The semiconductors drop (SOX under 425.80) and volatilty spikes higher (VIX over 14.21) so the bears continue driving the bus today. Copper and commodities are hit today. JJC loses the 40 level. The financials are weak as well. XLF 17.95 is a key bull-bear danger line in the sand; XLF is now printing 18.07. If 17.95 fails, there will be no doubt that the broad markets are heading far lower for an extended period. WTIC crude oil fights for the 88 level and slipped lower after the inventory numbers. SPX is at 1554 nearly retracing all of yesterday's gains. Germany's DAX chart, as well as the CAC and FTSE, are of great interest since debt downgrades are likely on tap. Beige Book is released 2 PM where markets will pivot.
Note Added 10:45 AM: Whoa, the bottom is falling out. SPX now at 1551 in a heartbeat. XLF is 18.04 so the bulls are hanging on, by only nine pennies. The 10-year yield is 1.70%. VIX 17.02. SOX is 418.32, collapsing over -3% today. TRIN 2.13 verifying the strong bearishness today.
Note Added 11:13 AM: XLF 18.00. The 10-year yield loses 1.70%, now at 1.69%; yields drop in concert with disinflation and deflation. AAPL down over -5% now to 406; Apple appears attractive for a long here but the 80/20 rule says 420 should lead to 380. Tech and small caps are leading the broad indexes lower. SPX 1548.83. Keystone bot SPXL to add some long exposure since the overall portfolio is heavily-weighted short.
Note Added 12:11 PM: XLF 15.95, the fate of the broad indexes is now being decided. Considering the Beige Book is on tap in less than two hours, markets may idle along sideways increasing the drama. XLF will bounce or die from here and the broad indexes will follow it. Two more letters laced with ricin are discovered, one sent to the Whitehouse. A press conference is minutes away. SPX is at 1548. Watch XLF.
Note Added 12:15 PM: XLF 17.92. "Houston, we have a problem."
Note Added 12:38 PM: VIX 17.69. SOX 417. XLF 17.91. The 10-year yield is 1.68%. Dollar/yen 97.42...97.38, as it drifts lower so will equities. Copper now under 3.19. The 80/20 rule says 3.2 may lead to 2.8. Crude oil 86.54 collapsing from 88 only a couple hours ago. The 8 MA remains under the 34 MA on the 30-minute chart signaling bearish markets ahead and the SPX fell through the 200 EMA at 1556.98 on the 60-minute chart signaling bearish markets ahead. Keybot the Quant remains short. SPX is at 1546.40. SPX S/R is 1564.16 (20-day MA), 1563, 1561, 1556.98 (200 EMA on 60-min), 1556, 1553, 1551, 1548.63 (last week's low is ruptured), 1548, 1546, 1543, 1542.32 (50-day MA), 1539, and 1531.
Note Added 2:31 PM: News organizations are running around like chickens with their heads cut off. Reports said that an arrest was imminent in relation to the Boston terrorism but it turns out to be an erroneous report. The news helped stabilize markets. The Beige Book came and went without notice. The Fed hints at a stronger economy but all that would mean is less QE so markets do not appear to be enthusiastic about this information. XLF recovered back above 17.95 so the bulls are cheating death. As long as VIX stays above 14.21, and SOX below 425.80, the market bears are fine. SPX is down -22 to day to 1552. The LOD is 1543.69 very near the 50-day MA at 1542.43 so a better test of this key support should occur. Last week's low is 1548.63 so that level is important today as well. Dollar/yen is 97.76, under 98, so the equity bears receive some strength from the stronger yen. TRIN is 2.71 with a spike high at 3.75, so this type of uber bearishness will likely result in a snap back move for markets to relieve the uber bearish pressure. NYAD also hit -2000 indicating uber bearishness that may help create a relief move tomorrow to relieve the strong bearishness. AAPL broke through four hundo today printing a LOD at 398.11; it can likely be bot for a long trade here.
