Keystone's Morning Wake-Up and Midday Market Action 7/1/13; ISM

Happy Canada Day to our friends up north. Today begins a new month, a new quarter, Q3, and the second half, H2. China PMI is one single hair above contraction at 50-ish verifying the recent weak economic data. The dollar/yen pops to 99.75, boosting the S&P futures to +8, as compared to the dollar/yen at 99.10-99.40 last evening when futures were down. So watch this relationship that appears in sync again. Dollar/yen up = up equities and dollar/yen down = down equities. Keystone keeps singing the 1618-1623 resistance gauntlet song since a winner and loser is determined by the price action across this zone. If the SPX stays under 1618, the bears will continue to gather strength and push price back under 1600 and lower. If price pops above 1623, the bulls will probably not look back until 1636 R and/or 1649-1650 R. Watch the three key moving averages to receive the answer; the 50-day MA at 1621.72, the 20-day MA at 1618.77 and 200 EMA on the 60-minute at 1618.75. If 1619 gives way to the upside, then the 20 and 50 will likely give way in quick order.

For the SPX today starting at 1606, the bulls need to touch the 1616 handle and the upside will accelerate into the 1618-1623 gauntlet and begin the battle for market control. The bears need to push under 1601 to accelerate the downside that would target 1593 in quick order. A move through 1602-1615 is sideways action today. Keybot the Quant is long and will likely stay that way unless UTIL 480.82, RTH 51.48 and/or XLF 19.20 fail.  If these three parameters remain in the bull camp, the markets will continue floating higher. If any of the three fail, that locks in the market downside path moving forward. Markets need to play out this morning into 10 AM with the ISM Mfg data since this will create a pivot point. So the initial move at the opening bell may not be the move in store for the day. The 60-minute chart with 200 EMA must come into agreement with the 30-minute chart with 8/34 MA cross as highlighted in this morning's charts. This agreement will identify the market direction forward.

The bulls are at an advantage since the new month brings in new money and bullishness, ditto the holiday. Fed heads begin pumping the markets tomorrow at noon time and politicians are on vacation which is market positive as well. If the bears run today, the markets may shift into the bull side from noon Tuesday into the holiday. If the bulls maintain the bullish start today through the close, the markets may float higher all three days into the holiday. Wednesday is a shortened session with the NYSE closing at 1 PM EST. The markets may take on a sideways function this week due to the holiday and traders taking time off for hot dogs, apple pie and fireworks. The Jobs Report is Friday morning and will also be the first opportunity for markets to react to the ECB decision on Thursday so the week may have a wild ending. Next week all the traders will return ready to begin the summer trading season. S&P's are +7 and dollar/yen is 99.67.

Note Added 9:16 AM:  GDXJ is receiving a reverse split this morning so that price will change at the open to reflect the split.

Note Added 12:16 PM:  The bulls stampede the bears from the opening bell forward, leaping to 1624-1626 after the 1616 was touched and is now moving sideways. The 1626-1627 is strong resistance. The bulls move through the 1618-1623 resistance gauntlet, and successfully back kissed the 1623 at 10:30 AM, helping the bulls keep the broad indexes elevated. The 20-day MA is 1618.05, the 200 EMA on the 60-minute is 1618.95 and 50-day MA is 1623.13. The bulls take out all three flexing their muscles. The TRIN is under 0.9 helping the bulls. Volume is light only about two-thirds of a day's average expected volume, so it is easier to push the jello around the plate. The SPX is above the 200 EMA now agreeing with the 8/34 MA cross on the 30-minute chart signaling bullish markets for the hours and days ahead. It's all going the bulls way, however, the move above the important MA's is not very convincing as yet, the volume is light, the 1626-1627 holds price down so far, UTIL is leaking lower with a 483 handle right now, and the SPX hourly and minute charts are either showing or developing negative divergence. Thus, the broad indexes likely need to play around sideways for a while and more action may occur across the 1618-1623 gauntlet. Give the bulls the nod right now but the move so far is not entirely convincing. The dollar/yen is 99.68 going no where so equities stumble sideways as well. Keystone took profits on DNDN, will look to reenter.  Also took profits on GLD, will look to reenter.  Also bot FRO, opening a new long position, a dangerous and speculative shaky shipper, that is showing attractive positive divergence. Also bot SKF, the double inverse ETF for financials, opening a new long trade (which is short financials).

