Keystone's Trading Week in Review and Path Ahead 12/29/12

On Friday, 12/21/12, Quadruple Witching Opex. The Mayan calendar did not foretell the end of the world.  Overnight, global markets are weak. Europe opens to the downside as the Plan B vote failure ripples thru the markets. The S&P futures are down over twenty handles.  The smell of jet fuel proved too enticing for the House and Senate as the rats ran from the sinking ship to the airport to begin luxurious vacations. The political leaders dropped the people’s business like a hot potato and instead prefer to sip eggnog in their slippers. The U.S. markets open and the broad indexes immediately plummet on the failed Plan B vote and the realization that a fiscal cliff solution is no longer guaranteed by the end of the year.  The markets, however, continue to provide the benefit of the doubt since the SPX fell from 1444 to 1422, then bounced and maintained a sideways range thru 1422-1433 all day long, a somewhat tame reaction all things considered.  The euro drops under 1.32.  The retail and financial sectors are weak.  At 10 AM, Speaker Boehner says the president and Leader Reid must now figure a path forward.  Consumer Sentiment is weaker than expected. President Obama speaks in the afternoon and says a ‘limited deal’ is possible in the remaining ten days but it sounds like it will be a watered down deal, and also that perhaps several mini-deals will occur with this fiscal cliff and debt ceiling drama for the weeks and months ahead. The markets will not like this path forward. The president smells the jet fuel and does not take questions, running from the podium to the airport to begin his fun and frolic in the Hawaiian sun, while the country hangs in the balance, and the 25 million under and unemployed people in the country continue to watch their lives and families fall apart each day. The Egypt voting is ramping up for the weekend again. Morsi continues to ramrod the Muslim Brotherhood into power. The street riots are growing more intense and violent perhaps leading to civil war, but Brent oil stays under 110. For the week, the Dow Industrials gained one-half percent, the SPX gained one percent, the Nasdaq gained 1.7% and the RUT gained 3%. Small caps and tech leading the broad markets is a bullish signal. Volume is light this time of year although OpEx ushered in strong volume today.  The president has raised everyone’s hopes for next week so he will need to deliver. Congress should be back on Thursday, so late next week may experience the same turmoil as this week.

On Saturday, 12/22/12, a major Bradley turn date for markets. The Egypt vote continues.

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On Monday, 12/24/12, Christmas Eve, U.S. markets close early. The markets drift sideways with a lower bias in light volume for this holiday-shortened session.  Weak preliminary retail sales data is creating a negative vibe. The malls do not appear as busy as expected and holiday sales targets are dropping. 

On Tuesday, 12/25/12, Christmas, U.S. markets are closed for the holiday.

On Wednesday, 12/26/12, U.S. markets reopen for trading. Happy Kwanzaa. The retail holiday sales data is weaker than expected, the weakest sales since 2008 as the crash was occurring.  On-line sales were up only 8.4% no longer producing double-digit growth.  The consumer is pulling back on spending due to higher taxes, unemployment and underemployment, negative fiscal cliff talk, Hurricane Sandy and the Connecticut mental illness tragedy. Interestingly, store traffic was strong but the buying was not, consumers were simply revisiting the scene of the crime (high credit card debt). News is released that President Obama and Leader Reid are working on a Plan C in Hawaii.  Leader Boehner says he is “not bringing the House back until the Senate does something” and in relation to the fiscal cliff resolution, “how we get there, God only knows.” The markets meander lower all day in a sick malaise. After the bell, Secretary Geithner says the debt ceiling will be hit on Monday 12/31/12; more Kabuki Theatre.