Note Added 2:51 PM: XLF is 17.98, the 17.95 remains the bull-bear danger line that will drag the broad markets lower if 17.95 gives way. The action this morning proved that behavior. So as long as the SOX and VIX stay in the bear camp now, XLF 17.95 is the most important parameter to watch to gauge market direction moving forward. If XLF stays above 17.95, the bulls can squib the markets out sideways from here into the closing bell. If XLF loses 17.95, the broad indexes will sell off in force. Bulls need to lure the SOX or VIX back into their camp to start an upwards market track again, which currently does not appear to be on tap today.
Note Added 3:37 PM: Lots of drama at Boston Courthouse; it is evacuated due to a bomb threat. XLF is 17.99. SPX is 1552 between 1553 R and 1551 S.
Note Added 3:58 PM: Took small profit on SPXL exiting and logging it as a day trade today. Also bot AAPL opening a new long position.
Note Added 4:01 PM: XLF closes at 18.01; this drama will pick back up in the morning as the fight at 17.95 will continue. Typically when markets experience a large down Wednesday, a lower low occurs on Thursday.
Nicely short since 1576 broke on monday, looking for 1530 before any meaningful rebound, but the 50d SMA may provide some good first support here too.
ReplyDelete1530 because if we assume that c=a, at a minimum then a was 1597-1552=45, b was 1552-1575, so c should end at 1575-45=1530. if c=0.618x a, then it will end at 1547, but it has already traded down to 1543 and invalidates this FIB extension IMHO.
That sounds good Arnie, there is strong horizontal price support at 1531 which jives with your number. 50-day at 1542.32 will likely see drama over next few days.
ReplyDeleteThanks KS. CNBC -for once- has a nice technical article: http://www.cnbc.com/id/100646957
DeleteThe meat of the story goes like this "The bears are hanging their hat on the idea that this bounce back will lead to a lower high, potentially a right shoulder that continues in the 1575 area. The first pullback of the year was March 20 with the Italian election. The left shoulder was built during the month of March, with the peak being around 1573. Then you had a head when it hit its high at 1597. If the pattern forms, the measured move from 1597, or the head, to the neckline would be take it to 1538-1542. The S&P could then move down to 1490-1510. A pivot point could then be 1472." All levels mentioned are right on target with what happened yesterday and today. Although I don't think we'll see 1472, I think we'll see ~1500. That's uber strong support. Note that we're now talking ~2 weeks out from now. The 1530 target is probably only first part of correction (abc of A)!?
Yep, we have been watching that here, the other day it needed a right shoulder and that just formed with yesterday's pop, it is a skinny right shoulder but good enough, so head 1597, neck 1540, target is 1483 if the 1540 fails. Bring up a one-hour or two-hour chart and it provides a nice perspective for the H&S.
DeleteWhat's your take KS on AAPL? thanks
ReplyDeleteDaily chart and weekly positively diverged, so a bounce should be on tap, however, RSI on weekly likely needs another low. 80/20 rule says 420 leads to 380. It may set up as a nice trading stock moving forward through a range at 380-480.
DeleteInteresting, KS. $BPSPX prints 78.20, finally below your target of 78.40 indicating longer-term bull pain. At the same time, $CPC hits 1.19. Probably okay to nibble on longs if we get that characteristic Thursday low - especially given Friday's OpEx buoyancy? (Perhaps a quick visit to that 1538-42 neckline. The 50MA must be around there too now.)
ReplyDeleteInteresting, by one single hair for BPSPX, that would be a good chart to post. CPC is moving up to the 1.2 area, the last time was the mid-November bottom, but that was a cheesy market bottom barely touching the 1.2+ area. The thinking is that since a move well above 1.2 to 1.3, 1.4, 1.5 and such has not occurred since last years selloff, so CPC may have some additional space higher, but yes, have to start thinking about a market bottom, albeit even a temporary shorter term bottom, if CPC moves above 1.2.
DeleteKS, some investors shorting basic materials, what sector or indicator should be monitored? What economic data or index will tell us about basic materials? Thank you for your help.
ReplyDeleteXLB will show you the materials sector. The negative divergence techniques shown here all the time would have helped identify the tops in late January and mid March. It has already dropped from 40 to 37. The 37.3 line is a firm support, 34-35 is likely coming if the 37.3 fails. SMN is a double inverse ETF playing the short side of materials and it has already popped from 49 to 57. Materials may serve as a steady trend-type trade moving forward but the quick money from the move off the top has already been made.
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