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Thursday, December 6, 2012

Keystone's Midday Market Action 12/6/12; ECB Lowers Growth Forecast

The opening bell begins another day under the Big Top, strike up the caliope and bring on the dog and pony shows.  The ECB did not lower rates, as was expected, but the big news was in the growth forecasts. Draghi says downside risks remain and the growth forecast was lowered to 0.3%, bingo. This reduction automatically hints that an ECB rate cut is coming at one of the following three meetings, January thru early March.  A rate cut would weaken the euro and the equity markets. Traders sniff this out and push the futures lower albeit only a couple points lower on the S&P's. AAPL is weak pre-market. The euro is down this morning at 1.3035. The 10-year yield continues to track lower to 1.57% showing that traders prefer the safety of notes and bonds to guard against the fiscal cliff shenanigans. As the previous charts show, watch the SPX 30-minute to see if the 8 MA stays above the 34 MA to maintain bullishness, or, the 8 fails down thru the 34.  Likewise, see if the SPX stays above the 200 EMA at 1405.26 on the 60-minute chart. This signals bearish markets ahead should it occur. SPX 1403 and 1399 are important downside support.

SPX support and resistance is 1419, 1417.53 (50-day MA), 1417.34 (20-week MA), 1416, 1413, 1411.86 (100-day MA)1409, 1406, 1405.30 (200 EMA on the 60-minute), 1404, 1403, 1401, 1399, 1397, 1394, 1391.88 (20-day MA), 1391, 1389, 1385.79 (200-day MA and 150-day MA) and 1385. SOX 372.80 and XLF 15.68 are key again today.

Note Added 12/6/12 at 9:42 AM:  Big move up for semi's, SOX. XLF remains elevated. SPX is testing the 100-day resistance. The LOD is 1406.15 so the strong 1406 support and the 200 EMA held on the first push lower by the bears. AAPL is negative. Tech is not leading the broad markets lower; the COMPQ and SPX are moving coincidentally. The bulls are starting the day off by flexing their muscles, trying to punch up thru the top rail of the sideways triangles shown on the previous charts at 1408-1411. Well, bulls, do you have the juice today? The euro is 1.3014 so here or higher is bull-friendly today, if the euro moves lower and loses 1.30, the bears will initiate strong downside selling pressure. So far today, the bulls have the edge.

Note Added 12/6/12 at 10:08 AM:  The SPX moves sideways into the apex of the sideways triangles that were charted. For now, it is a waiting game. Price should make a decision today. TRIN is 1.10 favoring the sell side action today by a hair. VIX is at 16.75. AAPL came down to print 518, and bounced with the positive divergence on the daily chart, now printing 539, it likely needs to explore those lower numbers at 515-530 a bit more, perhaps closing down there so the positive divergence on the daily chart can be firmly locked in to create a mini-rally.

Note Added 12/6/12 at 10:18 AM: Euro is 1.2983. SPX is coming down for another test of 1406 and the 200 EMA. Check out the descending triangle pattern on the SPX one-minute chart, it has to bounce, or die now.

Note Added 12/6/12 at 11:33 AM:  The SPX bounces from the 1406 support and moves to the strong 1413 resistance, using the 100-day MA as a tightrope, to continue the circus theme, that is today's range thus far, 1406-1413, so watch to see which way price exits. VIX dropped from its highs, now at 16.39 forming a confluence with the 20-day MA and 50-day MA, all at 16.40. If the VIX moves above 16.40, bears win today. If the VIX drops under 16.40 heading lower, the bulls will rule today.

Note Added 12/6/12 at 1:16 PM:  The sideways journey thru 1406-1413 continues. The VIX punched up thru the 16.40 confluence so that creates market negativity. The 8 and 34 MA's on the 30-minute chart are converging.  SOX is near 377 firmly bullish. XLF is 15.65, bullish. It is surprising the euro is not creating more market weakness today. The technology and financial sectors are keeping the markets elevated. Tech is leading the broad markets higher which also helps maintain market buoyancy. The bulls remain favored as price motors along sideways. The 10-year is 1.565%. The TNX chart from 11/3012 projected this area at 1.55%-ish. Type 'TNX' in the search box above to bring that chart up for further study if you are interested in Treasuries.

Note Added 12/6/12 at 3:11 PM:  SOX ran strongly higher today.  The strong 1413 resistance held all day long thus far. Neither side wants to run with the ball. The bulls are keeping the 8 MA above the 34 MA on the 30-minute chart but that may not last. The 100-day MA at 1411.86 has been in play all day long; watch to see which side that price closes in relation to the 100-day MA. The VIX is 16.59 remaining above the 16.40 confluence continuing to create market negativity.

