Keystone's Midday Market Action 1/11/13

Brent is 110.36 and WTIC oil keeps teasing 93. This 93 test is key, if 93 fails, the equity markets will sell off, if oil holds 93 support and heads higher, equities will rally. The 10-year yield is 1.92% so some money is flowing out of Treasuries. Equity markets are flat to begin the day. Tech is not leading the downside so this is bull friendly. TRIN is 1.50 which favors the sell side today. UTIL and GTX remain bearish.  RTH, JJC and VIX remain bullish, so the five parameters say status quo. The 8 MA remains above the 34 MA on the SPX 30-minute chart which signals bullish markets for the hours and days ahead. SPX S/R is 1476, 1474.51 (intraday high in 2012), 1472, 1468, 1466, 1465.77 (closing high for 2012), 1465, 1461, 1460 and 1457. The euro continues an upside orgy to 1.3352.  Keystone bot EUO opening up a new long position which is short the euro.

Note Added 1/11/13 at 9:50 AM:  The SPX 2-hour, 1-hour and 30-minute charts are setting up with negative divergence; they may want to play around at these levels for a couple more hours into lunch time but should top out and roll over. The broad indexes like to move up after the European close at 11:30 AM, like yesterday. The Fed is typically in there pumping in the 10 to 11 AM hour as well to help the bulls so the late morning trade will be interesting. WTIC oil is 93.00, on a tight rope, it has to make a decision, what say you oil, which way do you want to move?

Note Added 1/11/13 at 12:37 PM:  Oil fell under 93 along with the SPX losing the strong 1468 support but both have since recovered. This is an important pivot pair to remember moving forward.  Markets are flat and once again, there is a move higher occurring after the 11:30 AM European close, the SPX moved 2 1/2 points in one-half hour. If the SPX can print 1472 that would lock in the universal negative divergence for the hour and minute charts and create a roll over to the down side. These charts are already negatively diverged over the several day time frame but still have some very short term momo (think minutes and maybe an hour or two). Copper is takin' the pipe today. Watch to see if JJC drops under 46 which would be a feather in the bears cap and create downside market momo. Friday afternoon's tend to be buoyant as short traders pare back positions in front of the weekend, however, the new moon may continue today's negativity. The data shows an increase in inflows into funds but that should come as no surprise since it is the beginning of the year. The question is what do the money managers plan on doing with the money, and, if this is the start of a trend or a one-off. Traders remain uber bullish, note how the broad indexes did not fall after the WFC results this morning, the futures simply remained flat. The bulls do not want to sell the market, the vast consensus fully expects the SPX to be above 1500 at anytime and the upside to continue all year long. Investors Intelligence Survey shows bullish sentiment at notable highs. This clicks with the low VIX and low CPC put/call that verify rampant complacency. The TRIN is 1.32 which favors sellers. Yesterday the TRIN stayed under 0.60 which is uber bullish, despite the flat markets, and sure enough, by the end of the day the markets floated higher. Today is the opposite.  The TRIN favors sellers today so perhaps the sell side will appear this afternoon. This action would jive with the set-ups on the hourly and minute charts.

Note Added 1/11/13 at 1:03 PM:  Oil is 93.31 well above 93. SPX is 1469.61 above the strong 1468 support. Price is simply playing in between the 1468-1472 S/R. The XEU chart shows the euro launching from 130.30 to 133.65, a 2.6% gain, in less than two days time, a phenomenal move for a currency. Draghi has the touch, when he speaks, markets rally. Keystone added more EUO to this long trade that was opened today. The EUO minute and hourly charts hint at a move up from here, 18.52, due to positive divergence, and, conversely, the XEU euro chart and SPX charts show negative divergence in the same time frames.

Note Added 1/11/13 at 1:21 PM:  The 10-year yield is 1.87%. It was 1.92% when today's equity session started.  Quite a move.  If folks are placing their money into Treasuries, that is money not flowing into stocks.

Note Added 1/11/13 at 2:31 PM:  WTIC oil now at 93.55, oil is moving up. The SPX is at 1471, perhaps it can finally squeeze out the 1472 to lock in the negative divergence on the hourly and minute charts, then the SPX can roll over in earnest. Bulls are pumping oil to try and keep the markets buoyant.  Oil now 93.65, look at it go.

Note Added 1/11/13 at 3:43 PM:  Oil is 93.75 creating market buoyancy. The SPX took all day but came up to 1472. Wow, what a set-up, the SPX monthly, weekly, daily, 2-hour, 1-hour, 30-minute, 15-minute charts are all in negative divergence with the higher price high at 1472 now occurring.  This is an inflection where you either believe in an upside explosive move to occur, or, a pullback. The charts clearly say pull back.  The trader sentiment and bullish sentiment clearly believe in an upside rocket launch. It is very impressive to see negative divergence on the SPX across all time frames which means trouble ahead. The markets are going to give everyone something to think about over the weekend, but, come Monday, will there still be time to prepare? It appears prudent to pare back long positions, add shorts or buy insurance thru puts, and raise cash. In fact, it is time to soul-search again.  Study each long position you own and, search your soul, asking yourself, would you be content in owning that long position for a couple years (if a serious market sell-off occurs)?

Note Added 1/11/13 at 4:09 PM:  The SPX closes at the strong 1472 S/R for the second day in a row adding to the drama.  Copper, JJC, will be key next week. Commodities, oil and copper movement will be dictated Sunday night by any news out of China.  If copper and oil take another drop come Monday morning, that will create market negativity and serve as a catalyst for the downside.  Conversely, if China releases happy talk and copper and commodities explode higher overnight Sunday, then the upside orgy move for markets may be on tap surprisingly rewarding the traders that are in a bullish euphoric hypnotic haze. At this juncture, the markets are all set up to roll over at the opening bell on Monday and sell off. A feather is all that is required to push the markets over the edge. With the negative divergence set up with the SPX charts, if there ever was a time for a major market event to occur, Monday would be a likely candidate. Watch oil and copper overnight Sunday. Time for a slice of apple pie, or two.