Markets are a wild ride lately with lots of jukin' and jivin'. The strength in commodities and trannies pumped the markets yesterday. Keybot the Quant is long but markets can go either way moving forward. The algorithm is tracking utilities, semiconductors and commodities since these three stooges are most greatly affecting market direction currently. The bulls need UTIL above 504.65 and the upside will accelerate with blue skies ahead for bulls. The UTIL 504.65 number is important for all of next week. The bears need to push UTIL under 495.50 (the trap-door in the markets), SOX under 523.92 and/or GTX under 4776 to stop the market upside and introduce market weakness again. Yesterday, SOX and GTX jumped into the bull camp which created the upside in equities.
For the SPX starting at 1773, the bulls need to push up through 1774 and an acceleration will occur to the 1780's. Reference the previous charts for more information on the upside resistance levels at 1781, 1788, 1796, then 1801 and higher. Thus, a breach of 1774 will send price to test 1781 in a heartbeat, then 1788. The bears need to retrace yesterday's 22 SPX points, a formidable task, so instead the bears will simply try to prevent further market upside by flipping one of the three parameters above back into the bear camp. A move through 1754-1773 is sideways action today.
The SPX tested the 150-day MA at 1738.92 two days ago and bounced strongly. This gives the 150-day MA serious street cred moving forward so pay attention to this moving average. Price ran higher and is now testing the 100-day MA at 1772.10. Today provides the bounce or die answer from this important moving average. Keep an eye on the 20-week MA at 1781.48 since it provides an immediate gauge of who is winning, bulls or bears. Also, the 200 EMA on the 60-minute at 1799.87 is critical. Market bears are okay as long as price stays under 1799. Bulls will rule and a strong upside rally will be occurring above 1800 likely taking the SPX back up to the 1820's.
The Monthly Jobs Report is the main event today at 8:30 AM EST less than two hours away. The circus is arriving and the calliope is playing in the background. The consensus estimate is 189K jobs with an unemployment rate of 6.7%. Last month was the disastrous and paltry 74K jobs so pay attention to the revision of this number. Also, wage growth is key. Inflation will not exist unless wages rise. Consumer Credit numbers are released at 3 PM providing a gauge on how deep in debt all Americans are.
The dollar/yen 102.16 creating the market upside orgy yesterday. The dollar/yen was down at 101 when the BOJ started yelling Banzai! and turned on the printing presses full steam. This crushed the yen, sending the dollar/yen currency pair higher, and US and Japan stock markets higher. The BOJ meets on 2/17/14 and 2/18/14, about a week from now, so that meeting will be key to see if the yen-beating party continues, or not.
Developing a mosaic for equities markets over the next couple weeks, the bulls are looking good starting mid to late next week. Fed Chair Yellen will be speaking next week so this may help create market stability. A full moon occurs on Friday and markets are closed for the Washington's (Presidents) Day holiday on 2/17/14, so the pre-holiday bullish vibe would be in place for 2/13/14 and 2/14/14. Valentine's Day is Friday as well so folks will be in a good mood looking for love.
Markets are closed Monday, 2/17/14, and the BOJ two-day meeting occurs, so markets may pump higher when the US returns Tuesday, 2/18/14, as Japan is beating the yen. OpEx is that week as well so the typical Tuesday, 2/18/14 to Wednesday, 2/19/14, up move should be on tap creating another feather for the bull's cap. The 'Three Amigo's Summit', US, Canada and Mexico, is 2/19/14 and perhaps an approval of the Keystone XL pipeline will occur to make everyone happy, which would create market bullishness. Thus, you can see the factors lining up in favor of the bulls, say from 2/12/14 into OpEx 2/21/14. Does this mean the bulls are guaranteed to run higher in this period? No, but the background current of the markets will be favoring the bulls. With this scenario in place, the bears must perform damage on markets from now into next Tuesday or Wednesday, otherwise, the bulls will likely mount their rally from now into OpEx (the next two weeks).
Watch the VIX 200-day MA to determine if the bulls, or bears, will be winning moving forward as highlighted on this morning's chart. The VIX is above the 200-day MA signaling bearish markets ahead. The CPC and CPCE put/call ratios remain subdued. Traders remains complacent. The market selling has not negatively impacted the bullish euphoria to any great extent. Traders in general remain very bullish and yesterday shows how quickly most traders can become all bulled up. Interestingly, with all of yesterday's upside bluster, the volume was the lowest over the last week or so, not exactly a ringing endorsement of a recovery rally.
The Dow regained the 200-day MA at 15483 and the 150-day MA at 15623 as well. Use the 15623 as a pivot point (bounce or die). The Monthly Jobs Report will set the tone. Consensus 189K jobs and 6.6% rate. Watch UTIL 504.65, UTIL 495.50, SOX 523.92 and GTX 4776 to determine market direction. The upside resistance for the SPX is 1774, 1781, 1788 and 1796.
Note Added 7:35 AM: Banzai! Dollar/yen 102.27. S&P +7. Dow +50. Nasdaq +20.