On Thursday, 12/27/12, the markets leak lower after the open on weaker semiconductors and financials.  Consumer Confidence is weaker than expected and increases the market selling.  At 10 AM, Harry ‘Happy Talk’ and ‘the republicans are holding America hostage’ Reid says that “it looks like that is where we are headed.” (over the cliff) The markets sell off strongly on this news. The SPX loses the strong 1419 support.  Keystone’s SPX 60-minute chart with 200 EMA indicates bearish markets ahead.  Keystone’s SPX:VIX Ratio Indicator drops under 68 indicating severe selling ahead and a potential crash, however, the ratio recovers, finishing the day back above 68. The Dow Industrials drop under 13K.  The VIX moves above 20.  At 2:45 PM, news hits that the House will reconvene on Sunday at 6:30 PM EST. The SPX catapults from 1403 to 1412 and higher in a few minutes time. Congressman Scott Brown tweets that the president has provided a new offer but this news is quickly refuted by the Whitehouse.  Nonetheless, the market low is comically dubbed the “Brown Bottom.” Senator McConnell speaks as the last few minutes of trading plays out in the session saying he is frustrated over the progress on the fiscal cliff. This dampens the mood.  The SPX closes at 1418. The broad indexes end flat on the day recovering the earlier losses.  Leader Reid talks blaming the republicans again.  The Washington dysfunction is already hurting the economy and markets, simply look at the holiday sales numbers and Consumer Confidence for proof. As the evening moves along, McConnell says the “republicans will not write a blank check for what Senate democrats propose.”  Leader Reid says “the talks between Obama and Boehner have broken down,” and “the republicans are obstinate.”  As the dust settles, the president announces a meeting at the Whitehouse tomorrow at 3 PM.

On Friday, 12/28/12, futures deteriorate as traders and markets are becoming tired of the fiscal cliff theatrics.  The broad indexes drop lower after the opening bell. Copper weakens but markets remain in a holding pattern until the 3 PM meeting at the Whitehouse. At 3 PM, the broad indexes start to collapse but the S&P rating agency releases news that they will not downgrade U.S. debt based on the fiscal cliff impasse. The stick-save bounces and stabilizes the markets but President Obama says there will not be a new offer proposed at the meeting. The markets immediately sell off. The president offers nothing new and pushes off responsibility to the Senate requesting that Leaders Reid and McConnell develop a plan.  The broad indexes drop into the closing bell with the SPX closing at 1402 under where all the recent Fed and ECB quantitative easing programs were announced. Keystone’s SPX:VIX Ratio Indicator drops under 68 indicating a large triple digit down day for the Dow Industrials is on tap, which occurs today, and also that the broad indexes have fallen into a bear market pattern and the potential exists for a market crash in the coming days. After the bell, the e-mini S&P futures plummet about 25 handles punching out a low at 1383, lower than the 1391 low from a few days back. If the markets were to open now, the SPX would be down 40 handles and the Dow Industrials would lose well over 300 points.  The fate of the markets is in the hands of Leaders Reid and McConnel this weekend. They need a package that can be approved Sunday evening, otherwise, the markets are going to sell off strongly come Monday morning. The SPX finishes down 16 points, -1.1%, to 1402.  The Dow is down -1.2%, the Nasdaq off -0.9% and the RUT -0.63%. Tech and small caps did not lead the downside but for the week overall, tech did lead the markets lower. On a positive note, the dockworkers strike, which would have crippled the East and South U.S. Coasts, was averted for thirty days.

On Saturday, 12/29/12, France is overturning the ridiculous 75% tax rate on the wealthy but the damage is likely already done.

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On Sunday, 12/30/12, President Obama appears on Meet the Press Sunday political talk show to defend his fiscal cliff decisions.  Leaders Reid and McConnell provide a plan that?………. a vote occurs in the evening? ……… the Asian markets and S&P futures show?……… the European markets are? …….

On Monday, 12/31/12, the fiscal cliff drama sets the tone with ……  EOM. EOQ4. EOH2. EOY2012. Last Day of Trading for 2012. Dallas Fed Mfg Survey.  Farm Prices.

On Tuesday, 1/1/13, U.S. markets are closed to for the New Years Day holiday. ESM is officially open but will not be fully operational.

On Wednesday, 1/2/13, if Congress does not act, the U.S. hits the ‘massive fiscal cliff’ (a phrase coined by Chairman Bernanke in early 2012) that will cut the GDP, increase unemployment and immediately launch the country into recession, but, on the positive side, the nation’s debt will decrease. On 9/13/12 and 12/12/12, Bernanke says the Fed does not have tools to handle the fiscal cliff. First Day of Trading for 2013. PMI Manufacturing data. ISM Manufacturing Index. Construction Spending. FOMC Minutes.

On Thursday, 1/3/13, ADP Job Report. Jobless Claims.  Oil Inventories.

On Friday, 1/4/13, Monthly Jobs Report. Factory Orders. ISM Non-Manufacturing Index. Natty Gas Inventories.

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On Monday, 1/21/13, Presidential Inauguration, Martin Luther King Day. The president does not want a fiscal cliff mess and fiasco hanging over him on this day, thus, this date serves as an absolute deadline for the fiscal cliff and debt ceiling resolution.

