Friday, January 17, 2014

Keystone's Morning Wake-Up 1/17/14; Housing Starts; Consumer Sentiment

GE and MS both report earnings and beat estimates although not by any overwhelming degree for each. GE benefits from jet engine sales. GE is down -1.5% and MS up +1.4% pre-market. The INTC stink from last evening may linger today in the tech sector. INTC was trading down -5% across the pond earlier. Copper was negative hours ago but mounted another big comeback, like yesterday, and is now positive and moving firmly higher. Traders are latching on to a basic materials, infrastructure-type, positivity trade moving forward, obviously not expecting China to pull back. Housing Starts at 8:30 AM are one of Keystone's key monthly indicators, ditto Consumer Sentiment at 9:55 AM which will create a market pivot point. Industrial Production is released in front of the opening bell at 9:15 AM. Housing Starts consensus are 990K so it looks like no one wants to stick their neck out to call for one million numbers as yet. The one million plus starts, or a miss of one million starts, will set the mood for markets. Fed's Lacker speaks at lunch time.

Keybot the Quant remains short but the markets remain a coin-flip each day. Watch UTIL 491.68 and UTIL 494.12 as described in this morning's chart. Watch JJC 40.42 and VIX 13.87. The bulls need UTIL 494.12 to send equities far higher. If UTIL moves above 494.12, and the SPX above 1848, and both remain above, Keybot will likely flip long. The bears need to push UTIL under 491.68, JJC under 40.42 and/or VIX above 13.87, to place a lid on the market upside and turn markets lower, any 1 of the 3 would do. If the bears cannot make a move, and the bulls cannot push above UTIL 494.12, status quo, then markets will stumble sideways into the weekend like a drunkard looking for happy hour.

For the SPX today, the bulls need to push up through 1848 and new all-time highs are quickly on the way and a happy move into the weekend. The bears need to push under 1840 to accelerate the downside. A move through 1841-1847 is sideways action. Markets are typically bullish moving into a 3-day holiday weekend. The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead (reference this morning's chart). Markets are closed on Monday in Observance of Dr Martin Luther King Jr Day and will not reopen until Tuesday. Pay attention to where UTIL ends the day in relation to the 491.68 and 494.12 levels since this provides insight into market direction on tap for next week. Setting the daily market machinations aside, the SPX weekly chart remains negatively diverged (sans money flow in the near-term), ditto the SPX daily chart, the CPC and CPCE put/call ratios continue to scream complacency, as well as the VIX, and the CBOE SKEW prints another high at 137-ish, all signaling a significant market top at hand. Watch your wallet. Market bears need the negative 8/34 MA cross on the SPX 30-minute chart or they got nothing.

Note Added 6:02 AM on 1/18/14: The 8 MA stabs down through the 34 MA yesterday morning signaling bearish markets for the hours ahead. The bears tried to push under the 1840 early in the day but could not. Into the closing bell, however, price collapsed to 1835 once the 1840 broke. Markets remain a toss-up. Utilities would not make a decision. UTIL dropped to test the critical 491.68, but the bears could not push it down through. UTIL then ventured higher towards 494.12, printing a HOD at 493.57, only about 50 cents from bull victory, but fell on its sword, collapsing into the closing bell ending with the 492 handle where it started. In fact, UTIL ended exactly flat on the day, you do not see that often, showing that the computers cannot even decide which way the markets should break. Thus, status quo. The same UTIL fight will be in place Tuesday morning; bulls win at UTIL 494.12 and bears win at UTIL 491.68. Bulls need higher utilities and higher commodities. Bears need lower utilities, lower copper and/or higher volatility. SPX closes at 1838.70. LOD 1835.23. The 20-day MA is 1834.96. So price bounced off the 20-day into the closing bell. Thus, the 20-day carries a lot of street cred for next week.

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