Note Added 8:42 AM: The jobs number is 113K and 6.6% unemployment rate. Average hourly earnings, the work week and wages are all flat. The jobs picture is stagnant with companies simply trying to keep existing employees busy. Last month's revision is a disappointing 1K so the paltry 74K number last month increases one single hair to a shameful 75K jobs. The economy needs from 130K to 180K jobs per month just to keep pace with new entries into the work force and this is the 2-month total; a dire picture indeed. At the same time that the young folks have very little job opportunities available, they are expected to foot the bill for Obamacare while paying off student loan debt. This situation will create structural problems in the economy for years perhaps decades ahead. Retail and government jobs saw large job losses. The labor participation rate is up a touch from 62.8% to 63.0% remaining at a sick multi-decade low. Folks want to work but there are simply no jobs. That means people do not have money to spend which means that businesses will have even less need to hire. The markets react violently and remain jumpy. The BOJ quickly retreated with the dollar/yen collapsing to 101.55. S&P drops to -5, the Dow -50 and Nasdaq flat. The 10-year yield plummets from 2.72% to 2.64% instantaneously. The deflation vibe is alive and well.
Note Added 8:48 AM: Dollar/yen back up to 101.98. S&P +8. Dow +41. Nasdaq +20. Futures recover. Nothing to see here, move along, move along. Metals are flat. The 10-year yield does not recover remaining at 2.68%.
Note Added 8:56 AM: Dollar/yen 102.06. Banzai! S&P +11 Dow +62. Nasdaq +25. 10-year 2.68%. The bad jobs number hints that Chair Yellen may 'taper the taper', which would goose the stock market with more free money. Bad news is good news since the Fed may now slow the taper and start printing more money again. Time to par-tay, except of course, for all the folks that are out of work, and also the folks that do not own stocks which is over one-half of the country, and do not benefit from the Fed and other central bankers that make the rich richer.
Note Added 9:37 AM: Equities pop higher at the opening bell and the upside orgy begins. The SPX bounces off the 100-day MA at 1772.97 and 20-week MA at 1782.08 support levels. The 1781-1782 resistance gives way without a fight so that becomes support and price will want to test 1788 R. HOD thus far 1785.67. UTIL, GTX and SOX all run higher. It's a bull party. Dollar/yen provides the rocket fuel at 102.44. You know what to yell by now. Yep, Banzai!
Note Added 9:46 AM: Price comes up to test 1788 and receives a spank down on the first try. HOD 1788.25. The 1796 R would be in play if price breaks up through 1788.
Note Added 9:56 AM: Since the SPX did not break up through 1788, price decides to move lower to back test the 20-week MA and strong support at 1781-1782. Bounce or die.
Note Added 11:17 AM: Price dies but keeps trying to come back to life dancing across the 1781-1782 S/R level. The 20-week MA is 1781.94, call it 1782. Price is now at 1782.69. The 20-week MA has street cred so it is important which side price prefers. For now, price is staggering sideways through the 1781-1788 channel. Bulls win above 1788. Bears win below 1781. VIX drops but remains above the 200-day MA so bears remain in the game overall (reference the VIX chart). Utilities are higher but the bulls have not achieved UTIL 504.65. This is why the bulls are having difficulty gaining upside traction. The bears have even less juice with both SOX and GTX running strongly higher. Bears can stall the market upside if they prohibit UTIL 504.65 from printing. Bulls are going to have a party come Monday if they close the day with UTIL above 504.65. UTIL is now printing 502.08.
Note Added 12:02 PM: UTIL 501.93. SPX now testing the top side resistance at 1788 again. Keystone took profits on CLF exiting the long position after it received the positive divergence launch. CLF jumped from 18.5 to 21, +14%, in two days time off the possie d rocket fuel. CLF can be reentered once it pull backs but it may gain another buck or more over the next couple days before it drops. Also exited the countertrend SPXL (dangerous triple X long ETF) long play, taking profits which amount to a hot dog and a coke. Will look for other opportunities as the day proceeds.
Note Added 12:41 PM: SPX keeps dancing at 1788 R. Keystone took profits on the MCP long trade which receives the rocket launch from the positive divergence and falling wedge highlighted a week ago. Will consider reloading on a pull back. Keystone bot NEM opening a new long position. Newmont has been beaten but the charts are setting up with positive divergence. The hourly and minute charts may have placed their bottom and are already pushing price higher.
