Keystone's Morning Wake-Up and Midday Market Action 6/27/13

The markets stage a strong come back off the low at SPX 1560 on Monday.  It is a shame that free markets are faux markets since the central banker trifecta saved the day once again enabling the three-day, now perhaps four-day, rally. China stepped in to help their seizing banks on Tuesday morning (after their close on Tuesday) thus taking the Lehman-style event scenario temporarily off the table. This goosed equity markets into yesterday when ECB's Draghi waved the banner of easy money firing off his money bazooka with happy QE talk. Then, to complete the central banker trifecta, the Q1 GDP came in at a paltry 1.8%, sick weak growth, which means the Fed will continue printing easy money and the Fed talk this week is all pro QE. The market junkie receives more crack cocaine so equities move higher. The central bankers are the markets. The Fed talk continues today and tomorrow so the markets will be reacting to all snippets, dovish or hawkish.

Moving to the technicals, watch the Nasdaq and RUT since they underperformed the broad market yesterday. Yesterday's volume was the lightest over the last week. The importance of the 200 EMA on the SPX 60-minute chart at 1619.65 cannot be understated. The bears rule the markets with the SPX under the 200 EMA. The rally this week will roll over to the downside as long as the SPX stays under 1619. If the SPX takes out the 1619.65 to the upside, the story changes and the bulls will likely move up to test the 1636 R and perhaps 1649-1650 R. Thus, the decision around the 200 EMA, at 1618-1620, if price can make it upwards for the test, is a bounce or die juncture, likely resulting in from 20 to 40 SPX handles of oomph in the same direction that price commits. Watch the 8 and 34 MA cross on the SPX 30-minute chart now with the 8 above the 34 signaling bullish markets for the hours ahead. The 30-minute and 60-minute charts' turn signals are in disagreement and whichever side they jointly move to will dictate market direction.

The drama continues with UTIL 480.81, XLF 19.20 and RTH 51.48. All three are in the bull camp creating the up move in equities. If the bullish prices increase, then the broad indexes will continue higher. If any of the three lose the levels shown, the markets will weaken and begin drifting lower again. Keybot the Quant is long but if two of the three parameters turn bearish and the SPX drops under 1592, the algo will likely whipsaw back to the short side today. For the SPX today starting at 1603, and not yet able to test the 1609 R yesterday, the bulls need to touch 1607 and 1609 will give way with price moving towards 1614 R. The bears need to push under the 1592-1593 support level today and a downward market acceleration will occur. A move through 1593-1606 is sideways action but the S&P futures are now running higher at +11 so it looks like the test of 1614 R may come quickly today. And this action may set up the big test of the 200 EMA described above where a showdown of bulls and bears will occur.

Note Added 9:36 AM:  The bulls jump higher at the open with the SPX HOD at 1613.78 hitting its head on the 1614 resistance. Treat the 1614 R as the first ceiling, then 1618 R, but considering the importance of the 200 EMA on the 60-minute at 1619.60, the 1618-1620 zone is a resistance gauntlet, where good thing happen to bulls above, and good things for bears if price stays below.  XLF, RTH and UTIL are all running higher reinforcing the bull case. TRIN is 1.01 refusing to commit to a side today. Keystone took profits on the long SPXL trade exiting the position.

Note Added 9:41 AM:  SPX takes out 1614 R so this sets the stage for the battle at 1618-1620, a cage match, where two sides enter, but only one will exit from this critical S/R level. Fed's Dudley is on tap, wiping jelly stains from his neck tie as he prepares to make a statement. Markets await all QE snippets since the Fed's dovishness or hawkishness dictates market direction. TRIN 1.00 dead neutral.

Note Added 10:05 AM:  Fed's Dudley parrots the other Fed heads this week promising QE as far as the eye can see, but it now sounds like more of the same-o, same-o. The SPX drops a couple handles to back kiss the 1614 support. XLF, UTIL and RTH remains bull friendly. TRIN 1.29 favoring bears today. The mixed signals continue.

