Keystone's Morning Wake-Up 5/9/13; Jobless Claims; Wholesale Trade

The BOE keeps the main interest rate unchanged at 0.5% as the consensus expected. Weidmann says that the ECB does have the right to use expansive monetary policy. The euro weakens a touch but overall remains flat at 1.3140. The dollar/yen is 98.78 a touch lower as compared to yesterday, reflecting a stronger yen, so equities should be slightly negative, and the futures are slightly negative. The central bankers are in charge; if the BOJ is easing and weakening the yen, equities move higher, or, if the yen strengthens, equities move lower. Copper is weak today and will affect JJC as discussed below.

Fed's Lacker wipes away jelly stains from his necktie as he prepares to speak in one-half hour at 8 AM. Jobless Claims are at 8:30 AM.  Remember, last week traders were gloomy over the weak ADP Jobs Report but the Claims number was the lowest in five years launching market optimism that led into the Monthly Jobs Report numbers Friday morning and the upside market orgy ever since.  So Claims take on a wee bit more importance this morning.  Wholesale Trade is 10 AM where a market pivot point may occur. Natty Gas Inventories are at 10:30 AM.  Natty is a hot commodity these days so the inventories will affect the trade.  The 30-Year Bond Auction is 1 PM.  Fed's Plosser will drink a couple cups of coffee to counteract the drowsiness form the lunchtime steak as he prepares to speak at 1:15 PM. Earnings of interest include APA, CTB (rubber), DF and PCLN.  GRPN and GMCR reported happy earnings last evening so both stocks should run today.

Volatility, copper and commodities are the three main drivers of broad market direction currently; watch VIX 13.74, JJC 41.93 and GTX 4810, respectively. Three scenarios exist. First, status quo, where VIX stays under 13.74, JJC stays below 41.93 and GTX stays under 4810, which results in sideways markets. Second, for the bulls to send markets higher, the VIX must stay under 13.74, and JJC move above 41.93 and GTX above 4810. The copper and commodities would supply further bull fuel. Lastly, for the bears to send markets lower, the VIX must move above 13.74 while JJC stays under 41.93 and GTX stays under 4810. Thus, the bears need higher volatility while bulls need higher copper and commodities.

Market indicators such as NYMO, now over 60, and SPXA150R at almost 93% continue to signal markets topping but the bulls keep running higher nonetheless. Yesterday is another day reminiscent of early October 2007. Traders simply throw their arms in the air in disbelief since markets are unstoppable to the upside, and now it is expected that the broad indexes will continue higher every day due to the global central banker policies. The market momentum at least ensures that some sideways movement may occur to simply absorb and digest all the current upside energy. One week ago, GS told everyone to rotate out of the pumped-up sectors such as utilities, staples and healthcare and rotate into industrials, materials, tech and financials. This is easily verifiable with the market action over the last few days. Note the underperformance of XLU, XLP and XLV and the overperformance of XLI, XLB, XLK and XLF, respectively.

The weakness in copper and commodities from February forward frustrates the market bears since any other time in history this would lead to a downside correction for the broad indexes. However, these are not your Grandfather's markets anymore since the Fed, BOJ, ECB and numerous other central bankers, are now ingrained into the markets negating true price discovery. So equities continue higher despite uninspiring economic data, an ongoing structural employment problem and weak top line company revenue. Up until February, markets operate with a 'Risk-On' or 'Risk-Off' mode. Risk-on is lower dollar, higher euro, higher copper, oil and commodities, higher equities and higher Treasury yields (lower note and bond prices). Risk-off is higher dollar, lower euro, lower copper, oil and commodities, lower equities and lower Treasury yields (higher note and bond prices).  Due to the central banker intervention, markets are twisted in knots currently, and no one is really sure what any asset is truly worth with a third man on the field (Fed and central bankers). The markets morph into a 'Chase-for-Yield' mode now. The central banker money is simply pumping into high-yield instruments fueling the dividend stock bubble. This chase-for-yield is what negates the expected effects of weak copper and commodities. The question is how long this scenario can hold since weaker commodities obviously forecast a weak global economy moving forward which will eventually override the easy money. Pay very close attention to the dollar, $USD, moving forward.

On the esoteric side, today is a new moon and eclipse. The new moon is 8:30 PM EST. Typically, markets are weak moving through the new moon (reference the Other Market Signals page), however, last month the bulls negated the effects. For the SPX today starting at 1633, the new all-time high is 1632.78, the bulls only need a smidge of green in the futures and the high 1630's will print in quick order. The bears need to push under 1623 to accelerate the downside.  A move through 1624-1632 is sideways action. Keystone's trading algorithm, Keybot the Quant, remains bullish, however, if VIX moves above 13.74 and SPX below 1623, it is likely that Keybot would flip to the short side. S&P's are down -1.5 at this writing and copper is very weak projecting a drop in JJC at this juncture. The 10-year yield is 1.78% after teasing 1.80% overnight.

Note Added 9:13 AM:  Jobless Claims continue to show that firings and layoffs are easing. Unfortunately, companies are not hiring, so the economy is in a zone of no firing and no hiring.  The data hints that companies are operating at bare bone levels, whipping the current employees to keep productivity high, and muddling along through the lackluster economic back drop. Futures were unresponsive, then drift a bit lower, with S&P's down about 4 as the dollar/yen moves lower to 98.66 but the dollar/yen jumps to 99+ again, so futures recover, the S&P's now down less than a point. The 10-year yield is up to 1.80%.

Note Added 9:42 AM:  Dollar/yen 99.29. Go, go, go BOJ, weaken that yen. Equities are flat to up as dollar/yen rises. TRIN is flat at one to start the day not favoring bulls or bears. VIX is 12.92 unable to move above 13 so bulls are happy. Euro drops under 1.31 which creates the negativity in the markets today. JJC 41.23.  GTX 4730. Thus, no change to the positioning in volatility, copper or commodities, as discussed above, so markets move sideways, flatter than a newlywed's souffle. The 8 MA remains above the 34 MA on the SPX 30-minute chart signaling continued bullishness. The 8 MA is 1630.36 so if the SPX prints under 1630 it will drag the 8 MA lower for a potential bearish cross, otherwise, if the bulls keep the SPX above 1630, they will be drinking wine all day toasting the Fed and BOJ as markets continue higher. GMCR happiness is pumping all the coffee plays higher.

Note Added 9:54 AM:  The TRIN drops to 0.86 spending multiple days in the bull camp. The TRIN has remained under one for six days in a row, albeit one intraday spike on Tuesday. This uber bullish euphoria and energy will have to be relieved by some higher TRIN numbers today or tomorrow, or moving forward a couple days, which would equate to market weakness ahead. The SPX hourly and minute charts continue to display negative divergence wanting to see a roll over, even as price climbs 10-12 handles over the last two days. The SPX keeps teasing the all-time high at 1632.78. The beat goes on.

Note Added 10:33 AM: Dollar/yen 99.21 down a touch. 10-year yield flat at 1.80%. VIX is 13.17 fifty-seven cents away from the bull-bear danger line at 13.74. TRIN 0.73 which is a disconnect. This low TRIN says markets should be higher today. The higher volatility  however, agrees with current market sentiment to the downside. Keystone took profits on JO (long coffee) and SDP (short utes) exiting both trades. Both have further upside ahead. Will look to reenter moving forward. Also added more SPXU to that ongoing long position (inverse ETF against the S&P 500).