The bears took a beating yesterday with the mini Tepper Rally. Good news continues to be good news and bad news is good news, since more stimulus would be expected, so the rally continues. Eurozone GDP's are weaker than expected across the pond. France now slips into recession. There is no growth in Europe since September 2011 almost two years ago. Germany's GDP disappoints and it is expected to lead Europe moving forward. However, bad news is good news and the European indexes are flat to up. DAX is 8348 continuing to punch out new highs. Japan's Nikkei moves above 15K overnight. Dollar/yen continues to print new highs now at 102.73 (weaker yen). The S&P futures were down 3 or 4 when the dollar/yen was at 102.40 a couple hours ago. As the yen weakens, dollar/yen moves higher, and futures recover to the flat line. The central bankers control the markets.
Copper is weak thus far today but weakness in commodities has no affect on equities. This is very surprising as evidenced by last evening's chart where commodities and the broad indexes typically move in lock-step. This divergence started in February. One or the other will have to capitulate. Copper and commodities will have to explode higher and run upwards to verify the higher equity prices, or, equities will roll over to absorb the commodity weakness. Considering the slowdown in Aisa, China, now Malaysia this morning, as well as Europe's funk remaining, pressure should remain on commodities. There are many interesting market cross currents now. The dollar is starting to break out higher with the two-leg bull flag pattern that would target 86. The dollar will only add pressure to commodities. The euro/dollar now at 1.29 needs to move lower to help Europe climb out of the doldrums so that would be in sync with higher dollar and lower commodities. The oddity is that equities are not moving with commodities for the last couple months or more.
The spike in Japan JGB bond yields is another drama. BOJ is buying 70% of issuance which should at least maintain flat yields but instead the yields are sky rocketing higher. Volatility remains key moving forward. The VIX came up to kiss the 13.20 level yesterday but fell on its sword opening the door to the market push higher in the afternoon. The market bulls continue driving the bus if VIX stays under 13.20. If VIX moves above 13.20, the bears will growl. Keybot the Quant remains long but if the VIX moves above 13.20, and the SPX drops under 1634, the algo will likely flip short. For the SPX today, starting at 1650, the bulls only need one single point, to punch up through 1651, to accelerate another upside move. The bears need to retrace yesterdays big up move and push under 1634 to regain their momentum. A move through 1635-1650 is sideways action. SPX support is 1645, 1634-1636, 1626, 1618, 1614 and 1597-1598.
Global bellwether DE earnings just hit beating estimates but cutting sales forward blaming currency fluctuations. Deere says weak economic conditions causes a tempering of forecasts and decreases equipment sales projections made only a couple months ago. Copper weakens. Empire State Manufacturing data and PPI are released at 8:30 AM. TIC data 9 AM. Industrial Production 9:15 AM. Housing Market Index and E-Commerce Retail Sales data at 10 AM. Oil Inventories 10:30 AM. M earnings are of interest today ahead of other retail earnings tomorrow including WMT, JWN and KSS. Housing Starts tomorrow morning is the key economic data release for the week.
Note Added 8:20 AM: M earnings beat on EPS but flat on top line like most other companies. A dividend increase is announced, buy-back and guidance remains positive so it is up one percent pre-market. The great American consumer is remarkable. M likely continuing to benefit from customers leaving JCP. DE now -3.5%.
Note Added 8:51 AM: PPI is in line but Empire State Mfg Index is weak. The weak manufacturing sector jives with the lower commodity demand, but, bad news is good news for markets. Crude oil now down towards 93. Brent oil is under 102. US Dollar is 84-ish continuing to hint at a breakout for the bull flag pattern.
To find out more about what that FED trumpet wanted to express by that WSJ article about tappering QE, watch tommorow Rosengren speech and Saturday's Bernanke's speech.
ReplyDeleteToday the market wil go sideways to digest yesterday's fast movement(yesterday's candlestick on daily chart was a Marubozo white candle stick, so today we might get some little spinning top), tommorow the market will be a little shaked by the Rosengren's words (and another bunch of bears will get - unfortunately! - in the market) and on Friday being the OPEX close day , guess what? No Marubozo sell signal, no spinning top, no nothing, no bear around!
All slashed and doomed by some radioactive green up candlestick :).
Next week nobody will be tempted to short again - and that would be a certain problem to normal market mechanics.
:)
V.
...I've found one little picture (credits go to Mr. Lance Roberts):
ReplyDeletehttp://advisorperspectives.com/dshort/charts/index.html?guest/2013/LR-130514-Fig-7.gif
Margin Debt is so high now that you need NASA to watch it on sub-orbital level using military satellites :) ... when something bad will appear, all those folks will rumble to get out and cover the debt at the same moment creating those delicious moments of pure panic :) ....
V.
You have been calling for continued up V so you have the hot hand. Margin debt are at levels like 2007. The markets are likely at an inflection here. VIX 13.20 tells the story.
ReplyDeleteYes, it's true, here is an inflexion area.
DeleteVIX is a funny, good lookin' indicator ...yesterday it rose and also SPX rose ... last time I've seen that in 2007 or 2008 , I don't recall too well ;) ... VIX pushing up along with SPX pushing up is a hint for further trouble for me.
But today , tommorow or on Friday (maybe Monday or Tuesday, next week?) VIX will be smacked in the head to 10.75-11.20 levels (it has developed a bullish wedge and only the last point, E, the fifth, is missing around 11-11.50 to complete the technical formation, but an overthrown to 9.50-10.50 is not impossible). I'm sorry for those guys that got into UVXY (leveraged VIX instrument) and other toxic instruments long time ago... I know one such guy on another blog. He entered sometime in January 2013 on UVXY ... Oh my! :)
I don't have the hot hand, KS, I'm just an apprentice! Maybe in 5 or 10 years, yes, I will certainly better than now... I have a lot to learn, every day, every hour, without any time lost!
Here on your site I've learned more than 50% of what I know until now.
Thank you , KS!
V.
On that note, shorters must be hurting as well having to increase margin accounts. Ever flip that logic around and realize the short powder kegs may be very empty. Alot of money has been lost in squeezes.
ReplyDeleteDefinitely, the shorts are skittish now with no one wanting to venture on the downside. The commodities remain an interesting metric.
DeleteVIX 13.20? Are you sure about that number KS?
ReplyDeleteYep, 13.20 for VIX. Despite the run-up in the indexes, the markets continue to balance on a tightrope. Even though the VIX may move above 13.20 it will likely only trigger the main signal for Keybot the Quant to go short, other programming rules have to fall in place and one of those is dropping under the low prints. Since yesterday was a big up day, for the algorithm to go short the VIX must rise above 13.20 and SPX would need to drop under 1634, 16 points or so lower. Next few days will be interesting.
Delete