Fed's Williams mentions tapering of QE creating the late-day market swoon yesterday. That has no staying power since the markets are hooked on QE and QE is the markets now. The bulls are already dip-buying this morning with the S&P's up six. Long traders are not willing to throw in the towel since the Fed has created QE infinity. The short-sellers have given up after the thrusts higher from SPX 1598, and 1635, and 1648. The short-covering rallies keep creating loftier price levels in the broad indexes bolstering the bullish euphoria and squashing any bearishness. Traders are either long or sitting on the sidelines waiting. No one wants to be short. The group think is that there will be plenty of time to sell and lock in profits if the markets pull back moving forward. Markets have a way of always surprising everyone and a lock limit down open, although an extremely rare event, would drastically change the back drop in a heart beat. The focus is on if, and when, the Fed will taper QE. It is usually the things that no one is watching that creates a market change. No one ever mentions that the markets may wake up one day and realize that the Fed is no longer in control and the tapering of QE will no longer matter; market forces will reassume control independent of Fed policies.
Watch VIX 13.19 as the bull-bear line in the sand. Markets will weaken and sell off above VIX 13.19 while bulls remain on easy street with low volatility under 13.19. For the SPX today starting at 1650, the bears have the easy road only needing a point or two lower, to drop under 1649, and that will create a downside acceleration to 1634-1636. The bulls need to punch up through 1660.50 to restart the bullish party and march the indexes higher into the weekend. A move through 1650-1660 is sideways action. Keybot the Quant remains long the markets. If the VIX moves above 13.19, and the SPX drops under 1649, it is likely that Keybot would flip to the short side.
The 8 MA remains above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead, but, as highlighted in this morning's chart, the 8 is slated to stab down through the 34 after the opening bell. The only way the negative 8/34 cross can be prevented, or reversed quickly if it occurs, is if the bulls create a strong opening, and that is what they are attempting with the higher futures. Consumer Sentiment is released at 9:55 AM and Leading Indicators at 10 AM so independent of how the markets move in the first one-half hour, the 10 AM pivot will tell the tale. Fed's Kocherlakota speaks at 1:45 PM. The Fed is likely increasingly concerned over the asset bubbles they have created in divvy stocks and high-yield instruments and perhaps the mention of tapering QE yesterday, and the last few days, by different members, is an attempt to tamp down expectations. As they say in Brooklyn, "Good luck wit dat." The markets are an addicted junkie now and are surviving on the Fed and BOJ crack cocaine. Kocherlakota will probably repeat the mantra about tapering but markets will likely turn a blind eye until a firm commitment to tapering is announced.
Today is OpEx. Volume should be higher at the open and at the close today. The IRS (Internal Revenue Service) head that was fired the other day by President Obama, but remains in place (figure that one out), will be grilled shortly for information on the IRS targeting Americans based on political beliefs. The bears are very close to creating a market turn but cannot acquire the last bit of oomph to turn the tide. Watch VIX 13.19 and SPX 1649 to see if the bears ate their Wheaties today, or not. Copper is up. Gold is down. The 10-year yield is 1.88%. European markets are higher. The dollar/yen is 102.56 up from the 102.20-102.40 level from yesterday, hence, the weaker yen creates the bullish market fuel as usual. Markets simply move up and down depending on the Fed and BOJ easing policies.
Note Added 9:19 AM: Dollar/yen 102.60. S&P's +7.
Note Added 9:35 AM: Dollar/yen 102.65. VIX 12.75. TRIN 0.72. The 10-year Treasury yield moves up three basis points to 1.91%. Say no more, all four items provide bull fuel. The SPX is over 1658 making a run at 1660-1661 to create an upside acceleration. The 10 AM pivot is key this morning.
Note Added 10:10 AM: Consumer Sentiment and Leading Indicators data create a bullish pivot higher for markets and the SPX is testing today's break-out level at 1660.50. Dollar/yen is over 103+. Banzai!! The weaker yen pumps bull fuel into the stock market. VIX collapses to 12.47 with the bull-bear line at 13.19 far higher. TRIN 0.88; under one and bullish. The 10-year yield is 1.92%. The bulls already recover yesterday's losses. Long traders firmly believe QE will never end so markets will continue higher indefinitely. Bears cannot create any substantive market selling until the VIX moves above 13.19. The bulls pull the rug out from under the bears once again by preventing the 8/34 MA cross on the SPX 30-minute chart. Looks like the bulls want to have a happy day leading into a summer-like weekend. HOD is 1660.62. Another move above 1660.50 will likely lock-in the upside for today.
Note Added 3:04 PM: The bulls took all day but finally punched up through 1660.50 so the thrust over 1665 occurs. HOD and new all-time high is 1665.17. Dollar/yen is 103.20 so the weaker yen pumps equities higher. VIX collapses today down to a LOD at 12.26. TRIN is at 0.73 which is uber bullishness. The 10-year yield is 1.95% moving up verifying the bullish move in the broad indexes today. On top of all that bullishness, shorts typically pare back positions ahead of the weekend to reduce risk, adding more afternoon bull fuel, no doubt helping to create the pump higher over the last hour. Remember from last week markets receive a push higher at the 1:50 to 2:05 PM area. This is the fifth segment of six 65-minute segments of trading each day which runs from 1:50 PM to 2:55 PM. Then the final leg is 2:55 PM to 4:00 PM. So, keep an eye on markets between 1:50 PM and 2:05 PM each day forward. Yesterday the pivot at 2 PM was down, today it is up.