In February, the debt ceiling hits.

In February, Italy elections.

In February or March, the National People’s Congress convenes.  China President Xi Jinping and Premier Li Keqiang take over complete control and the ten-year transition of power is finished. China now sets inflation and budget targets moving forward. China will push to a domestic-led economy, private consumption, rather than an export-led economy, but a domestic economy will grow at a slower pace.

In March and April, the BOJ head’s will be replaced so strong QE will likely begin. Perhaps a low in the Nikkei in January or February may provide an attractive entry for a long trade once the money-printing begins (weaker yen).

In September, Merkel (Germany) seeks re-election and will not want to see Greece exit the euro before the election but will not care afterwards. Perhaps Greece and Germany will both exit the euro in the future.

Keystone's Morning Wake-Up 12/29/12; Fiscal Cliff Kabuki Theatre Final Act Set for Sunday Evening

Pennsylvania is hit with more snow as the dust settles from the Friday night act of the Fiscal Cliff Kabuki Theatre. The president called a meeting to the Whitehouse, not to propose a counter offer, but rather to tell all parties involved that things are the same and the Senate should bandaid together a skinny-mini fiscal cliff package.  This skinny-mini is analogous to placing a wooden plank out from the cliff that we must all now walk. The political lack of leadership, dysfunction and pettiness, by all parties involved, is truly astounding. In private business, no manager would call together other high-priced managers to tell them that there is nothing new, that is simply a waste of time and money.

The duty of providing leadership is now sluffed off on Leaders Reid and McConnell to come up with a plan today and tomorrow. The reason the drama is ratcheted up now is the e-mini S&P's reaction after regular trading closed at 4 PM EST. Traders and markets are becoming fed-up with the political shenanigans. The void of leadership is sending markets lower as traders and citizens lose confidence in the economy and future. The weak Consumer Confidence number proves this as well as the weak holiday sales which are now rippling into weak global retail sales numbers. The S&P futures dropped about 25 handles punching out a lower low at 1383, under the 1391 low from a few days ago. The SPX is set to open down about 40 handles and the Dow Industrials down over 300 points on Monday unless the politicians provide a stick-save Sunday evening.  A lot of times, the drastic drop in the futures evaporates by the time the opening bell rings for the regular session, but the outcome is likely dependent on what happens Sunday afternoon and evening. In 1987, the crash was a cascading type event where Asia was down large, which rippled into the European markets, then when the U.S. opened the goose was already cooked. Thus, the futures and currency markets are uber important on Sunday evening, as well as the political drama over the anticipated Reid and McConnell package.  The urgency will continue into the opening bell on Monday morning, the last trading day of 2012.

The SPX falling thru the 200 EMA on the 60-minute chart at 1418 is a very negative indication. Likewise, the SPX came up to try and hold the 20-day MA at 1422, and 50-day MA at 1412, but both these levels have failed.  Keystone's SPX:VIX Ratio Indicator plummeted to close at 61.73 well under the bull-bear line in the sand at 68 indicating that the markets have fallen into a bear market pattern and have potential to crash in the days ahead. The only thing that saved the bulls yesterday was the clock running out at 4 PM. The VIX jumps to 23. The semiconductors failed in the final minutes which will create a large push lower but the bell rang.  SOX 377.10-ish will be very important on Monday. The SPX did not hold the uber strong 1403 support, closing just under at 1402.  The SPX is now under where the FED announced QE3 Infinity in early September at 1438, also QE4 Infinity and Beyond at 1430, also where the ECB announced the OMT Bond-Buying plan at 1403.  Do you think the luster is off the QE rose?

The debt ceiling limit is key. Pay attention to whether or not if the plan handles the debt ceiling. If the debt ceiling is not part of the plan, then all the theatrics will continue daily thru January and markets will sell off unwilling to tolerate more of the dysfunction.  If the debt ceiling limit is pushed off, even a few months into the future, as part of the plan, the markets will stabilize and cheer up on that news. The fate of the markets is in the hands of Reid and McConnell this weekend. As Tiny Tim says in Dickens' A Christmas Carol, "God Bless Us Everyone."

