Yesterday's projection from the futures pointed to an SPX test of the all-time highs at 1709.67, but price simply did not develop the strength. The gap at SPX 1707 remains open. The HOD yesterday is 1704.95. For today, starting at 1698, the bulls need to touch the 1705 handle, and that will ignite an upside acceleration to fill the 1707 gap and test the 1710 high in quick order. The bears need to push under 1692 to accelerate the downside. A move through 1693-1704 is sideways action for Tuesday. The SPX daily chart pierced its upper standard deviation band so a move back to the 20-day MA at 1658.60, and rising, is a reasonable expectation moving forward through September. The 50-day MA is 1673.87, and rising, and has not yet received a back test after the break out 6 days ago, so it is a reasonable expectation for price to test this support moving forward. The upper standard deviation band on the SPX weekly chart is now at 1720-1721 so the door must remain open for the 1720's and would occur if the Fed tapers less or provides otherwise more bullish commentary tomorrow. Bulls needed either copper or utilities to cooperate yesterday to verify the upside, but copper did not have enough juice. UTIL moved above 483.35 which would lock-in further upside market bullishness, but, alas, four minutes later price collapsed. Without copper and utes, the broad indexes leaked lower as the day proceeded.
For Tuesday, the fight for market direction is determined by copper and volatility. The bulls must push JJC above 39.90 to receive upside market fuel. The bears must push the VIX above 14.65 to receive downside market fuel (reference this morning's chart for further discussion on volatility). Two other areas of interest are utilities and commodities, UTIL and GTX, respectively. The bulls need UTIL to move above 483.35, and stay there, to pop the champagne corks. The bears need GTX to drop under 4892 (now only 44 points above) to verify a downside market move. Any change to any of these four parameters will push the broad indexes in that direction. If all four remain in their respective bull and bear camps, equities will simply float sideways into the Fed decision tomorrow. The 2-day FOMC meeting begins today. Since the QE tapering decision is only 11 or so trading hours away, markets may be content in bumbling sideways until Chairman Bernanke brings the tablets down from on high. At least everyone can easily see that free markets do not exist since equities move depending on what a Fed chairman says and not company fundamentals or economic data. Once the junkies are hooked on easy money crack cocaine, it is hard to wean them off.
Secretary Lew speaks at 8:15 AM. Consumer Price Index (CPI), that will continue to show inflation on a milk carton, is released at 8:30 AM. TIC data, showing foreign investment in the U.S., is 9 AM. NAHB Housing Market Index is 10 AM. Tomorrow, Wednesday, is a pivotal market day that will be etched in history. Housing Starts are in the morning and the Fed circus will be in full swing the last two hours of trading. During OpEx week, a Tuesday low typically leads to a Wednesday high so if markets sell off today, a potential quickie long play for nimble day traders may be on tap. Watch VIX 14.65, JJC 39.90, UTIL 483.35, GTX 4892 and SPX 1705 and 1692 to determine market direction. Futures are flat at this writing about three and one-half hours before the opening bell.
Seems like Scott is right.
ReplyDeleteIf 1740 is reached and taken, this opens the gates to 1820-1835 area.
The road to 1740 starts , of course, with a new all times high...
V.
KS,
ReplyDeleteVIX is now above the 200 and closing in on 14.65. GTX is down BIG and now below the 4892 threshold. JJC & UTILs below the mark. 1705 on the spx seems to be holding although the market wants to push through. I'm thinking keybot is so good, the SPX will close the gap at 1707 just as the VIX crosses 14.65.
What say you grand wizard?
The GTX was very important, watch 4888 today, it is now creating market bearishness. You can tell that markets just want to idle ahead of the Fed since the decision is so close. VIX on the verge of a major decision and will break one way or the other. SPX teased the 1705 but did not have enough juice. Watch VIX 14.64 closely, if it moves above, and SPX drops under 1698, Keybot will likely flip to the short side. Any bull move in JJC, GTX or UTIL will keep the bulls running higher.
Delete"... At least everyone can easily see that free markets do not exist since equities move depending on what a Fed chairman says and not company fundamentals or economic data. ..."
ReplyDeleteThe media is filling with predictions of $10-15 billion taper.
What happens if they announce "no taper yet" tomorrow? Expect the unexpected.
Yep, it is all a crap shoot. And Bernanke will probably come up with a new fancy idea. Since consensus is 10-15, even say 10-12, no taper or less than 10 and equities would likely rally. If the taper is more than 12, equities may sell off. Status quo if the consensus range is hit.
DeleteThere should be a market pivot at 2 PM EST, then at 2:30 PM as Bernake provides commentary.
Hey Keystone-
ReplyDeleteIs the FED Chairman permitted to override the decisions of the board members? So for example, does a dovish Chairman have the freedom to override his/her board members if they vote towards impeding accomodative policy? The reason I ask is because I always thought the FED Chairman was just a front man who runs interference between the FED, The Government, and the Public; he/she isnt a rogue emperor who just does whatever they want despite the FOMC consensus. The FED Chairman is basically a cover man who tries to cloak the FED's unconstitutionality behind the disguise of economic stimulus and other Keyenesian tomfoolery.
Where exactly does the FED Chairman's jurisdiction end? If Janet Yellen becomes the nex FED Chair, who cares? She cant just create dosvish policy because she likes it, she will have to do what the board members want her to do. It should not matter who the next Chairman is, the decision to ease is not solely at the discretion of the chairman.
FeS2
Nope, the Fed Chairman rules the roost. The Chairman makes the final decision no matter what the members say. Everyone can be against him and he can simply do what he wants to do. This would be hard to explain and cause controversy that is why it does not happen. But the Chairman is the decision guy, or gal, if Yellen gets in. She would rule the roost. Good ole Keystone would always listen to everyone's input in the business world, then just do what he wanted to do. LOL
DeleteYikes. I didnt know the FED Chairman had that much power.
DeleteFeS2
A new all time high will be registered until the end of this week although FED might (!) taper today.
ReplyDeleteIt's the 'masters' way of telling "markets mark new ATH although we are tapering. They are free and enjoying their freedom".
No, they are not free.
Prepare for the most hideous circus in markets history!
Enjoy it with a beer or two .... not with positions in the market!
I don't trade the FED event, I'm all in cash!
Those are not markets to be traded!
As a professional I'm advising you to wait for follow-through for the moves after the FED event! Wait a few days to see the dust calming and the market picking a meaningful direction and sticking with it! Watch for TA signals, consider carefully the MA's and be nimble!
Trading today is strictly for poker gamblers!
GL to those!
V.
It is a circus V and the performers are beginning to arrive. Bernanke has to walk the tight rope today.
DeleteThank you KS. You are here with us sharing your knowledge. May God give you health and happy days. You fully deserve it!
DeleteV.