Note Added 1:37 PM: SPX 1790 pierces up through the 1788 resistance. The 1796 is the next strong resistance and last stop to 1800+. UTIL is 502.09 not above 504.65 and VIX is 15.27, printing at the lows of the day, with the broad indexes printing at the highs, but remaining above the 200-day MA at 14.59, so the bulls have not yet proven they have what it takes even though the markets are climbing higher. Keystone shorted FB opening a new short position since the charts are setting up with negative divergence. Facebook has lots of momo upside energy; price ran from 24 to over 64, +170%, in the last 7 months, but it should stall as the weeks move forward. Also bot JGBS an inverse Japanese bonds ETN opening a new long position. JGBS is thinly traded and has moved flat so that must be considered. Also bot SJB, a thinly traded ETF that shorts high yield. SJB charts are very attractively positively diverged so a launch may occur in the near future, however, all trades are highly speculative and risky. If you bring up an HYG chart that is placing a matching price high with neggie d on weekly chart so a spank down should be coming as the weeks move forward. HYG can be entered short. The ongoing JCP long trade is a psycho ride. Penney's was flushed the other day with five times volume, that followed the 3x volume day a couple days before that; both are capitulation volume days. One would think everyone that wanted to sell ended up throwing in the towel once and for all. JCP recovers since then but there are sharks in the water that are trying to bankrupt the company. Traders are colluding to talk it down and try and bury it. Traders may be surprised at JCP moving forward since the old customers may return a lot faster than is given credit. Penney's is a household name and despite Ron Johnson nearly ruining the company, and he may have, folks may run back to JCP due to its strong brand and solid presence for decades. Time will tell. JCP may either catapult to glory, or collapse in a heap at any day forward, it is a wild one. JCP charts say up but the coordinated naysayers are trying to crush it. GOOG is moving higher towards the 1180 discussed in the chart last evening. GOOG is setting up as a short but probably best to wait until next week and see if the stars align for this high-flying momo stock. When Google rolls over, that will likely dampen overall market sentiment since it has been such a stalwart.
Note Added 1:57 PM: UTIL 502.51. SPX 1792.38. Price is running towards the test of 1796 R. VIX 15.20 near the 15.11 low.
Note Added 2:21 PM: UTIL 502.49. SPX 1793.00. VIX 15.18.
Note Added 3:12 PM: UTIL 502.98; the bulls still need one and one-half points. SPX 1795.30 with HOD 1795.47 so price is teasing and testing the 1796 R. If the SPX moves up through 1796, the 1801, and higher is next. Bears need to hold the line at 1796. The VIX is 15.12 at the lows creating the upside fuel but above the 200-day MA keeping the bears smiling. The BOJ is pumping today with dollar/yen 102.35. The 10-year yield is 2.68% remaining 5 basis points under the 2.72% level before the jobs number this morning. Thus, folks are buying stocks and bonds today. Probably with the BOJ's money. Keystone bot WLT a highly speculative and dangerous coal stock opening a new long position. Charts are setting up with positive divergence. Walter was played long last year at the July-August bottom and enjoyed a nice upside orgy from the possie d. It is setting up similarly.
Note Added 3:44 PM: UTIL is running higher 503.60 only one point away from 504.65. Financials are providing bull fuel. XLF is 21.30 and the bulls will easily send the SPX above 1800 if XLF crosses above 21.38 only eight pennies away. The bulls came to play today. VIX 15.15 so the bears are trying to hold the line and prevent any further drop in volatility.
Note Added 3:55 PM: Interesting markets. The bulls keep pumping utes. UTIL at 504. XLF backing off now at 21.27. VIX 15.31 up off the low. The SPX came up to tap the 200 EMA on the 60-minute at 1799 discussed above, the critical bull-bear line.
Note Added 4:11 PM: The bulls run the indexes from +1.1% to +1.7% higher today as traders surmise that new Fed Cahir Yellen may 'taper the taper' since the jobs picture is so bleak. After all, she said jobs will be her number one priority. The SPX ends at 1797.02 so it likely will want to tap 1801 R next week. The 20-day MA is 1804.25 and 50-day MA 1809.35, two firm upside resistance levels. Price bounced off the 20-week MA at 1783 which is a big plus for bulls. However, the rally today may be all hat no cattle. UTIL ends at 503.85 and it needed 504.65 to prove that equities should move higher. Price is less than a buck away but the bulls did not push it up and over, yet. The bulls also need XLF 21.38 to confirm the upside rally but fell short at 21.31, nonetheless within pennies, so financials will have a huge impact on Monday morning. VIX 15.29 but bulls are unable to yet push the VIX under the 200-day MA at 14.59. The most important of these metrics, the 200 EMA on the 60-minute at 1798.90 remains an obstacle for the bulls that close at 1797.02, falling about two points shy. Thus, the broad indexes end the week sitting on the fence. The rally looks good but the signals underneath are not yet confirming the upside joy. On Monday and Tuesday someone will win. Using the mosaic from above about the tone for a bullish market from 2/12/14 through 2/21/14, the bears need to come to play early in the week, Monday, otherwise, the bulls may run the table the next couple weeks. Markets are set up at an inflection point as all the information above highlights. The above price levels serve as pivot points so a decision should occur right away either sending the SPX up into the 1820's again and higher, or, the other shoe drops, where the downside kicks in and the SPX is moving towards 1745 again. The start of next week may be dramatic. Watch to see if the 200 EMA is overtaken, or not. The decision will occur perhaps on Monday and interestingly, the weekend will play out first, and currency crises tend to begin on the weekends. Dollar/yen 102.32. Banzai! The BOJ and Fed are always just behind the curtain, like the Wizard of Oz. For now, a slice of apple pie with cinnamon will provide fuel to plot future moves.
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