Keystone's Morning Wake-Up and Midday Market Action 8/19/13

On Monday, markets tend to move the opposite direction of the OpEx Friday, which was a flat to down session. The full moon is 9:45 PM EST tomorrow night and markets tend to be bullish moving through the full moon so perhaps equities will try to find a near-term bottom for a bounce into mid-week. The SPX weekly chart favors continued weakness ahead but a bounce would be in order with the SPX now down -3.2% off the 1710 top on 8/2/13.  Watch the 50-day MA at 1657.40 and 100-day MA at 1631.37. Watch the Dow 50-day MA at 15282 and 100-day MA at 15103. The SPX is below the 200 EMA on the 60-minute chart at 1677.40 signaling bearish markets for the hours and days ahead. Markets will remain weak and in sell mode as long as the SPX stays under the 200 EMA.

The CPC and CPCE put/call ratios, and relatively tame VIX, continue to indicate trader complacency. If trading in a weekly and monthly time frame, longs should not be entered until panic and fear develops at a CPC above 1.20. Currently, traders are buying the dips fully believing in the Fed and central banker easy money, believing that markets will never go down again. The VIX 200-day MA is 14.70 and serious markets selling will develop if volatility moves above this critical moving average. The NYMO is -80 in the area where near-term market bottoms occur. The June market bottom occurred in the -95 to -105 area. The TRIN continues to favor bulls day after day with numbers under 1.00 so a higher TRIN would be expected in concert with market selling. There are no economic data releases today. URBN earnings after the bell kick off a plethora of retail earnings this week. HD, LOW and TGT are key.

Keybot the Quant remains short with four key parameters dictating market direction; UTIL 483, XLF 20.13, VIX 14.21 and RTH 54.00, utilities, financials, volatility and retail, respectively. All four are bearish. If any one parameter turns bullish, the markets will recover and bounce. Keybot will likely stay short unless three of the four turn bullish. If UTIL stays under 483, markets are in serious trouble. If VIX stays above 14.21, and then moves above the 200-day MA at 14.70 mentioned above, markets are in serious trouble. Thus, the bulls are going to fight back focusing on these four parameters. Higher yields with the 10-year Treasury now at 2.84% are sending utes lower. Financials may experience weakness in light of the JPM bribery probe where sons and daughters of Chinese big-wig's may have been given jobs in exchange for favorable treatment. The retail sector is very important this week and the earnings will either help the market bulls recover for a happy weekend, or, tank the markets. India must be monitored due to the rupee and tumbling stock market. A currency crisis may be developing that would negatively impact the globe.

For the SPX starting at 1656, the bulls need to touch the 1664 handle and the upside will accelerate. Bears need to push only 3 points lower, under 1653, to accelerate the downside. S&P futures point to a drop of -3 or -4 SPX points at the opening bell one-hour away. A move through 1654-1663 is sideways action. Watch UTIL 483, XLF 20.13 and VIX 14.21 very closely since their movement dictates market direction.

Note Added 11:57 AM:  Status quo. Utilities, financials and retail all remain weak. The VIX is 14.61 above 14.21 causing market negativity and is also fighting at the 200-day MA at 14.68. The VIX under 14.68 allows the bulls to prevent the markets from dropping, for now. Watch VIX 14.68 closely. SPX is 1654.56 flat on the day thus far. The 10-year yield is up to 2.87%. The SPX hourly and minute charts are set up with positive divergence. Keystone added to the SPXL long S&P play which targets a VST market bounce. If VIX moves above 14.68, however, the markets will start selling off in force.

Note Added 1:52 PM:  SPX 1651. UTIL 477 collapsing as yields rise, the 10-year now at 2.88%. XLF 19.85. RTH 53.44. VIX is 14.96 with a HOD at 15.01 above the 200-day MA at 14.68. It is surprising that equities are not selling off more strongly. TRIN 1.12. The SPX hourly and minute charts continue to set up or are set up with positive divergence. The money flow on the 2-hour chart is weak and bleak so the market malaise may continue for another hour or two. UTIL, XLF, RTH and VIX all want the markets to sell off strongly but the bulls are holding back the push lower, for now. INTC and AAPL are moving higher helping the Nasdaq.

Note Added 7:08 PM:  They sold 'em into the close today. SPX is 1646.06 under the 50-day MA at 1657.45 and perhaps sniffing out the 100-day MA at 1632.21. The Dow already lost its 100-day MA and has been leading the broad market lower. Watch the 20-week MA at 1639.49. The daily and weekly charts remain weak but a bounce is in order. NYMO is -100 consistent where a bounce should occur, however, the CPC and CPCE put/calls continue to show complacency. VIX is now above 15, so perhaps a handful of traders are becoming more defensive. Many more traders must develop panic and fear before an intermediate term bottom can be placed. The SPX hourly and minute charts should create a bounce tomorrow. That would be good timing for the market to perform a quick recovery bounce through the full moon tomorrow night into mid-week. Earnings are key in the morning and will directly impact the futures. Bears only need to see a smidge of red in the futures overnight and before the opening bell and the SPX will be in the 1630's lickity-split. Markets begrudgingly move lower today. The dip buyers refuse to believe that markets will go down, since the Fed said it will supply QE Forever, but as the dip is bought, the markets continue lower. The SPX has dropped about 20 points so far after the UTIL 483 trap-door (50-week MA) opened.