Keystone's Morning Wake-Up 3/11/13

Daylight Savings Time is in full force so set your trading clocks accordingly. A new week is set to begin with markets somewhat flat this morning. Europe is weak, especially Italian banks since Fitch downgraded Italy debt overnight which places their rating in line with Moody's and S&P's, one level above Spain. Metals are a shade lower with soft ag a shade higher. S&P futures are down a couple points. The 2-hour, 1-hour and 30-minute charts are setting up with negative divergence as highlighted this morning but it may take until lunch time to properly align the charts for a market move lower. The bears got nothing unless they can move the 8 MA under the 34 MA  on the SPX 30-minute chart and this will require the SPX to drop under 1549 and head lower to pull the 8 MA lower.  The Tepper Rally continues as his call stated that equity markets would continue to pump higher on the easy Fed stimulus. SPX 1548 is strong S/R, ditto 1553. If the SPX moves above 1553, the all-time highs for the SPX at 1560-1580 will likely come into play.

This OpEx week in March is up over 80% of the time so the bulls have the wind at their backs again. Today is the new moon so market weakness would be anticipated. The weakness in copper, commodities and oil over the last month should surely have led to a substantial market sell-off but instead the Fed's printing press is much stronger. The way that JJC (copper) and GTX (commodities) move today will dictate market direction. The market bulls are able to overcome the negativity in raw materials by pushing the VIX lower. The bears cannot growl until VIX 15.45 and higher occurs. The CRB Rind Index, a basket of lesser known commodities that are harder to manipulate, and therefore a very good indicator of broad market direction, are teetering on the edge of the 13-week MA cross. For now, the Rind is above this critical moving average but it must be watched closely this week; a failure here would be a large feather for the bears cap. If the Rind stays above the 13-week MA, the bulls rule (reference the Other Signals page for further information on the Rind or simply type 'Rind' in the search box).

The TRIN was higlighted on the weekend with several days in a row of sub 1.00 numbers and low 0.50 uber bullish prints, which typically signasl the need for a snap-back market selling move to relieve this over-the-top bullish sentiment. TRIN above 1.00 today is happy bears, below 1.00 continues the happy bull path.  The utilities sector has rallied strongly as traders chase yield and perceived safety. This is a big plus for bulls since a move down in equities would likely lead to a recovery move back up unless the utilities become negative here forward. Market relationships are out of whack these days, no doubt due to Fed intervention that continues to skew price discovery, but traders are taking the approach of 'dance while the music plays', then run for your life once the music stops. The volumes are very light for all the up days last week and none of the days were able to overcome the last sell day volume seven days ago.  Professional traders are looking forward to Joe Sucka showing up to hold the bag but so far, that involvement by the retail trader may be muted. In this technological age, perhaps the public is not at as much of a disadvantage as years past.

The continued Fed stimulus and intervention is trying to create the wealth effect in the economy so folks run out and spend more to then fuel a recovery. With traders treating the markets as a casino right now with no intent on holding long, and instead waiting for the signal to jump ship, this is not a healthy market environment.  And with savvy traders at all levels now due to technology, Twitter, and many other tools, the reasons that such QE worked in the past may no longer hold water creating a very tricky trading environment. Chairman Bernanke, a scholar on the Great Depression, says that there was not enough stimulus created quickly enough which extended the depression, so he is dropping money from helicopters. However, in the 1930's, many traders were completely in the dark concerning the interplay of markets. Nowadays, everyone knows what the Fed is trying to do which places into question how well it will work.  With all the stimulus, the U.S. GDP is -0.1% (just revised to +0.1%), truly shameful that future trouble is created every day and at the same time the stimulus is not helping create long-term stability. QE is only a sugar high.

For today, watch GTX 4910, that would signal bullish fun ahead, bears need to stay under 4910. Watch VIX 15.45, bears need volatility above 15.45 but bulls want to keep it under 15.45.  Watch SPX 1553 and 1543. The 1553 would start the path to all-time highs and 1560-1580. The bears need to push under 1543 today to start a down move that has strength. A move through 1544-1552 is sideways action. As always, reference Keystone's Key Events and Market Movers posted each weekend for the daily itinerary for markets. The retail sector is important this week so watch XRT and RTH. AAPL and GE receive downgrades this morning. The GE call may be timely since the weekly and daily charts are negatively diverged across all indicators and signals weakness ahead. GE is an attractive short at these levels. As discussed here over the last week or two, Apple is an attractive long from these levels.