Note Added 12/6/12 at 4:06 PM:  The SPX jumps higher in the final minutes closing at the highs, at 1413.95.  The bulls are happy with the SOX and XLF firmly in their camp.  Bears are happy with the VIX at 16.59.   The 8 MA remains above the 34 MA on the 30-minute chart adn the SPX stays above the 200 EMA on the 60-minute chart both indicating bullish markets for the hours and days ahead.  Since the close was near the high, Keybot the Quant will likely flip long if the SPX moves above 1414 and higher tomorrow. Thus, watch the overnight futures, the bears must keep things negative. Any tinge of positive futures will lead to an upside market acceleration tomorrow as well as Keybot flipping to the long side. The main event tomorrow, before the open, is the Monthly Jobs Report at 8:30 AM which will obviously impact markets as well. TRIN is 0.83 after a low 0.54 yesterday, two bullish days, which will require some market selling to relieve this extreme bullish sentiment. Interestingly, the TRIN has not printed any print, intraday or otherwise, above 1.40-ish for eight trading days.  1.40 represents moderate and orderly selling. So there has been no strong panic-style selling (1.50 and higher) in the markets for over a week, but uber bullish euphoric buying has occurred the last two days. The CPC put/call will be interesting this evening to gauge market sentiment. Protection to the downside is cheap these days and many short plays show desireable entry points but trader's are not concerned at all about the markets dropping.  Oil and commodities dropped today but stocks were up.  The VIX was up and stocks were up, this happens only about 10% of the time, one side or the other is wrong. The euro was down and dollar was up which should correspond to lower equity markets. The mixed signals continue. The euro is 1.2968 so use that as a point of reference overnight and for tomorrow. The Big Top closes the tent flap for this evening but fear not, the carnival will open again tomorrow.

23 comments:

  1. I could be wrong but I'm seeing continued sideways action. Even if we break at in one direction or the other, it won't go far. The bulls don't have much traction above 1420, the bears don't have much weight below 1403. I look for this to continue, until we are either surprised by an agreement on the cliff or wake up to the reality that it isn't happening. As we move down the road, panic will begin to set in. But really, what's changed? The white house position remains unchanged. The GOP position is unchanged. There's not enough votes to swing the decision one way or the other. Each side has a considerable amount at stake for caving. Obama feels he has a mandate (in a sense he does). The GOP risk losing their seats if they break pledge. Why would either side budge?

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  2. The circus does have a lot of acts to follow. SPX is bumping up against the top of the sideways triangle at 1408-1411, the bottom rail is at 1403. So, perhaps the sideways vibe will continue thru 1403-1410 but if price breaks out of one side or the other, that side should ride to short term victory.

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    1. Check this out KS!
      http://www.marketwatch.com/story/tanks-roll-in-cairo-five-killed-in-protests-2012-12-06?link=MW_home_latest_news

      V.

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    2. Yep, but what is very interesting is that you would think Brent Oil would head higher, it is not, it is around 109 two bucks under 111 which would show strong Middle East trouble. So this is a head-scratcher. It may simply mean that the global economic slowdown is much stronger than thought and the world simply does not need the oil since business is slow. So, keep an eye on Brent in relation to Egypt.

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  3. Watch semiconductors closely today, SOX has moved wildly up and down and it will take the markets where ever it goes. SOX jumped from 374 to over 377 after the open, now down to 375.72. The 372.80 level is the bull-bear line in the sand where strong market selling will occur.

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  4. Yeah, it doesn't look like Apple's going to revisit 520 before it's rally. But can it break 550?

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    1. I've told KS in another comment that on Thursday a great choice would be AAPL pie, not blackberry pie (RIM).... too much AAPL pie slices might be a source of indigestion right on Friday, after non-farm payrolls .... :)
      Guess I was right (until now) :)
      Symbol Price Change % Change
      AAPL 547.14 8.35 1.55%
      RIM 11.71 -0.13 -1.10%

      a break of 550 might be possible for AAPL but the price won't settle there .. might 'touch' 551-554, but after such an ecstatic experience the price will 'calm down' below 530.

      V.

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  5. AAPL 20-day MA is 560 so it could venture up to there, then back down. Positive divergence on daily chart will help to keep it buoyant near-term.

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  6. Anyway, I'm not some smart a**.... in fact I am a quit non-intelligent person :) .. but I worked as IT programmer for several years and also for 5 years I worked in 2 banks from here (Romania)- an austrian and a greek capital-origin bank as senior auditor concerning the banks' IT systems, Accounting and Treasury Dept. And I started to develop at home an IT program that's mainly using the same variables as the programs used by the biggest US banks, and it seems to help me :).
    I want to tell you something - we entered now in a whole new era when human traders are fired and banks (US especially, but also from UK) are using more and more algo-bots for trading.
    That's why we are seeing 'such' a market behaviour.
    I'm from another country, from Europe, don't have any contact with US.
    But if any person from SEC (from US) have the smallest piece of brain still active they will forbid and prosecute the usage of algo-bots and machines in the US banks instead of human traders.
    Why?
    The answer is soooo simple and it will be observed after a certain number of years : your retirement funds (i guess they are called 401k or something like that) will be destroyed by those algo-bots used in banks - the banks and other financial institutions are using retirement funds to open certain market positions (long -short) and alternatively they open opposite positions (short-long).
    If anyone from SEC has the brain to understand what I am writing will action against banks that make lay-offs and install trading machines.
    It's weird that they are using your own money to drag you in poverty :) ....