Note Added 12:34 PM:  SPX comes down to back test the 50-day MA at 1623.09. Price is at  1623.72 bouncing off the 50-day four minutes ago. Looks like some drama is on tap. UTIL 482.71 now only two points above the danger line.

Note Added 12:41 PM:  Note the daily chart with the 50-day MA sloping upwards, and 20-day MA sloping downwards. Price may end up preferring to move between this range using these moving averages as the upper and lower limits, which is currently a range of 1618-1623. The bulls are keeping their heads above water with the SPX at 1624.09 and 50-day MA at 1623.09, so one buck to the upside, and bulls know they must close above the 50-day today to prove they have the upside juice moving forward. UTIL 481.67 now less than a point from the 480.74 danger line. Things are getting interesting.

Note Added 1:43 PM:  If you bring up a minute chart you can see how price is dancing across the 50-day MA at 1623-ish bouncing, then drifting back, then bouncing, then drifting back. Will the bulls hold the 50-day MA support? Utilities continue to leak lower. Whoa. UTIL just failed at 480.74, now printing 480.59. If UTIL stays under 480.74, the broad indexes will weaken.

Note Added 1:45 PM:  SPX collapses through the 50-day MA at 1623.04 now printing a 1621 handle. That was fast. A sideways bracket is formed by the 20-day MA below at 1618 and 50-day above at 1623. UTIL 480.85 back to the bull side by a dime. The drama continues. Dollar/yen 99.62, a bit lower, so the SPX is a bit lower.

Note Added 1:51 PM:  UTIL collapses to 480.04. Hold on, this may get interesting.

Note Added 2:06 PM:  The 200 EMA on the 60-minute chart is 1618.95. The SPX is 1620.08. The 8 MA is curling over to the downside on the 30-minute chart. UTIL 480.74 exactly on the danger line so bounce or die and the markets will follow UTIL.

Note Added 3:33 PM:  SPX is 1616.11, where the break out started this morning in the first minute of trading, under the 200 EMA on the 60-minute at 1618.92 which signals bearish markets ahead. Who knows where it ends today? The 8 MA is dropping towards the 34 MA on the 30-minute chart.  UTIL is 479.03 creating the market negativity this afternoon. XLF is 19.54 above the 19.25 danger line and RTH is 52.32 above the 51.60 danger line. The bears will need either RTH or XLF to join the bear camp to send the SPX under 1600. Keystone bot DBA opening a new long position.

Note Added 4:00 PM:  After all the theatrics, the 1618-1623 gauntlet held, so far. UTIL 479.59. The rejection of both the 20 and 50-day MA's two times over the three days is bearish hinting that the bulls do not have the juice to take equities higher. Volume is below average about 72% of a day's average expected volume. The 8 MA is moving downwards towards a negative cross of the 34 MA on the 30-minute chart in the first hour of trading tomorrow, however, you know what has to be done, the bulls must catapult equities higher at the opening bell to send the 8 MA back up and prevent the negative cross. So bulls need another morning of S&P futures at +7 or higher before the open tomorrow. If the 8 stabs down through the 34, and the UTIL stays negative, the markets should start selling off in force. If markets are weak tomorrow morning, Fed's Dudley may pump the indexes at noon time with happy QE talk. The markets may stumble sideways ahead of the holiday in this light trading environment. Tomorrow is the last full day of trading until Friday. The battle for the 1618-1623 gauntlet continues.