Keystone's Morning Wake-Up and Midday Market Action 4/22/13; CAT; Existing Home Sales

Happy Earth Day. Hug a tree today. The G-20 chooses to ignore Japan's currency devaluation, labeling it instead as a program to fight deflation and move towards a 2% inflation target. Therefore, the yen drops, dollar/yen pops, and futures pop higher. The BOJ is the key driver of markets to begin the week. The Baron's cover over the weekend displays a bold headline; "Dow 16,000." Typically the uber bullish, or uber bearish, magazine and newspaper headlines identify trend changes. Chairman Bernanke bows out of the Jackson Hole meeting. This news is interesting due to the importance of Jackson Hole for announcing quantitative easing programs.  The QE2 announcement in August 2010 was hinted at Jackson Hole.  So the take on Bernanke's announcement will be interesting today. Keystone views it negatively for markets since Bernanke is letting everyone know well ahead of time to not expect any new or continued QE announcements this summer. Why else would he cancel his appearance, and cite scheduling conflicts, when there is plenty of time to rectify schedules? Bernanke must be growing concerned over the new asset bubbles he and the BOJ are creating in real estate, utilities, dividend stocks and other perceived safe haven sectors.

Fitch downgrades the U.K. following Moody's downgrade last week. Italy hopes to develop a government and reelects the aging president. The Existing Home Sales may create a market pivot at 10 AM.  CAT earnings are key since they are a proxy for China. There are many companies reporting earnings this week, AAPL tomorrow, providing a broad cross-section for the economy. Watch the top line revenue numbers to see if there are any increased sales, or, if the EPS beats only occur from continually reducing headcount and whipping current employees to work harder and longer. China economic data is important late this evening.

VIX 14.25 is key today. The bulls will mount a more substantive upside rally if the VIX falls under 14.25. Keybot the Quant is short to start the week but if the VIX drops under 14.25, the algorithm may flip to the long side. The bears need the XLF (financials) to drop under 17.95 to gain downside momo.  For the SPX today starting at 1555, the bulls only need a smidge of positivity in the futures, and that is easily in place this morning, and the upside will accelerate. The 1561 level, 1564.06 (20-day MA) and 1565 offers resistance to begin the day. Key price resistance levels above are 1555.69 (200 EMA on 60-min), 1561, 1564.06 (20-day MA), 1565, 1569, 1575-1576, 1589 (last week's high), 1593 and 1597. Bulls will score a big win and continue the rally if the SPX moves above the 1564-1565 level.

Note Added 7:34 AM:  CAT earnings cough up a hair ball missing on top and bottom lines, and lowering guidance moving forward. The mining industry is very soft. The news takes a couple handles off the S&P futures, now up about seven.

Note Added 9:46 AM: Markets jump higher at the open then promptly fall on their sword, the broad indexes now stumbling sideways. At the open the VIX jumped over 15 which should indicate lower equities not higher. VIX is now 15.37; watch the bull-bear line at 14.25. XLF is 18.05 above the critical 17.95 bull-bear line. Semiconductors, SOX, leaped to above 419 at the open, then collapsed to under 414, all in the first fifteen minutes; a weak chip and tech sector does not foretell great times ahead but the central banker pumps trump fundamentals. The SPX is fighting at the 200 EMA at 1555.68 as described with this morning's charts and commentary. If the SPX stays under 1556, the bears are in great shape. Bulls need to push the SPX above 1556, then above the 20-day MA at 1563.98.  The 10-year yield drops under 1.70%, now at 1.69%.  Note how the air came out of the BOJ money-pumping machine over the last couple hours, the yen strengthens, with the dollar/yen drifting lower away from the important psychological 100 level, now at 99.51. Hence, equities are weak with the stronger yen. Keystone bot CLF opening a new long position. This is a dangerous and speculative knife-catch. The charts are positively diverged and a snap-back move may be on tap.

Note Added 9:58 AM:  SPX is 1555.68; the 200 EMA is 1555.68. A decision is needed by the markets, bounce or die from here. Existing Home Sales in a couple minutes.

Note Added 10:01 AM:  Housing numbers miss. Dollar/yen 99.49. SPX died, now printing with a 1553 handle. VIX 15.56. XLF 17.99. TRIN is 1.26 favoring bears today.

