Keystone's Morning Wake-Up and Midday Market Action 5/6/13

The first full week of May begins.  The bulls scale new heights overtaking SPX 1600 and Dow 15K although the Dow was unable to close above 15K, disappointing the newspaper headline writers on the weekend. So Dow 15K will remain a fixation by traders.  The lower volatility creates the bull fuel. Market bears got nothing until the VIX is back above 14. Crude oil climbs this morning on the increasing Middle East tensions where Syria says Israel's actions over the weekend are a "Declaration of War." Watch the dollar/yen 99 level and euro/dollar 1.31 level as pivots. Market bulls are happy with dollar/yen moving above 99 and through 100 which will take the SPX well into the 1620's and higher. Bears want to see dollar/yen flat at 99 and lower to take the stock market lower.  The dollar/yen is at 99.30 this morning showing some buoyancy so the S&P's are buoyant as well. Today is the 3-Year Anniversary of the Flash Crash. Keystone was up all night baking a cake to commemorate the occasion.

The 8 MA remains above the 34 MA on the SPX 30-minute chart signaling bullishness for the hours and days ahead. Ditto with the SPX above the 200 EMA at 1572.82 on the 60-minute chart. The 20-day MA is 1577.54 and rising.  The SPX weekly chart shows nasty universal negative divergence across all indicators potentially indicating a significant top in the markets. Ditto the NYMO and SPXA150R charts as presented this weekend. Scroll back to review the charts and technical analysis to prepare for the week ahead. For the SPX, starting at 1614, the bulls need to move up through 1618 and the wild upside bull orgy will continue in force with the SPX jumping several more handles into the 1620's. The bears need to retrace yesterday's move and push under the strong 1597-1598 support level to accelerate the downside, a formidable task but not impossible.  A move through 1599-1617 is sideways action today. The opening bell is a few minutes away.

Note Added 9:37 AM:  The markets are off and stumbling.  SPX is at 1617 hinting at a stronger move higher, however, the VIX is up today, now at 12.99, now 13, so this will hinder a market move higher, unless, of course, volatility starts leaking lower. VIX remains under 14 so the bears have nothing to be happy about. Nasdaq and tech is outperforming today as traders trip over themselves to buy tech since GS said to rotate from the utes, healthcare, telecom and staples into tech, materials, industrials and financials. Trades may want to rethink the 'whole rotation-thingy', to paraphrase Sarah Palin.  XLI and XLB are flat to down to start the day so it does not look like the hype about running into industrials and materials, respectively, continues. The 10-year Treasury note yield is flat at 1.74% after its big up from 1.63% to 1.74% on Friday. TRIN is 0.84 so bulls are favored today, so far. Dollar/yen 99.28.  WTIC crude oil drops to 95.26.  Utilities are taking the pipe today, like rats fleeing a sinking ship, UTIL -0.8% to a 524 handle. UTIL was over 537 four days ago so this is a -2.4% move off the top. It is ridiculous to see sectors such as utilities trade like commodities. The utility weakness is interesting since if utes lead the broad markets lower that typically forecasts a stronger downside path for markets. Time for Keystone to make use of the hammock in between the oak trees on this beautiful scenic summer-like day.

Note Added 12:05 PM:  VIX is under 13. Dollar/yen 99.36.  The 10-year yield is 1.76% up two basis points. TRIN 0.80.  So lower volatility, higher dollar/yen, higher yields, lower TRIN, all four say equities should be up, and the SPX is now up over 1617 perhaps headed for a test of the all-time high at 1618.46. Today's HOD 1618.22. Utilities, UTIL, now down to a 523 handle. Aunt Harriet and Uncle George are frantically calling their money manager but no one answers the phone. They just placed their entire life savings in utilities since it was supposed to be safe. In only four days they have already lost 3% which is equal to the yearly yield they were chasing.

Note Added 2:55 PM:  VIX 12.78 near the lows for the day. Dollar/yen 99.38. The 10-year yield 1.77%. TRIN 0.71. All four eeking more into bull territory so the SPX floats higher to print a new all-time closing high at 1619.77. Tech and small caps are leading the upside which further aids the bulls. Surprisingly, the punch through the prior all-time high at 1618.46 should have resulted in a quick acceleration to the 1620's but instead markets appear tentative. The Dow Industrials print a HOD today at 14988.87 twelve bucks short of the 15K, so far. UTIL now has a 422 handle so Aunt Harriet and Uncle George climb into the 1993 Cavalier, that has one tire low on air, and drive to the manager's office to find out what is going on with utilities. Crude oil 95.92 keeps teasing the 96 level.

Note Added 3:19 PM:  The SPX 30-minute, 1-hour and 2-hour charts are all set up with negative divergence. Scroll back to the charts from the weekend, the 1-hour chart, or 30-minute it may be, shows the thin red lines to watch if price prints a new high today. The new high is printed and you can see how the negative divergence formed. So price should roll over moving forward. The 8 MA remains above the 34 MA on the 30-minute so markets remain bullish and bulls are not concerned. The 8 MA is 1618.20 so as long as the SPX is below this level it will pull the 8 MA down for a potential cross of the 34 MA.

Note Added 3:27 PM:  VIX 12.82.  Dollar/yen 99.34. 10-year yield 1.77%. TRIN is 0.76. All four remain bull-friendly.

Note Added 3:36 PM:  RUT up +0.5%.  COMPQ +0.4%. SPX +0.2%. Dow flat.  XLI +0.7%. XLK +0.5%. XLB +0.3%. XLV -0.6%. XLU -1.3%. So small caps and tech lead the upside which is a bullish sign.  The Dow is flat so some of the luster of the blue chips is fading as traders chase into tech as evidenced by the COMPQ and XLK.  Excuse Keystone for one second as he laughs, because the huge outperformance move today in industrials (XLI), is comedic. Traders are tripping over each other to buy like school girls fighting for the last Justin Bieber concert ticket.  All the recent manufacturing data is in the doldrums but the fast easy Fed and BOJ money has to go somewhere; the healthcare, utes, staples, telecom and high-yield asset bubbles are already bulging. Money is rotating out of healthcare and utilities and into tech, industrials and materials, however, all these sectors show topping behavior on the weekly charts.

Note Added 4:04PM:  SPX prints a new all-time high at 1619.77 and new all-time closing high at 1617.50. Dow is unable to poke above or close above 15K today. Volume remains below average as the broad indexes drift higher.  UTIL closes at 522.03 (538 to 522 is a drop of -3% in four days). Aunt Harriet and Uncle George arrive at the office to ask about what happened with their utilities portfolio but all the lights are off and no one answers the door.