage and pull Bernanke away, he will have all the indexes red if he keeps talking. On the SPX 30-minute chart, the price high to price high over the last two days clearly shows strong negative divergence across all indicators which created the spankdown starting two hours ago. The 8 MA remains above the 34 MA on this chart so this moving average cross continues to favor the bulls currently.

Note Added 12/12/12 at 3:28 PM:  VIX 15.79, the bears brought volatility back up... now 15.81.  Note the SPX 1429, 1428.....  Harry must be on coffee break since no one brought the hook to remove the Chairman, therefore, the broad indexes keep leaking lower. Whoopsies, now the Dow Industrials dipped red. Euro is 1.3061. There's the hook, the total damage by Bernanke was a drop from SPX 1438 to 1428, ten handles. More importantly, and the concept that no one talks about, the markets are below where QE3 Infinity was announced, and now the markets are even under where QE4 Infinity and Beyond was just announced.  It's time for a heart pill. Watch VIX 15.79.

Note Added 12/12/12 at 3:49 PM:  Keybot the Quant is long but now is in position to potentially flip short if the RTH drops under 44.35. To create further theatre, the all-important Retail Sales data hits at 8:30 AM EST which will dictate if the RTH fails, or not. The RTH is 44.86. The SPX is at 1427 as the day moves towards the close. The VIX remains elevated at 15.94. The 10-year yield is 1.71%. Traders moved away from notes and bonds today but they must have put that dough under their mattress since it does not appear to be flowing into the equity markets.