Note Added 3:34 PM: Market melt-up continues. Dollar/yen 103.26. Banzai! SPX new all-time high at 1667.08. VIX 12.45. TRIN at 0.66. Keystone took losses on MWW, SJB and SKF. Will look to reenter all three. Also bot SLV, a long silver ETF, opening up a new long position.
Note Added 3:51 PM: The bulls keep running with SPX at the interesting 1666 number. Keystone bot NEM, the largest gold miner, opening a new long position.
Note Added 3:53 PM: SPX is up +2% this week which surprisingly, is the leader, with RUT (small caps). Tech lags at +1.7% and the Dow is up +1.5%. The XLI (industrials) outperforms up 2.2% on the week.
Note Added 4:02 PM: The SPX closes at 1666, an interesting number considering the low in March 2009 was 666. The new all-time high is 1667.38 and new all-time closing high is 1666.12.
Note Added 5/18/13 at 5:20 AM: As the numbers settled out, the SPX inches higher to print the new all-time closing and intraday high at 1667.47. The bulls are running the markets straight vertical now on the central banker money. The weaker yen (dolar/yen over 103+) is what provided the rocket fuel along with lower volatility and a relentless TRIN that stays uncharacteristically low day after day.
this sideways is a killer one... :(
ReplyDeleteV.
Interesting how SPX can't break higher despite good news, a weaker yen and a lower VIX.
ReplyDeleteSpoke too soon, here's the new high. Wouldn't it be interesting if the SPX topped at 1666?
ReplyDeleteno, it won't ;).
Deletebut today might close at 1666.66 to make all those conspirationists to boil over that .... :)
But it has some more to go ...
V.
yes sir!
Delete1666 !
this week-end will see some Exorcist rituals with Pretcher's picture, penthagrams, other dubious stuff and the last 666 numbers of " Barron's "
Lol! :)))))
but the beat will go on juuuuust a little more :)
V.
The move up through 1660.50 creates the upside acceleration, now above 1665 in a heartbeat. The low TRIN and low volatility adds the bull fuel. Markets run up on the weaker yen. For the 80/20 rule, the dollar/yen 98 led to 102. The 102.80 leads to 103.20 which is attained now so this would be a potential area for the yen to strengthen (dollar/yen lower), but as seen by the action, markets are simply possessed now going straight up.
ReplyDeleteArnie, you had mentioned a target of 1675. Would this view change for any reason other than a break through this number (give or take).
ReplyDeleteKS, is all this money pumping supposed to be inflationary? If it were only going into bonds, would that supposed to have any affect on the money supply? What is the long term damage theoretically being caused by the POMO? As usual, thank you for all your help. Im still an obvious novice, but Ive learned a tremendous amount from you.
V, keep up the good work and hilarity.
Thanks all, BK
The Fed and BOJ are likely creating severe damage. New asset bubbles are formed in dividend stocks and other high-yield instruments. It will not end well but no one knows when the end will occur, or what will trigger the end. Traders look to the Fed to ascertain when QE ends using that as a signal that the party is over, but, as typically happens, an extraneous event, or the markets themselves, will likely takeover and dictate the move.
DeleteKS,
ReplyDeleteWhat do you think of HL?
TW
As alwasy TW, you have to make all decisions for yourself. Keystone went into SLV and NEM at the close yesterday. All miners appear attractive now but they are knife-catches as most picks are here. Regardless, thinking longer term, miners and shippers are likely candidates that even if they continue on a weak path, they will likely be the initial stocks to recover after the market sell off arrives, if it ever does. HL is at that 3.20 level so using Keystone's 80/20 rule, it is likely prudent to grab a 2.7-2.9 print for an entry, however, any price here or lower appears attractive for a long.
DeleteKS,
ReplyDeletehard to be bearish these days... Without some longs I would have gotten killed months ago. Markets melting up, the SPX seems to be logged in hugging the upper boundary of the bollinger bands and this could theoretically go on forever.
KS, what do you think about Terry Laundry´s and Peter Eliades Cycles Works?
There might be an interesting time symmetry in play: March 2009 low at 666 SPX, than the April 2011 high, that brings as to the Mai 2013 (must be a High). If true, that could mean that now could be a major entry point for shorts, and June 2015 could be the next major long entry point.
On a shorter time scale there´s an end date for this upmove coming up next week on May 25th.
That´s all speculative of course.
The other interesting thing is GLD, correction almost finished, will enter the second position if 124 gets reached.
Andy
There work is in tune with the Bradley dates with the major turn date on 6/22/13 opening up a turn window between 6/14 and 6/28, however, the markets may sell off into this turn and it may be a recover move, so, you have to take it as it comes. Markets continue to indicate a significant top at hand but the confidence in the Fed and BOJ keeps the upside thrust moving along.
Deleteremeber the "Tower index" ? (the one that associates the building of very big/tall buildings with risk of imminent recession)
ReplyDeletewell.... news from China! :)
http://qz.com/85661/the-worlds-tallest-building-will-be-in-the-middle-of-an-empty-field-in-china/#
V.
Interesting stuff V, the Dubai Tower was a big deal completed in Jan 2010 and construction began around the time of the 2007 market top.
Delete