Keystone's Midday Market Action 1/10/13

The inventory data at 10 AM appears higher on the surface and you never want to see higher inventories. The SPX leaped higher at the opening bell to print a HOD at 1469.44.  The 1468 is the very strong S/R that Keystone has been harping about, ditto 1472.  For now, 1468 resistance is holding. Utilities remain weak. GTX (commodities) jumped above 4950 but now has fallen back below, pay attention to this today since a move above 4950, that holds, will create a leg higher for the broad indexes.  VIX remains in the cellar at 13.59. RTH remains flat despite the TIF bad news.  Copper, JJC, is juiced on the China data overnight.  Thus, the bulls are trying to pound higher using commodities and copper as the fuel.The euro moves upwards towards 1.32. Draghi supplied the magical elixir for the punch bowl today, and the markets are experiencing an early day bullish intoxication.

Keystone took profits on the long SPXL overnight trade exiting after the opening bell, however, the profits will only purchase a hot dog and a coke today.  Also sold EGLE exiting this long position at a loss. Timing was everything on this one and the initial entry was a bit too high. The shippers remain attractive and from a long term investing perspective it would be prudent to hold a shipper such as EGLE, DRYS, GNK, FRO, or many others, but Keystone does not like much of anything on the long side right now. EGLE remains an attractive long term trade but it may experience a pull back in the near term. Building a cash position and increasing short exposure appears prudent moving forward. Keystone also bot SRS opening a new long position.

Note Added 1/10/13 at 10:39 AM:  The 10-year yield hits the 1.90% level so that shows there is money flowing from bonds into stocks today. The euro is over 1.32. The SPX is pulling back a few handles but the day remains in sideways mode with oil, copper, gold and silver all higher. Interestingly, the RUT (small caps) are negative and COMPQ is leading the SPX lower so tech and small caps are leading the broad market lower. GTX is under 4950. TRIN is 0.58 which is very bullish for stocks and will help create market buoyancy. RTH is flat showing that traders continue to firmly believe in the great American consumer. This is why V and MC continue to rise but are topping out. The retail and housing sectors are the two pillars that long traders are relying on. If either or both of these sectors should falter, that would create a reason for traders to start caring about the downside risks. VIX is inching higher towards 14.

Note Added 1/10/13 at 10:51 AM:  Speaking of the retail sector devil, news just hit that emails apparently show WMT knew about the bribery shenanigans. The emails always tell the tale.  WMT drops one-half percent, the RTH turns red. WTIC oil slips one penny under 94. Watch oil.

Note Added 1/10/13 at 11:24 AM:  The euro is 1.3218. VIX is 13.87.  The 10-year yield is 1.89%, a one-tick pull back. The small caps were negative, then as the morning plays out, the Nasdaq went negative, then the SPX, but the SPX and Dow Industrials are fighting to stay positive. The Euro markets are closing and on many days the U.S. markets will bounce from the 11:30 AM bottom, so the path forward will be interesting.

Note Added 1/10/13 at 12:17 PM:  Markets are in meander mode again, traveling sideways. The 8 MA remains above the 34 MA on the SPX 30-minute chart so the bulls are happy. GTX is 4943. The bulls need the juice from GTX 4950 to drive markets higher, otherwise, a sideways to sideways down bias should continue thru the day. Keystone added to the long SJB position.  Many of the ETF's are thinly-traded so that should always be a consideration when trading. Thinly traded stocks have less liquidity than stalwarts like AAPL, IBM, and other blue chips and major indexes, so flexibility is required when considering pricing on entries and exits in the lesser traded vehicles.

Note Added 1/10/13 at 2:43 PM: The SPX maintains buoyancy this afternoon, however, the  GTX is 4935 drifting lower, acting as a weight on the SPX disallowing a move higher.  The strong 1468 resistance overhead has held, so far but look at the huge push right now, big upside thrust. SPX is thru 1468, if it holds the strong 1472 is next. With this push higher, the 30-minute, 1-hour and 2-hour chart indicators are lining up with negative divergence which hints at topping action right now, at either 1468 or 1472.

Note Added 1/10/13 at 2:50 PM:  USO, a proxy for oil, shows negative divergence on its hourly and minute charts.  The SPX HOD is 1469.44 from the top paragraph. Price is there right now. Looks like there may be an exciting end to the day ahead. Note how the TRIN stayed down at 0.6-ish all day long which also provides bull fuel. The euro moved strongly today on the ECB, up euro = up markets. The EUO short ETF is dropping down for a matching or lower low with positive divergence setting up for another long trade now or in the couple days ahead. With such a sharp move higher in the euro today, usually a day or two is needed to burn off the momo but EUO is worth watching.

Note Added 1/10/13 at 3:13 PM:  The SPX punches out a new HOD at 1471.06, less than a buck away form the strong 1472 R. The 10-year is 1.89%.  Considering the yield was over 1.90% today, and the big late day melt-up right now, why isn't the ten-year over 1.90% again on its way to 1.91% and higher to show money flowing from bonds to stocks? Perhaps the thrust higher in equities now are simply trading positions and nothing else.

Note Added 1/10/13 at 3:23 PM: Another HOD at 1471.49.

Note Added 1/10/13 at 3:46 PM:  There's the 1472 resistance. Large buyers rushed in to push it up and over. This is a critical test. GTX remains at 4931. Brent oil turned negative. The 10-year yield now touches 1.90%. TRIN is 0.62.

Note Added 1/10/13 at 4:07 PM:  The SPX closes at 1472.12 at the strong 1472 S/R and prints another five-year closing high, but not above the intraday high from 2012 at 1474.51. The HOD is 1472.30. The bulls keep running, the shorts keep throwing in the towel to provide the mini-bumps higher. Since the buying is short-covering and not so much true long term bulls entering, this behavior tends to create air underneath the markets making any potential downside, which very few are considering, to be that much more dangerous should it appear.  The CPC, NYMO and other indicators will require study this evening. The bulls are gun-ho over the banks and feel the way forward is led by the financials and it is full steam ahead. The importance of WFC earnings cannot be understated, it will be a circus in the morning, there are huge stakes riding on WFC's earnings. WFC will immediately serve as a proxy for the financials. The bulk of the bank earnings occur next week. GTX closes at 4935.  The 10-year yield is 1.90%.  The euro is 1.3252. The markets love Mr. Draghi.

Note Added 1/10/13 at 4:14 PM:  AXP pre-announces earnings ahead of next week, beating by three pennies on the bottom line with top line meeting, perhaps a smidge light on revenue. AXP popped one-half percent but is now trading flat at where it closed today. Thus, AXP, and WFC, will serve as two proxies for the financial sector ahead of Friday trading.