Keystone's Midday Market Action 6/20/14; OpEx Quadruple Witching

Boo! Today is Quadruple Witching so robust volume occurs at the open and will also occur during the last one-half hour of trading before the closing bell. Keybot the Quant algorithm remains long the market as the bears cannot catch a break. In fact, the bears are mortally stabbed today with JJC (copper) moving above 37.60, into the bull camp, and creating much of the market strength today. The bears need to push JJC under 37.60 as soon as possible, otherwise, the beatings will continue. JJC is printing 37.97 currently up +1.6% hoisting the bears on a pike. Copper remains the key equity direction driver currently.

The bulls needed to push the SPX less than one point higher to create an upside acceleration today and that move is playing out. The Dow prints a new all-time high at 16978.02 only about twenty points from 17K. Trannies have not exceeded their prior all-time intraday high. The SPX prints another all-time intraday high at 1963.91. Everything is going the bulls way. Fed Chair Yellen cheer leads the stock market and everyone is wasting no time buying. Typically, a Fed meeting move that delivers happy news receives a 25 to 30-handle pop in the SPX. Price is currently up about 20 points from the 1940-ish low where the 3-day rally began so the move remains mild based on prior bull moves. A 10-point move higher today, however, will place the joy in line with prior Fed-pumping joy.

Previous charts such as CPCE, CPC, VIX, TRIN and the SPX weekly and daily charts, show a very negative set-up for markets. The bulls may squeeze out one to three more weeks but the indexes are very toppy now. Considering the low put/calls, the SPX may top in this existing area right now and these price levels may hold for the indefinite future. The SPXA150R, the percent of S&P 500 stocks above their 150-day MA, is at 84.80 very elevated. The 90 level is a gift for short-sellers since the markets are virtually guaranteed to sell off due to the over exuberance. This area from SPXA150R 84.80 and higher is a great place to begin scaling into index short positions going forward.

The BPSPX is up to 83.80 remaining on a firm market buy signal. Bears need to reverse the BPSPX by six percentage-points to receive a sell signal. This is more of a lagging and confirmation signal. The SPX 2-hour chart shows that price needs some more time at these elevated levels to create negative divergence with the indicators (see previous chart) but a near-term market top should be very close at hand either today or Monday. Copper is a game changer. Watch it closely. If JJC stays above 37.60 it is nothing but blue skies and rainbows and a continued bull rally party. Bears need JJC back under 37.60 or they got nothing.

Traders remain very complacent. The next couple weeks will be very interesting. The bears are likely enduring the last of the near-term pain today and perhaps Monday. Watch JJC 37.60. Interestingly, seasonality-wise, the week after OpEx in June (next week) is typically a down week. Thus, astute traders may begin positioning themselves for expected weakness next week ahead of time. Markets should top out at anytime. Copper is the fly in the ointment for bears creating the strength today that may help equities maintain buoyancy into the closing bell.

Summer begins tomorrow in the northern hemisphere with the solstice occurring at 6:51 AM EST. Keystone is donning his ceremonial Celtic fur vest and Merlin hat and plans to spend the night waiting for the sunrise inside the crystal circle beyond the pines.

Note Added 12:42 PM:  VIX turns positive today but remains low overall helping market bulls. TRIN is up to 1.23 so the Nasdaq is lined up negative as would be expected but the SPX and Dow remain positive. With volatility and the SPX/Dow all positive, one of them is wrong. Either VIX drops to signal happy bulls into the weekend, or, VIX continues higher sending the SPX and Dow lower. JJC is 37.98 well above the 37.60 bull-bear line so the bulls are relaxing looking forward to the weekend. The SPX 2-hour chart is negatively diverging with the RSI rolling over but the MACD line still wants another high (see this morning's chart), thus, another one to three candlesticks are needed, so the bears may be able to create the market top very late in the session today, if not, likely Monday.

Note Added 9:40 AM on 6/21/14: The bulls run higher riding the copper chariot. The SPX, Dow, UTIL, XLU and XLE all print at new all-time highs. The SPX 2-hour chart is negatively diverged across all indicators except for the MACD line over the very near term (the last four hours of trading), therefore, a spank down would be expected as discussed on Friday but price likely wants to tease at the highs again at 1963-1965 which should create universal neggie d and a more extended down move. It may take one to three candlesticks for the MACD line to negatively diverge so equities should top out either Monday morning or Monday afternoon. The 1955-ish S/R is a logical initial downside target. The bears should have a turn at bat next week. The bulls are cruising on a euphoric ride of complacent glory.