Markets are churning sideways, remaining elevated due to the two-day momo, and now above where the fiscal cliff drama took hold in mid to late December. The SPX is at the September-October market highs. The markets may idle into the FOMC Minutes at 2 PM which would be expected to be a market pivot point. Yesterday was a historic upside day. The three key sectors now influencing the markets to the greatest extent are utilities, commodities and volatility. UTIL is under 466 and GTX is under 4958 maintaining market bearishness. VIX is under 16.50 helping the market bulls maintain the punch bowl at the party. The VIX has now moved to lows, at 14.56, which identified the September-October market top (13.6-14.6).
The charts this morning highlight the NYAD and TRIN hinting at a market top currently forming. The CPC put/call ratio continues to show a complete lack of fear or panic in the markets. In fact, the markets have not experienced fear since the May 2012 selloff and August-November 2011 selloff period which includes the waterfall crash in August. This is eight months of complacency in markets, where the "don't fight the Fed" mantra is firmly followed by nearly all traders--and this has worked out since the SPX is at matching highs currently. Complacency eventually leads to fear, however. All the way thru the fiscal cliff drama over the last month, despite any hand-wringing displayed by spine-less politico's, trader's were fearless and complacent fully expecting a positive solution, which occurred. A very attractive entry point for long plays occurs when panic and fear is rampant when the CPC is above 1.20 but alas, this continues to appear on a milk carton, and the markets decided to rally anyways.
The 10-year yield is 1.86% so there is money flowing from bonds to stocks but the yield did pop to 1.85%-ish right away yesterday and flat line which shows that those willing to move out of bonds did it quickly and ran into stocks, but that trend is not continuing to any great extent, so far. In a nutshell, watch UTIL 466, GTX 4958 and VIX 16.50 to determine broad index direction. The FOMC Minutes at 2 PM will create a market pivot point. Due to the two-day bull orgy momo, price may stay elevated a couple days to burn off the bullish energy.
Note Added 1/3/13 at 11:46 AM: The SPX is at 1464 printing a HOD at 1464.55. The resistance above is 1460-1461, 1465, 1465.77 (closing high for 2012), 1468, 1472, 1474.51 (intraday high for 2012), and 1476. Thus, the SPX is teasing the 2012 highs currently held back by 1465 R. The 1-hour and minute charts are all negatively diverged now. The 2-hour chart is squeezing out its high now, so considering each candle is two hours, it would be anticipated to roll over with the other very short term charts in the 2 to 4 hours ahead which would be before the closing bell. The 10-year is at 1.86%. If the equities markets want to run higher you will see the 10-year yield climb. UTIL is now over 462. VIX at the lows at 14.40. The euro fell thru 1.32 today but has since recovered slightly above. Time for a slice of blueberry pie.
Note Added 1/3/13 at 1:07 PM: The SPX 1465 resistance continues to hold. UTIL approaching 463. The 10-year remains at 1.86%. VIX in the cellar. Volume is lackluster. The SPX hour and minute charts are all lined up with negative divergence as previously mentioned, two-hour is just getting there, going into the FOMC minutes at 2 PM so the guess would be selling ahead with price receiving a spank down from the negative divergence and the FOMC minutes perhaps serving as a catalyst. The 8 MA is moving sideways on the 30-minute chart but not yet curling over.
Note Added 1/3/13 at 3:14 PM: The SPX punches out a high at 1465.47, thirty pennies shy of the closing high in 2012 listed above. The FOMC Minutes were a catalyst surprising traders to find out that half the Fed members are feeling uneasy about all the QE bond-buying. They should. However, all the doves, Bernanke, Yellen, Dudley, Evans, they are too busy to listen since they are concentrating on keeping the printing presses going. That is why the move down for equities, as the negative divergence kicks in, is limited for now, since most traders know that Helicopter Ben will print money all the way thru QE17 when it all falls apart. The 10-year leaped over 1.90% and the dollar jumped higher. The Fed news may change asset relationships but, again, knowing the Fed will print until the cows come home lessens the importance of the news. UTIL, GTX and VIX have not changed their stripes today so the markets continue along in a flat line. Keystone took profits on the EUO trade exiting the position. That was the short euro trade. Will look to reenter. Keystone bot SJB which is an ETF that shorts high-yield. It is thinly-traded so that must be a consideration but the positive divergence on both the daily and weekly charts is very attractive for this knife-catch. Note the negative divergence shown for the HYG ETF which is a nice short set-up. Keystone also bot more FAZ adding to that ongoing long position.