Note Added 10:35 AM:  Here it is for all the marbles. 200 EMA is 1619.62. SPX is 1619.29. HOD 1619.64. The battle is on. Bounce or die.

Note Added 12:58 PM:  Die, at least so far. The 50-day MA is 1620.47. The 20-day MA is 1620.10 just now starting to stab down through the 50 which is a bearish market signal. The 200 EMA on the 60-minute is 1619.48. So this confluence at 1619-1621 is far more important than even this morning's hype provided. Three major moving averages are being tested simultaneously. The first try by the bulls this morning was rejected. The SPX hour charts may want to take one more run up to test the critical 1619-1621 resistance today. The 8 MA remains above the 34 MA on the 30-minute chart signaling bullishness ahead, however, the 8 MA is 1616.05, so if price moves under 1616 and lower, this will curl the 8 MA to the downside. Current print is 1616.32. HOD is 1620.07. TRIN 1.09 favoring bears but only by a smidge. Watch for more drama at 1619-1621 where the fate of markets over the short term is being decided. Whichever side that price closes on today, above or below the 1619-1621 gauntlet, will likely point the SPX in a 20 or 30-handle move in that direction. Bears want to hold 1619 and lower. Bulls need 1621 and higher. XLF, UTIL and RTH continue to remain bullish favoring the bull rally move higher. The tension mounts.

Note Added 1:54 PM:  Stauts quo. SPX stretches its legs to 1618 continuing to tease the 1619-1621 resistance gauntlet. TRIN is 1.20 so the bears are holding their own today despite the financials, retail and ute sectors pushing higher to help the bulls. Gold is at 1203, about to break the psychological 1200 level, not seen since summer of 2010, three years ago.  Both gold and silver ran out of gas today. GLD collapses to 116.63. Keystone bot GLD opening a new long position. The GLD minute, hourly, daily and weekly charts are favorable with positive divergence so this beaten down ETF should at least receive a dead-cat bounce moving forward. Also bot more MUX adding to this small cap speculative miner long position.

Note Added 2:15 PM:  SPX receives another spank down from the 1618-1621 resistance gauntlet now moving sideways at 1614.  Gold and silver receiving lots of negative attention again today. Gold loses the 1200 level. Keystone bot more SLV adding to this ongoing long position.

Note Added 2:26 PM:  SPX 1614 is strong support after it gave way to the upside as resistance this morning so price is moving between the 1614 S and the 1618-1621 resistance gauntlet. The TRIN and VIX creep slightly upwards over the last one-half hour which causes the drop in the SPX from 1618 to 1614. The drama continues.

Note Added 3:40 PM:  UTIL is 482.42 drifting towards the 480.82 danger level. SPX is 1614.49 sitting on 1614 support.

Note Added 4:06 PM: Today is a draw. SPX is 1613.20 losing the 1614 support, which now flips back to resistance again. The three moving averages hold the fort for the bears; the 20-day MA at 1620.00, the 50-day MA at 1620.42 and the 200 EMA on the 60-minute at 1619.37. The 20 MA stabs down through the 50 MA which is a bearish market signal moving forward. The 8 MA remains above the 34 MA on the 30-minute chart signaling bullish markets for the hours ahead. The SPX 2-hour chart is rolling over but the MACD line hints that price may want to attack the 1618-1620 (1618 is strong resistance along with the three moving averages listed) resistance gauntlet again tomorrow. So the market story for the next 20 or 30 SPX handles will be told tomorrow depending on whether the SPX closes under 1618 or over 1620. If UTIL loses 480.82 tomorrow, the broad indexes will be selling off and heading lower but if UTIL stays above 480.82 that will give the market bulls the nod and a chance to take out the 1620. Remember, the SPX began June at 1631. The SPX is up for 7 months in a row. The bulls only need 18 points and they can print another positive month. If not, the bears will finally log the first negative month in the last eight. Tomorrow is EOM, EOQ2 and EOH1.