Keystone's Morning Wake-Up and Midday Market Action 9/26/13

The bears are given an open door for the last two days but unable to walk through. If the bears do not plan on running with the ball, the bulls will take the ball and run the other way. If GTX, commodities, move above 4888, now at 4856, more bull fuel will send equities higher well up over 1700. On the bear side, four parameters are in play; UTIL 485.33, XLF 20.01, VIX 14.67 and JJC 40.00. The bears keep teasing at these levels, but fail to move through any of them. If 1 of the 4 levels are crossed, a lid is placed on any additional equity upside. Keybot the Quant is long but if 2 of the 4 turn bearish, and the SPX drops under 1692, and stays under, the algo will likely flip to the short side.

For the SPX today starting at 1693, the bears only need one-point lower, to drop under 1692 and that will accelerate a move into the mid 1680's. The bulls need to touch the 1702 handle and the upside will launch to 1710 in quick order. A move through 1693-1701 is sideways action. VIX remains low and CPC and CPCE put/call ratio's remain low signaling a lack of fear and complacency continuing. Traders are unconcerned with the political theatrics increasing each day. Everyone knows the can will be kicked down the road and the CR will be agreed to on Monday evening so there is no need to worry. This set-up hints that the risk is more to the downside than the upside.

Q2 GDP is in line at 2.5%. Pending Home Sales are 10 AM so markets may take a stutter step although this data is not typically a market mover. Natty Gas Inventories 10:30 AM. Kansas City Fed Mfg Index at 11 AM. Fed's Stein, Kocherlakota and George are out speaking and spinning today. The 7-Year Note Auction is 1 PM. NKE earnings are after the bell. S&P futures are +4.50 so watch the five parameters listed in the first paragraph to see which market direction is favored. The 10-year yield is 2.65%. HTZ drives off a cliff -9% pre-market. If cars are not rented, business people are not traveling to see customers and folks are not taking vacations. European markets are mixed with Italy's political drama heating up again.

Today, 9/26/13, is a target date for Keystone's Eclipse Indicator. Today and 11/26/13 are identified as two dates, +/- a couple weeks, that are susceptible to a major market sell off. This eclectic indicator has a very reliable track record. So the current window is now through 10/10/13, and then the next window 11/12/13 through 12/10/13. The entire range is susceptible to market selling but the two windows are typically where a turn down would occur. Interestingly  so far, the markets have created a near-term top and several day minor sell-off. If the first window, now, results in a strong pull back, the second window will typically not be applicable. But if the markets do not sell off significantly over the next two weeks, the window in late November and early December will gain importance.

Since the markets are down 5 days in a row, talking heads say equities are oversold. Wrong. No where near there. The SPX daily chart shows that the RSI and stochastics have not even dropped below the 50% levels yet let alone be oversold. A relief bounce is a reasonable expectation but the daily charts show weak and bleak indicators that likely need to see lower lows with prices in the days ahead after any market bounce would occur. A move to test 1710 resistance would not be unreasonable. The 8 MA is under the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours ahead, however, the bulls are going to try and create a positive 8/34 cross today. Watch the 8/34 closely as well as GTX 4888, UTIL 485.33, XLF 20.01, VIX 14.67 and JJC 40.00 to determine market direction. Bulls win today with SPX 1702 while bears win sub 1692.

Note Added 11:16 AM: GTX 4869 less than 20 bucks from 4888. UTIL 485.56 pennies from 485.33. XLF 20.11. VIX 14.35. JJC 40.53. TRIN 1.09. SPX touched 1702 so price popped to HOD at 1703.85, more would have been expected, now at 1694.14. Speaker Boehner's comments on the president needing to negotiate appear to have dampened today's mood. The main drama is around the GTX 4888 and UTIL 485.33. Bulls need GTX, bears need UTIL.  UTIL 485.43.... 10 more cents and the utilities will create broad market weakness.

Note Added 11:22 AM: High drama. UTIL 485.39...... bears need 6 pennies and they place a lid on the market upside.

Note Added 3:30 PM: UTIL failed at 485.33 which will place a lid on any further equity market upside. The second number for UTIL to watch is the 50-week MA at 483.55. This failure will cause additional market weakness. Ditto XLF 20.01 now at 20.04 three pennies from failure. Keybot the Quant is long. If either UTIL 483.55 or XLF 20.01 fails, and SPX drops under 1692, Keybot will likely flip short before the closing bell. Also watch GTX 4888. Price is sneaking up to the 4888 and this will be a feather in the bulls cap that will allow markets to stay elevated. This is high drama into the closing bell. Watch UTIL 485.33, 483.55, XLF 20.01 and GTX 4888. Bears win with either UTIL 483.55 or XLF 20.01. Bulls win with either UTIL 485.33 or GTX 4888.

Note Added 3:51 PM: UTIL 484.40 creating bearishness under 485.33 but creating bullishness above 483.55. XLF 20.09. GTX 4881. Equities stumble sideways. Utilities become important again. Bulls are gunning for a plus-485.33 close since it places a lid on the upside along with GTX 4888 and bulls must bust up through one or both of these levels to send the SPX 1700+.

Note Added 4:01 PM:  Numbers are still settling but UTIL ends at 485.36, three cents on the bull side. Amazing how Keybot identifies the numbers ahead of time. The bulls squeeze out a 3 cent victory if the 485.36 is final. The pivot in UTIL tomorrow morning, up or down, will likely take equities up or down in the same direction. XLF hangs on and refuses to fail at 20.01.