Morning everybody. I would like to wish everybody a happy new year!! Unfortunately due to a family medical emergency yesterday I was only able to trade the first 30min of the day, where I bought every thing I could get my hands on (FB, AAPL, HPQ, SBUX, etc etc) and spend the rest of the day in E.R. and pharmacy. All is well now.
ReplyDeleteHowever, the market has spoken. And spoken in a big time: it wants to go up. On Friday it was indeed about to crash, and from an elliot wave perspective the market could have gone either way.
If the clowns in D.C. hadn't baked this half ass deal and sugar coated it, the SPX would have easily been down 65 points or more by now without a problem. Normally news is noise for trading IMHO, but this was too fundamental an event to be ignored, and that showed the past 2 days. Last week the market priced a deal out (as I mentioned), so any deal -and we got one- would do, and it did.
From an EWT perspective. The move up from 1343 to 1438 was IMHO wave 1. Then we got an ABC for a wave 2 correction with A to 1412, B to 1448, and C to 1398. Wave B and C and whole wave 2 relate perfectly from a Fib. retrace and extension perspective. Now the market is working on a wave 3.
Assuming wave 1 was 95 points and wave 3 started at 1398, we can assume 3 to extend: 1.382x wave 1+ wave 2= 1.382x 95 + 1398 = 1530.
A wave 4 should then retrace to ~1500-1490, and wave 5 should then extend to 1.618x 95 + 1398 = 1550.
Note that these levels are VERY close to KeyStone's top predictions for 2013. I think that's very interesting and I can really see us getting there.
If this 1520-1550 top would be IT long term for the markets or not, I don't know. I don't want to look that far ahead in time. Let's trade it day by day, but for now the market has spoken.
Interesting stuff Arnie. Good luck to your family. Weekly SPX chart is negatively diverged over the six-month time frame, there may be some near term oomph, however, in the coming week or three, which may jive with your higher targets. The 80/20 rule says a close above 1480 will lead to the 1520's. Thus, the price range here, at 1464-1478, then 1478-1485, that would lead to the 1520's, then perhaps to the 1550's. At this juncture a thought would be down from here, 1464, to the 1420's, spike back up to 1460-1480, then roll over for extended down. The thought now is that the top would occur at sub 1485-ish, but, as said, can only take these erratic markets one day at a time, or, hour by hour.
ReplyDeletethanks, all is well. There's serious resistance at 1530, so that seems like a logical target and big time test for reversal or not. I love it when three different "methods" come up with numbers in the same ball park (I mean what's +/- 20 on 1520... we're talking +/- 1.5%...). That gives clearly credibility to each "method"/"prediction". And people, KS knows his stuff!!! so keep an eye on that ball park number
Deletebest two trades will be short this market when its higher as previously discussed by the KS A+ Arnie... Short bonds in a way that your damn face doesn't get ripped of like the short YEN trade that took years to break out. I'm thinking monthly charts and a bond etf that you can deploy options strategies on. Or just options initially like selling puts. Got to start to get the feet wet on that trade this year. I'm glad I'm not Seabreeze and Partners that's serious draw down.
ReplyDeleteIs that Doug Kass's Seabreeze?
Deletepyschotic break short squeeze on HLF (36.90-37.98) HFT scalp points
ReplyDeleteI'm looking at NUGT here on the throw back its a divergent monster. I'm going bid shares at the 12/28 close it looks like we can get some over shoot on the beat down which is taking place right now.
ReplyDeleteKS, need some advice from you, is this a good time to short semi's? Thanks!
ReplyDeleteAnon, you have to make all the decisions yourself, Keystone does not give any advice. The site is simply for education and entertainment. Although Keystone's humor yields cricket sounds most of the time. SOX daily shows negative divergence so it may retrace a bit, but the weekly chart likely wants another high, so trading that would be a lot about timing. SSG is a short ETF for semi's and the daily chart shows positive divergence with a little mini pop off the bottom now, however, SSG weekly wants to see another low, so again, it would all be in the timing. There are likely better things to play these days.
ReplyDeletehey MCAP, how did Seabreeze Partners perform in 2012?
ReplyDeleteThe news was the right sneeze fro TZA. Always darkest before the dawn, something was up when it dropped to 12.11. Such manipulation. It seems that the drug dealers are worried that maybe the crack will "hurt" their clients as they are driving to get groceries near the cliff of exuberance. Its nice that pimp Bernarke cares for our tolerance levels before he adds more smack to the street.
ReplyDeleteYes KS Doug Kass. As for there performance I'm assuming it's stellar they know what their doing I'm just bitching about the inevitibility of drawdown it can really take a huge pyschological toll on you sometimes. Short bonds great idea but that's going to take a lot of dollar cost averaging, a lot money and a lot hedging. Don't want miss that one.
ReplyDelete