Keystone's Morning Wake-Up 5/22/13; Chairman Bernanke; FOMC Minutes

Chairman Bernanke testifies this morning at 10 AM EST. Existing Home Sales are at 10 AM so markets will pivot at this time. The FOMC Minutes are at 2 PM so that will create another market pivot. Oil Inventories are at 10:30 AM.  TOL earnings beat so that encourages the housing sector just as HD earnings did yesterday. However, LOW earnings are lackluster, Mortgage Applications are the weakest in months and lumber prices have been collapsing for the last two months. TGT earnings miss and guidance is lowered. HPQ earnings hit after the closing bell so this will affect the tech sector. Copper is up strongly this morning which will help bulls. The BOJ is full steam ahead with QE and a weaker yen so the dollar/yen moves up towards 103 and takes the U.S. futures higher.

Keybot the Quant is in position to flip short and needs to see SPX 1663 and lower today to complete the move, however, the jump in copper will likely ruin the bear's chances. Watch JJC 41.77, VIX 13.11 and GTX 4795, copper, volatility and commodities, respectively. All three are causing market negativity to start the day but that may quickly change at the bell. For the SPX today starting at 1669, the bulls need to touch 1675 and the 1680's will print quickly. The bears need to push under 1663 to accelerate the downside and begin more extended downside action. A move through 1664-1674 is sideways today.  The Fed's Bullard saved the markets yesterday morning. Bernanke and the FOMC Minutes today, if they both continue to pump the virtues of QE, which is very likely, keeps the bid under the market and prevents the downside from occurring. Watch the 8/34 MA cross on the SPX 30-minute chart as highlighted in a previous post. SPX S/R is 1675, 1667-1669, 1661, 1649-1650, 1633-1634 and 1626-1627. The 20-day MA is at 1623.24, and rising, and needs back kissed, identifying the 1624-1627 area as very important support.

Note Added 9:53 AM:  Dollar/yen hits 103 creating equity buoyancy on the cheaper yen. JJC is 42.12 above the 41.79 bull-bear line creating equity lift. VIX is 13.32 remaining bearish above the 13.12 bull-bear line. TRIN is 0.70, another uber low TRIN day which keeps the bulls moving higher. It is remarkable to see the low TRIN numbers day after day with no, or very little, reversion to the plus one side. SPX HOD is 1674.17 heading towards the touch of 1675 that would ignite the upside.

Note Added 10:05 AM:  Chairman Bernanke's remarks remain dovish so SPX hits 1675 and boiinnng, over 1679 in a heartbeat. The Fed is the markets. Oddly, VIX remains elevated, the 10-year yield drops to 1.90% and dollar/yen is 102.82. JJC is now up to 42.24 and TRIN is at 0.70 providing the bull fuel. The 10 AM pivot was a launch move for bulls.

Note Added 11:05 AM:  Nutty start to the day, markets are all over the map. Equities retreat when Bernanke mentions a decision on QE may be in weeks (not months) and he would not rule out before Labor Day. Dollar/yen explodes above 103. The 10-year yield falls to 1.90% then jumps to 2.00%.  VIX remains elevated. JJC dropping now at 41.97. TRIN 0.73. It will probably be a wild ride all the way through the FOMC minutes this afternoon. Lois Lerner, at the center of the IRS scandal, pleads the Fifth Amendment refusing to testify so that drama grows.

Note Added 8:28 PM:  The bears finally get a chance.  The mixed signals from the Fed encourages the selling. VIX 13.12 and JJC 41.77 are key. Volatility spiked as highlighted this morning so that provided a hint of today's action. The drop in copper sealed the deal for bears but in the final minutes JJC recovered. Copper is key overnight. Bulls need to see green and bears need to see red since copper will likely dictate market direction at the open.  Today was an outside reversal printing a higher high and ending at a lower low than yesterday. Typically this indicates a trend reversal but more often than not price will sneak higher again.  Volume was robust for this sell day; the strongest volumes since the April top and sell off.  Typically, if a large down day occurs on Wednesday's, markets do not bottom on a Wednesday, and Thursday shows further weakness even if a bounce occurs in the morning. Over the last few months the track record is mixed but a couple years and further back markets would always be weaker on the Thursday after a strong Wednesday sell off. The Fed has distorted the markets in many different ways.  On the bull side, the two days in front of a three-day holiday weekend are typically bullish, also working through the full moon (Friday) the markets are typically buoyant. In a perfect world, with markets following historic norms, the SPX would print a low tomorrow and then move up into the holiday weekend. There is lots to sort out after today's drama. The SPX bounced directly off the 1649-1650 support level. If this fails, 1633-1634 would be targeted. The dollar/yen remains above 103. The 10-year yield jumps to 2.03%. Keystone's Inflation-Deflation Indicator (CRB/10-yr price) is 286/98.375 = 2.91 which indicates ongoing disinflation on the verge of slipping into deflation under 2.90 but this will have to be monitored over the coming days. Thus, the asset relationship of lower yields and lower equities must be watched. HPQ earnings after the bell set a positive tone for tech. If copper is red overnight, the market bears may have some legs.