Keystone's Midday Market Action 12/28/12; Fiscal Cliff Meeting 3 PM

Chicago PMI causes no great shakes in the markets. The broad indexes are negative to begin the day, the SPX well under the 200 EMA on the 60-minute chart at 1418.34 indicating bearish markets ahead.  The SPX:VIX is 69.44 remaining above the critical 68 level that would open the gates to Hades. SOX fell under 377.10 to create market weakness but recovered back above.  JJC is 45.38 a tiny hair above 45.36, bullish. A drop under JJC 45.36 would usher in market negativity.  The market bulls are happy with SOX above 377.10 and JJC above 45.36.  Bears need to push under both these levels, otherwise, they got nothing. The bears also need to push under 1402 to get a party going and this target remains several handles lower.

The euro is 1.3228, above 1.32, providing a feather for the bull's caps.  The 10-year yield is 1.70%, use this as a pivot, so equity bears win with the 1.6x% handle and lower while bulls win if 1.71% and higher occurs.

Note Added 12/28/12 at 10:21 AM:  Copper turns negative, the JJC falls thru 45.36.  SOX, however, stays above 377.10. JJC under 45.36 will pull markets lower. SPX:VIX ratio is 69.25.  The euro is 1.3228.  The 10-year is 1.70%. Tech is not leading the downside, however, so the bears cannot gain traction. SOX 377.10 is key.

Note Added 12/28/12 at 11:14 AM:  JJC remains under 45.36.  SOX moves above 380 providing market lift. The SPX:VIX ratio is over 70. The bulls are relaxing and not too worried. The euro remains flat at 1.3225. The 10-year is 1.71% so one tick in favor of equity bulls. The bears are happy as well as long as the SPX stays under 1418.34 as described at the top of this missive.  The 50-day MA is 1412.25 so there is lots of drama around this level as traders await the next fiscal cliff soundbite.  JJC is 45.29 leaking lower.

Note Added 12/28/12 at 1:33 PM:  JJC is 45.23, bearish. SOX is 378.99, bullish. SPX:VIX ratio is 70.00, bullish. The euro is flat at 1.3219.  Dollar is higher. The 10-year yield 1.72%. The SPX continues to play around at the 50-day MA at 1412.  The 3 PM circus show is on tap ahead.  At the completion of the meeting, watch to see if there is a clown parade to a microphone in the Whitehouse driveway. If the parties are willing to appear together to provide comments, then this increases the chance for a fiscal cliff deal by Monday. If there is no press conference after the meeting, and all parties are peelin' rubber out of the Whitehouse gate, waving to each other with one finger salute's, then that would hint the negotiations are not going well. The key for the fiscal cliff deal moving forward in the days ahead is whether or not the debt ceiling is addressed. Markets should bounce if the debt ceiling is handled, even if it is only pushed forward for a few months. If the debt ceiling is not part of the fiscal cliff solution, the markets will sell off since all the current market theatrics and drama will continue along thru January.

Note Added 12/28/12 at 3:11 PM:  Copper gave up the ghost today but the semiconductors will not, the SOX remains above 377.10 which creates market buoyancy.  The politicians are all at the Whitehouse for the big meeting. The children's magician is said to be arriving shortly to entertain them all. Secretary Geithner is there which means the debt ceiling is part of the discussion as per the comments in the previous paragraph. The broad indexes should travel flat into the close unless SOX 377.10 fails that would create a sharp drop lower. The SPX moves sideways over the last hour thru 1408-1410. Keystone's SPX:VIX ratio just lost 68 over the last few minutes but here comes a potential stick save again.  S&P says they will not lower the U.S. deb rating due to the fiscal cliff impasse. The SOX leaps to 379 and SPX leaps up thru 1410 in a heartbeat.

Note Added 12/28/12 at 3:21 PM:  The SPX:VIX ratio is 68.08.  Despite the stick-save, the ratio is only a hair above 68.  A drop below 68 would signal a triple digit down day for the Dow Industrials, set up far more negative markets moving forward, and signal a potential market crash ahead. SPX:VIX is 67.93 .... quick, tell the Fed to throw another sound bite on the tape machine since the S&P rating news did not go far. SOX is 379.19 two points above danger.

Note Added 12/28/12 at 3:34 PM:  SPX:VIX is 68.16. Nothing but pure drama. The pizza delivery boy is driving up to the Whitehouse so the party must be in full swing. SOX remains elevated at 379. The VIX HOD is 20.82 almost tagging 21. The fate of the markets will pivot off of Keystone's SPX:VIX ratio 68 level. Thumbs up for bulls if the ratio remains above 68. If the ratio drops thru 68, a bearish wrath will hit the markets hard. Whoa,.... as this is typed, now the ratio is 67.55....