    Oh well ...I've made my job , i've told you ... I really that someone from SEC is curious and reads tour blog KS ...

    V.
    Disclaimer: I don't consider myself accountable for the information above :), ok ? :)?

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    1. Errata: "i really hope that someone from SEC is curious and reads your blog KS"
      V.

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    2. And of course, anyone has the freedom to consider that i'm just crazy :D ! But you will continue to experience markets that react really weird (i.e. a bullish information appears but markets turn bearish without any particular reason- fundamental or technical)
      V.

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  7. The S.E.C. will follow the efficiency argument. It's not just the time and salary saved by not paying live humans, but that algobots can only make system errors (where they were programmed incorrectly, or didn't carry a decimal point far enough). Of course that can be significant, just looked at Knight Capital. But there are far more human errors than there are system errors. 4132 vs 1432, or trader hitting an extra zero. An algobot can't be dyslexic.

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    1. oh yeah...the efficiency argument... oh well :) ...
      i know the Knight Capital case ... at a larger scale it would be scary if something happens ... All in all the US markets determine in certain ways the world capital markets , it's not only the retirement money aspects ...
      Anyway ... What once started must come at some point to an end , no ?
      :)?
      V.

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  8. V,
    I get your point (don't really disagree with it), but we have a habit of not fixing things because someone (in this case Wall Street firms) is making money off of it. When we boil it all down, it's why we don't fix a lot of things. It's not right. It's not wrong. It's just our reality. And those who see the fault in that generally don't have enough power (money) to fix it.

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    1. Thank you Shane!
      What you just have said wiped out all my possible thoughts on applying to Visa Waiver ... American society seems that has a lot of violence embedded. Here in south-eastern Europe (i live in Romania) life still tastes good in the traditional way.
      Let's say that the 'heat' of power of powerful persons (as wealth and socially) is not so distubing when it comes to the illusion of individual freedom of each person.

      This phrase was the most useful for me : " And those who see the fault in that generally don't have enough power (money) to fix it. ''

      thank you!
      V.

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  9. About 80% or more of the trading action currently is performed by robots and HFT. The big concern is the Flash Crash aspect to it all. Since the HFT loads up the trade on one side only to pull the bids suddenly to create a vacuum, that can lead to trouble. It is probably a given that another Flash crash will occur, it is only a matter of when. The SEC and other authorities understand the situation but they are overrun by the technology aspect. The folks that understand this complex trading are all making lots of dough and not interested in making peanuts on the enforcement side, so it is hard for the regulators to keep up. Like anything, there are no easy answers. The human's make mistakes, and the robots are only as good as their programs. Knight's program was not ready for prime time and they went live anyways, which killed them. All you can do is surf the waves.

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    1. In this case it's clear that the main function of SEC is not accomplished!(to regulatory supervise the capital market)...if they don't cover all aspects (including technology issues)....this is a BIG problem.
      V.

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  10. KS: Do you still think AAPL can make it to 620 before it falls again?

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    1. Using the 80/20 rule, 8's lead to 2's, so if AAPL can close above 580, that should open the door to 620. The important 20-day MA is 560. Tonight's close is 547. So those are the stepping stones that can be watched. If 560 is attained and held, a move to test the 580's should occur. If a close above 580 occurs, price should visit the 620's. It was a cheesy low that Apple placed today, it may go up to the 20-day, hit its head, then come down to print 515-530, then the positive divergence can receive a firm signal for a more sturdy move higher to 580 and/or 620. The real possibilty exists that AAPL can simoply break down at anytime. The chart this morning shows that an H&S is already in place only requiring a failure at 520 and price pierced that today. The upside is limited on a trade, for the risk involved, ditto downside, seems like if a close above 560 occurs a small long may be given consideration, and if a close under 520 occurs a consideration for a short would be in order, otherwise, let it play out, there are lots of fish in the ocean. Also note the 150 and 200-day MA's at 597-604, they will likely offer resistance as well if price wants to move back up.

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  11. SPX closed at the highs. The bulls have it lined up for tomorrow, all they need is green futures overnight, any lift at the open will launch an upside acceleration and Keybot the Quant will likely go long. The bears must keep the futures negative all night long with all their might.

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  12. On the short-term, I think I'm about ready to throw in the towel on the bear case. Big picture, I'm not sure where all of this happy optimism is coming from, but there's enough fodder to keep the bulls chomping for a bit.

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  13. Which indicates to me Shane that we may be near the top short term. If the monthly numbers are positive, a trade that has served me well in the past is to short the indexes after a new high is reached and the initial morning froth has settled (I have been long up to this point with trailing stops but see very little room to move higher).Alternatively if the market continues to rise higher during the day, I see a top tomorrow in any case. This market is screwing with everyone so watch the comments from KS who seems better positioned than most with his calls

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  14. It's logical. Election is over, market pukes out out of anger, gathers steam for holiday rise. I think all will be bearish Jan 1 until earnings first quarter 2013. Status quo. Financial cliff is a joke. Nothing is going to happen.

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