Note Added 10:31 AM:  XLF is now at 17.94 slipping into the bear camp so this weakness in financials will create another leg lower for the broad indexes if the XLF stays under the 17.95-17.96 level. XLF pops back above so let it play out over the next hour. Since volatility wants to stay bearish to begin the day, the financials are steering the ship right now; the way XLF moves is the way the broad indexes will move going forward. TRIN 1.52. Crude oil dropped below 88. Copper remains weak. The 10-year yield is 1.68%.  And look at the dollar/yen, now 99.09, collapsing from near 100 over the last couple hours, so traders are not buying into the BOJ's easy money, the yen strengthens, and equity markets weaken. SPX has a 1549 handle.

Note Added 1:36 PM:  Markets are mixes continuing to stumble sideways. XLF recovered and is now at 18.06 away from the danger line at 17.96 creating a lift in the broad indexes. VIX is 14.85 remaining above the 14.25 so this keeps the bears in business.  TRIN is 1.05, a hair on the bear side but essentially flat neutral not favoring bulls or bears today, like the flat markets. CAT disappointed this morning but it jumps 3% after much of the weakness was priced in recently. All the pundits and talking heads that said this morning that CAT is no longer a bellwether for the economy, have reversed their thinking and now say CAT is a firm guide for the overall economy. GOOG experiences a one-minute 4% flash crash after this morning's open. With the flash crashes in the DAX, CAC and FTSE last week, these incidents are becoming much more common. SPX has regained the 200 EMA on the 60-minute chart at 1555.73 signaling bullish markets for the hours and days ahead, however, the move is tentative. The 8 MA remains above the 34 MA on the 30-minute chart which continues to signal bullishness ahead. The bears need the SPX under 1556 as quick as possible to place the kibosh on the upside, otherwise, the bulls will float the markets higher. Crude oil is a ping pong ball today, now above 88 at 88.51.  Dollar/yen 99.32. Semiconductors recover today and tech in general is helping the bulls. Small caps are lagging the broad markets. CLF pushes higher and Keystone exited the long trade entered this morning, logging it as a day trade, that type of quick move could not be passed up to lock in the gains. Will look to reenter.

Note Added 2:24 PM:  VIX dropping like a stone now at 14.41; the 14.15-14.25 area is the bull-bear line in the sand.  SPX pops now at 1563. TRIN is 0.86 now firmly in the bull camp for today.  Dollar/yen is steady at 99.34. Here's the big fight and back kiss of the 20-day MA resistance at 1564.41. HOD is 1564.05 just printed. 

Note Added 2:45 PM:  SPX is 1564.44; the 20-day MA is 1564.44. A decision is needed by the markets, bounce or die from here.  The 20-day MA is a very important S/R line for all stocks and indexes. VIX is 14.27 on the verge of entering the bull-bear zone and possibly turning bullish at 14.15-ish which would create an upside market thrust. Bears must prevent the VIX from falling any further.

Note Added 2:50 PM:  A moment of silence is observed in Boston and at the exchanges in honor or the three deaths and the many wounded in the terrorism attack last week at this time.

Note Added 3:26 PM:  VIX is 14.30 traveling flat sideways hanging on to the bear side. The SPX is at 1564 not yet able to punch up through the 20-day MA at 1564.44. The bulls need the VIX to drop for the SPX to punch up through the 20-day MA. Semiconductors show a dramatic comeback today. SOX drops under 413 this morning and runs to 423 as the day proceeds.  A move above SOX 424.00 will create strong market bullishness. TRIN is 0.85 set up to be bull favorable into the closing bell. Crude oil is all over the map today, under 88, above 88, above 89 a short time ago, now at 88.81. The move from 88 is key, equity bulls will benefit with a move higher in oil while equity bears should benefit from a move under 88 as further disinflationary and deflationary forces appear.

Note Added 3:56 PM:  Canada thwarts a terrorism attack on the Amtrak train on the route between New York and Montreal.  Markets do not respond.  VIX remains sticky at 14.31 not wanting to fall lower, so the SPX drifts a bit lower, now with a 1562 handle.   Markets are idling willing to wait for the NFLX and TXN earnings minutes away. TXN will greatly impact the SOX. Volume is only at about 70% of a day's average expected volume. Same ole trend, up days are weak volume and down days are on stronger volume. Keystone is buying CLF into the close reopening a long position in this highly speculative knife-catch iron ore trade.

Note Added 4:01 PM:  VIX, SOX and XLF will dictate market direction tomorrow. Tech earnings right now will impact the Nasdaq.

Note Added 4:05 PM:  NFLX beats bottom line, top line matches, the stock soars 16%, obviously a plus for the tech sector. Note the huge pop in the last minute of trading today in NFLX from 175 to close at 201, obviously, the chosen few, the insider trading folks, were given the results ahead of time, and front ran the results.