Note Added 12/28/12 at 3:40 PM:  President Obama says there will not be a new offer. The markets plummet. The SPX is down to 1405..... SPX:VIX ratio is 67.06......  SOX is 377.90..... The cat's out of the bag, the meeting was simply a dog and pony show as expected, the markets are developing a bad mood from these circus shenanigans.

Note Added 12/28/12 at 3:45 PM:  Here is the biggie, for all the marbles, SOX 377.26 .... 377.17 ... only a few more pennies .... bears have to keep pushing ... 377.23 ... if the semiconductors fail, the SPX will drop directly into the 1390's.... SOX 377.12.... hang on Nellie, the tension mounts, only two more pennies ........ there it is, failure.  SOX now under 377.10.  SPX now at 1402 the lower target the bears needed from this morning's missive. Markets should drop strongly here.

Note Added 12/28/12 at 4:03 PM:  The close is significant. SOX is under 377.10.  JJC is under 45.36. Keystone's SPX:VIX ratio closes at 64.75. This signals a triple digit down day for the Dow Industrials which occurs today. This signals serious market negativity moving forward, markets will begin moving far lower. This also signals an increased likelihood that the markets may crash in the days ahead. The bulls will have to come to play on Monday. There are no more second chances. The importance of the SPX:VIX ratio 68 failure cannot be understated. The only market save that appears possible will be for the politicians to vote for a strong fiscal cliff package on Sunday evening, or Monday, otherwise, the markets are a lost cause and the selling will become very ugly. The 12-month MA is 1385, this is the waterfall edge, Keystone's official point of no return. The meeting continues at the Whitehouse.

Keystone's Morning Wake-Up 12/28/12; Fiscal Cliff Kabuki Theatre

The Fiscal Cliff Kabuki Theatre continues today with a meeting scheduled at the Whitehouse at 3 PM EST for the major players. Remember the similar meeting a week after the election, at the same time of day, on a Friday afternoon, which was simply a dog and pony show? The president wants it to look like he is in control and trying hard to find a solution so it is easier for people to blame the republicans. Same old stuff from both sides. All sides are simply using the meeting as an excuse to begin the weekend drinking early. The markets were rolling over yesterday, Keystone's SPX:VIX ratio failed at the 68 level, twice during the session, only to recover on the fiscal cliff optimism, an impressive stick save of the markets. Watch the VIX today to see if it can move up over 20 to help the bears, or not.

Watch SPX:VIX since 68 ushers in a wrath of trouble, as witnessed yesterday before the recovery rally.  A feather in the bear's cap is the failure of the 200 EMA on the SPX 60-minute chart. The 200 EMA is 1418.44 and the SPX closed at 1418.10 signaling bearish markets for the hours and days ahead. However, at 34 cents difference, this fight is not over and will continue today. Copper plays a key role lately. Traders are getting bulled up over copper in anticipation of new ETF's coming on-line next year, however, a chart such as SCCO is setting up with negative divergence showing that folks are likely becoming too enthusiastic about copper. Nonetheless, the JJC 45.36 helped support the bulls yesterday.  Watch JJC 45.36 today, if price stays above the bulls will maintain buoyant equity markets all day long, if JJC fails at 45.36, the markets will take a strong leg lower.

Three other sectors are important; SOX 377.10, XLF 15.85 and RTH 43.65. Semi's and financials are helping bulls while the retail sector is helping the bears. For the SPX today, beginning at 1418, the bulls have the easy road only needing to touch the 1423 handle to ignite an upside acceleration.  The bears need to push under 1402 which will create a downside acceleration into the 1390's. A move thru 1403-1421 is sideways action today.  Any changes here will directly move markets in that respective direction. The euro fell under 1.32 which is bearish for markets, now at 1.3186. The 10-year yield is  1.71% so watch which way it moves. WTIC oil sits on its 90 pivot and Brent oil sits on its 110 pivot. S&P futures are deteriorating over the last hour, now down seven.

The TICK machine hit both -1200 and +1200 TICK's yesterday, you do not see that often. It signifies a completely erratic, bi-polar market, ready to leap one way or the other but it does not yet know which way.  The NYMO is at -22, typically, that should move lower to -40, -60 perhaps -80, to signal a near-term market bottom.  Ditto the CPC put/call. Remember, we are looking for CPC at 1.20 and higher since that will signal fear in the markets and a good time to nibble and bring on long positions. The CPC inched up a touch yesterday but remains under 1.20.

