Keystone's Midday Market Action 12/17/12; Fiscal Cliff

Markets pick up where they left off on Friday. This is the last full trading week for 2012. The bears are receiving strength from the VIX above 15.80. The bulls are receiving strength from the XLF above 15.77 and RTH above 44.35.  Any change in these three parameters will push the markets in that respective direction.  The euro is at an inflection point sitting at 1.3160.  If the euro moves higher, the bulls will ride to victory today. If the euro moves lower, the bears will win.  Speaker Boehner provided a new offer for taxing the wealthy over the one million limit so markets remain positive in the overnight futures. David Tepper of Appaloosa, a Pittsburgh boy, was on the business channel a short time ago and his bullishness perhaps had more to do with the buoyant futures over the last hour.  Tepper is best known for his 'don't fight the Fed' mantra when QE2 was announced in 2010 telling all to jump on board.  The QE2 Rally was dubbed the Tepper Rally; he was obviously 100% correct.  Thus, Tepper says the Fed is pumping now so it is full steam ahead for the markets and jump on the bandwagon. He is also pumping Apple this morning.

During OpEx weeks, Mondays are typically up. A Tuesday low typically appears where the markets then move higher into a Wednesday high.  A Bradley turn window is open this week, a major turn, with the actual turn date on Saturday.  Considering that next Monday is Christmas Eve and a short session, and markets are closed on Christmas Day, the intensity in the broad indexes may ramp up steadily all week long with some fireworks Wednesday thru Friday. C downgraded AAPL this morning which caused this bellwether stock to fall below $500 pre-market. Apple recovered a short time ago on Tepper's comments. The department stores are starting to post sales, never a good sign, since the sales must be light if the discounts are coming quickly. The bulls have a slight advantage since the low volume action helps to slowly squeeze and pinch the bears out of short positions. Of course it can go the other way but the markets continue to be leaning bullish looking for a favorable fiscal cliff resolution.

The 10-year is at 1.72%.  Oil is flat.  Copper is negative. Commodities recovered over the last hour. The weakness in commodities, CRB and GTX, is very important moving forward. China is willing to accept slower growth in exchange for stability; this is not encouraging talk for copper and commodities. Watch the 20-day MA at 1407.39, 50-day MA at 1415.09, 100-day MA at 1415.36 and 20-week MA at 1419.14. The SPX begins at 1413.58. The bulls need to punch up thru the 1419.00-1419.50 resistance ceiling as discussed on the weekend, if so, an upside acceleration will occur. The futures indicate that the bulls want to make a run for it to the upside. Watch VIX 15.80 since the bulls got nothing unless they push volatility lower.  The bears need to push under 1412 to accelerate the downside. The 1413 support is uber strong so any breach of the 1412-1413 will create a downside acceleration.  A move thru 1413-1418 is sideways action today.

The Empire State Manufacturing data was weaker than expected. The Fed's Lacker, the dissenting voting member, speaks at lunchtime so watch for any sound bites. In a nutshell, watch euro 1.3160, VIX 15.80, XLF 15.77, RTH 44.35, and SPX 1419-ish, and SPX 1413-ish, which dictate broad market direction today. The S&P's are up 0.27% while the Nasdaq is up 0.14%, so tech is not leading the upside today, thus, the bulls may not have much upside oomph. And do not forget to make amends, since the end of the world, according to the Mayan's, is Friday.

Note Added 12/17/12 at 10:04 AM:  The bulls punched up thru the 1419-ish gauntlet so the move accelerated to a HOD at 1423.13 thus far.  Tech is not leading to the upside, however, and neither is the small caps, albeit by a smidge for small caps, so the bulls may not have much oomph.  The VIX is 16.79, slipping under 17, but well above the bull-bear line at 15.80, so volatility remains bear friendly.  The financials, XLF, are higher to 16.24 and so is retail, RTH, now at 44.89.  So these three parameters remain status quo so the markets should remain sideways range bound. The euro moves up to 1.3173 so this helps the bulls gain upside in the broad indexes. AAPL reversed course and is weaker, printing a lower low than Friday at 507.66 but this is not under the 505.75 low on 11/16/12. Watch Apple closely since the market mood can quickly change if AAPL 505 fails.

Note Added 12/17/12 at 10:26 AM:  AAPL fails the previous low at 505.75, now printing a 502 handle.  Apple LOD so far is 501.23.  The SPX 30-minute chart shows the 8 MA below the 34 MA which is bearish for markets for the hours and days ahead but the 8 MA is curling upwards so watch this action closely today. TRIN is 0.64 uber bullish but what else is new, each day sees a continual low TRIN. The TRIN will want to print above 1.00 to burn off all this bullish energy at some point forward. The day may become interesting. Fed's Lacker is speaking in a television interview right now.

Note Added 12/17/12 at 11:17 AM: The SPX 1424 resistance held so far, the 1426.63 R is next then very strong R at 1429.  The daily chart shows the upper BB at 1433 which is also very strong resistance, thus, 1424, 1429 and 1433 are the three key resistance levels above. The 20-week MA is 1420.77. The 8 MA is moving up and converging on the 34 MA on the 30-minute chart. If the 8 moves up thru the 34 that will be a big feather in the bulls caps and will ensure a day or two of bullishness ahead. The bears need to start pushing hard to the downside today to stop the 8/34 cross from occurring. AAPL meanders sideways across 507. The Apple minute charts, 30-minute, one and two-hour charts, are all positively diverged, so this favors price bottoming and moving higher in the hours ahead. Utilities are up. Copper is down.  The euro is flat at 1.3168. The tension mounts.

Note Added 12/17/12 at 11:44 AM:  SPX punches up thru 1424 on news that Speaker Boehner and President Obama are in a meeting at the Whitehouse over the fiscal cliff. The SPX punched out a new HOD at 1426.81. VIX is 16.67 drifting lower. Apple continues higher off its positive divergence.

Note Added 12/17/12 at 12:13 PM:  The 10-year yield is 1.74%, moving up a tad since this morning so money is moving from Treasuries to stocks.  The Whitehouse is going to announce the Boehner/Obama meeting results in the minutes ahead so the political and market theatre continues.  The markets are pricing in a happy ending and the president's press secretary is the one that will either play the joyous seasonal trumpet, or, lay an egg. Tech is leading the broad indexes higher now by a tiny smidge, the Apple move higher is providing some extra oomph, this helps the bullish case.  The 8 MA just pierced up thru the 34 MA on the 30-minute chart signaling bullishness for the hours and days ahead. If this should reverse, the inflection would be the fiscal news minutes away, which would have to spank the SPX down immediately, otherwise, the bulls appear in good shape early this week. Jay Carney, the press secretary must deliver the goods in a few minutes; if he performs some carnie-barkin', or other such song and dance, the markets will deflate. The markets are expecting very happy news in the minutes ahead. VIX is 16.73.

Note Added 12/17/12 at 1:21 PM:  The euro is 1.3160, sitting on that tightrope refusing to fall in one camp or the other, unable to make a decision. VIX is 16.79.  Note that AAPL is up to 514 where the recent two-day island was formed on the gap down from 525 to 515.  Thus, if an island reversal occurs, Apple would immediately pop to 525, perhaps that would occur on positive fiscal cliff news. This 414-415 is resistance so a logical place where Apple may stall. SPX is drifting lower, markets are meandering, staggering sideways. TRIN remains uber low, a low print at 0.52, now at 0.62, which is uber bullish.