Keystone's Morning Wake-Up and Midday Market Action 8/16/13; Housing Starts; Consumer Sentiment

Markets always take the stairs up and the elevator down. Yesterday was the elevator. The 10-year Treasury note yield pops above 2.80% yesterday and currently. Every, literally, every single person, even the cab driver and the night cook at the local diner last evening, says yields are going no where but up, it is guaranteed. You know what happens when everyone is on one side of the trade. The TNX chart posted the other day shows that yields may actually be topping at this 2.75%-2.85% area, despite the fact that the move above 2.75% represents a breakout to a new range. The daily chart has near-term momo so more loftiness in yields can be maintained into next week, however, the 10-year yield would be expected to top out in this sub 2.90% area. There is a large amount of overhead resistance from 2012 that kicks in above 2.86%. At the same time, the 10-year yield has not dropped to back kiss the important neck line levels for the inverted H&S patterns at 2.40%, 2.30% and 2.00%, which would be prudent. So Keystone is the lone voice in the wilderness looking for lower yields moving forward, perhaps A. Gary Shillling may be in this camp as well, while 99% of Wall Street says higher yields are on tap without question. Keystone continues to look for disinflationary and deflationary pressures moving forward, against the new back drop and realization that QE is no longer effective. Egypt deteriorates, oil prices remain elevated, and all eyes are watching the Suez Canal. The Muslim Brotherhood calls for a Million-Man March today after Friday prayers which ended a couple hours ago. 

Housing Starts are just released and show a 6% jump to 896K but overall sideways. Throwing out the high and low numbers for Starts, there is an ongoing sideways range through 850K-950K since last October, almost one year ago. Therefore, the Starts are a key indicator of economic strength moving forward. If Starts begin printing above 950K and then above one million, happy housing times are here to stay. If Starts begin printing under 850K, then the U.S. is slipping back into recession and troubled times. Consumer Sentiment at 10 AM will create a market pivot point.

Technical damage occurs in the markets yesterday. The Dow lost its 50-day MA at 15281 and sits on the 100-day MA support at 15098 (watch this closely today). The SPX is near its 50-day MA at 1656.74. The tight standard deviation bands on both the Dow and SPX resolve to the downside. The 200 EMA on the SPX 60-minute chart at 1678.74 failed which signals bearish markets for the hours and days ahead. The important and strong 1685 support failed. Watch for back tests of the important 1678 and 1685 levels moving forward. The 8 MA remains under the 34 MA on the 30-minute chart signaling bearish markets ahead. The SPXA150R fell under the 80 level which signals continued bearish markets, unless the 80 is regained.  The 200-day MA for the VIX at 14.72 was taken out to the upside, albeit by one penny at 14.73, but a move higher in the VIX is very bearish for markets. If VIX is above its 200-day MA, you do not want to be long the markets.  Semiconductors (SOX 473.07), financials (XLF 20.13), retail (RTH 54.07) and volatility (VIX 14.21) all collapse (volatility spikes) creating the market negativity. 

Keystone will be out from late morning on so yunz are on your own today. Watch the SPX 200 EMA at 1678.74, the SPX 50-day MA at 1656.74, the SPX 1685 resistance, the VIX 14.21 bull-bear line in the sand, the VIX 200-day MA at 14.72 and the XLF 20.13 bull-bear line in the sand to determine market direction today. If the bears push the SPX under 1659, only 2 points lower, the downside will accelerate further.  As this morning's chart shows, the 2-hour, 1-hour and 30-minute SPX charts are setting up with oversold conditions, a falling wedge and positive divergence so a dead-cat bounce may be on tap, perhaps beginning in the 10AM-11 AM Fed POMO pump area. Markets will not settle-in today until after the 10 AM pivot. Volume may be elevated at the open and at the close today due to OpEx. Initiating long positions in equities, on a weekly and monthly basis, is not attractive until fear and panic shows in the markets with the CPC put/call ratio moving above 1.20. The CPC is at 0.96 so check the ratio this evening after the markets close.

Note Added 9:41 AM:  UTIL 485.09 is coming perilously close to the trap-door at UTIL 482.97 (50-week MA). If UTIL loses a couple more points, market mayhem will result. VIX is 14.38, under the 200-day MA so the bulls are trying to fight back, but above the bull-bear line in the sand at 14.21 which will maintain weak markets moving forward. XLF 20.04. SPX pierces the 50-day MA at 1657.45 with a LOD at 1656.17. Bounce or die. UTIL 484.58 ........

Note Added 9:51 AM:  UTIL 483.91. The 50-week MA is 482.94 (trap-door). The intensity grows. SPX takes an initial bounce off the 50-day MA. Financials are being pushed higher to help the bulls. XLF 20.11.

Note Added 10:13 AM:  High drama with the UTIL 483 trap-door. Price taps on the door but it held, for now. VIX drops under 14.21 so markets recover. Watch XLF 20.14 as the pivot. If XLF moves above 20.14, the bull recovery rally is in place. If VIX moves above 14.21, equities will weaken again. If UTIL 483 fails, markets should drop dramatically. The Fed POMO pump should help the bulls.