Chicago PMI is 9:45 AM, this is important since it hints at what the ISM may hold when it is released on the first of each month.  Pending Home Sales are at 10 AM and Natty Inventories at 10:30 AM. Thus, no big movers today, markets will be more focused on the fiscal cliff circus with the clowns performing a dog and pony show at 3 PM. The markets will react wildly depending on if President Obama picks his nose or if Speaker Boehner coughs. A major Bradley turn date occurred last Saturday, and markets have fallen ever since so perhaps the turn was to the downside moving forward.  A full moon was two hours ago, markets tend to be buoyant into and around the full moon but the fiscal cliff drama dominates all market indications these days.  There are only two trading days remaining in the year. Monday is EOM, EOQ4, EOH2 and EOY. If the fiscal cliff drama turns into a Greek Tragedy over the weekend, next Wednesday, 1/2/13, will be the first day to trade off the news that we are all currently in mid-air, falling off the fiscal cliff. The bungee cord looks frayed.

Note Added 12/28/12 at 8:02 AM:  The president must have coughed, or, perhaps Leader Reid said it was all the republicans fault again, at any rate, the S&P's are now down over 8. The S&P's are down -0.57% with the Nasdaq down -0.54% so tech is not leading lower so the bears likely do not have much oomph despite the deterioration this morning. Watch copper and semiconductors closely. Copper was positive early this morning but has gone negative over the last hour. This will drag JJC lower and create negativity.  If SOX loses 377.10 as described above, the SPX will likely drop under 1400 and move into the 1390's.

Note Added 12/28/12 at 8:41 AM:  Futures deteriorated further but the euro started rallying now up over 1.32 to 1.3218. The S&P's are down 7. AAPL is down pre-market. The euro behavior is strange. The goose in the euro only resulted in a couple point improvement in the S&P's. The 10-year yield is 1.70% so it will be interesting to see if the 1.6x% handle appears today to verify bearish equity markets, or not.

Keystone's Midday Market Action 12/27/12; Consumer Confidence

Copper is key today, watch JJC 45.36. The broad indexes will move higher if JJC moves above 45.36. Markets remain weak if JJC remains under 45.36. Copper is flat this morning oscillating on both the positive and negative sides so JJC 45.36 will provide plenty of drama today.  The 200 EMA on the 60-minute chart is 1419 which would lock in a move to the low 1400's and perhaps down thru 1400 if it fails. The 1419 is also strong support so the importance of this level cannot be understated. In addition, GTX 4975 and RTH 43.65 are important, both are creating market negativity. Also, SOX 377.50 and XLF 15.85, both are creating market bullishness. Any change to these parameters will send the broad indexes in that respective direction.

For the SPX today starting at 1419, the bulls need to touch 1429.50 to create an upside acceleration. The bears need to see 1416.50 to create a downside acceleration. If the SPX starts drifting under 1419, the breach of 1416.50 would be very likely. A move thru 1417-1429 is sideways action. The euro remains buoyant at 1.3277. The 10-year yield is 1.77%.  New Home Sales and Consumer Confidence are released at 10 AM and will create a  market pivot point. Oil Inventories are at 11 AM, delayed one day due to the Christmas holiday. The politicians are back in town so hang on to your hat, and wallet. The fiscal cliff Kabuki Theatre begins anew. Traders continue to expect a deal.

Note Added 12/27/12 at 10:34 AM:  The SPX is dropping like a stone after the very weak Consumer Confidence number and Harry 'Happy Talk' and 'the republicans are holding America hostage' Reid saying that "it looks like that is where we are headed." (over the fiscal cliff)  The critical 1419 collapsed. The SPX drops under the 200 EMA on the 60-minute chart signaling bearish markets for the hours, days, perhaps a couple or few weeks ahead. Bad things will happen to markets now. The bulls must find a way to immediately push the SPX back above 1420, otherwise, the bulls will fold like a cheap suit. Keystone's SPX:VIX Ratio is 69.36 nearing the 68 bull-bear line that will firmly lock in strong market bearishness moving forward. The bulls must prevent SPX:VIX from failing under 68.  The VIX is now over 20 at 20.36.  The SPX may want to back kiss 1419 at some point forward. The euro is dropping to 1.3228.  The 10-year yield drops to 1.74%, check that, now 1.72%.  See how yield moves lower as the equities markets move lower. AAPL is down four bucks to 508. TRIN is 1.56 showing very orderly selling today, no panic at all, the type of selling that can continue indefinitely. The uber low -1200 TICK identifies today's low at 10:20 AM with a 1408 handle on the SPX. Watch copper, JJC 45.36.

Note Added 12/27/12 at 10:55 AM:  The SPX sits between 1409 support and 1413 resistance. Keystone added more BBY; it will be interesting to see if 11.20 holds, or not.

Note Added 12/27/12 at 12:44 PM:  The SPX fell thru 1409, 1406 and 1403 support, printing a LOD at 1401.80.  Keystone's SPX:VIX Ratio Indicator fell thru 68 signaling market bearishness ahead, also a triple digit down day for the Dow which is currently occurring, and the markets are on notice that a crash can potentially occur.  Watch to see if the ratio remains under 68 thru the close.  The VIX is 20.85 approaching 21.  The euro is 1.3207 on the verge of failing the important 1.32 psychological level. The semiconductors, SOX, broke down, the SOX fell thru 377.50 which now creates further market bearishness. Copper is resilient, the JJC is trying to hang on to 45.36, if this fails, and price collapses, the markets will take another leg lower, the SPX will fall thru the 1400 psychological level. The Dow Industrials dropped under 13K. The 10-year is 1.71%.

Note Added 12/27/12 at 1:03 PM:  The SPX:VIX Ratio Indicator jumps back above 68 nullifying the bearish signals described in the previous paragraph; the bulls are back in biz.  Keep watching the SPX:VIX 68 level. The SPX is at 1407 between 1406 support and 1409 resistance. The 50-day MA is 1412.60. The 10-month MA is 1394.04. The 200-day MA is 1390.13. The 12-month MA is 1384.88 which is the cliff edge, or waterfall, confirming a cyclical bear market ahead. The 50-week MA is 1384.12.

Note Added 12/27/12 at 1:19 PM:  The SPX:VIX ratio is up over 70.  JJC is at 45.40. Semiconductors are staging a comeback but will help maintain market weakness if SOX remains under 377.50.  The SPX is now testing 1409 S/R. The bulls need to keep the SPX:VIX above 68 and JJC above 45.36. The bears need to push the SPX:VIX under 68 and JJC under 45.36. This is the current stalemate, any movement with these parameters will dictate market direction.

Note Added 12/27/12 at 2:31 PM:  Here she is, the SPX:VIX ratio, gliding in for another landing at 68, now printing 68.17.  JJC is 45.34, copper may be rolling over. The 10-year yield is down to 1.70%. Hang on to your hat.  SPX:VIX is now 68.09..... 68.04 .......

Note Added 12/27/12 at 2:48 PM:  SPX:VIX dipped under 68 for a few minutes but is now at 69.46 staying bullish. JJC is at 45.39 creating bullishness. News that the House will reconvene on Sunday at 6:30 PM EST is boosting the markets. Traders obviously think a deal is coming together for Sunday evening or Monday, the last day of the year. The SPX just launched from 1404 to 1412 in a few minutes time.  The 50-day MA is 1412.69 so look for drama around this level.

Keystone's SPX 60-Minute Chart with 200 EMA Indicator

This one provided drama yesterday. The last couple days another tease of the 200 EMA occurs, just like mid-month and early December. The SPX threatens to collapse thru the 200 EMA at 1418.96 but recovers allowing the market bulls to pop another wine cork and continue the rally party. There is a steep downward-sloping channel in play. The negative divergence (red lines) created the spank down and the positive divergence (green lines) created the bounce off the critical 200 EMA. The chart provides a mixed bag where both bulls and bears can make a case.  The number to watch is 1419 which is also very strong support over many months. If 1419 fails the low 1400's are coming and likely a drop thru 1400, thus, the importance of the 200 EMA cannot be understated.  Watch 1419 like a hawk today. If bullish, you are very happy if the SPX remains above 1419. If bearish, you will rule the markets for days and perhaps weeks ahead if you can push the SPX under 1419. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

Note Added 12/27/12 at 10:58 AM:  The SPX fell thru the 200 EMA at 1419 this morning signaling bearish markets for the hours and days ahead.

Note Added 12/28/12 at 6:20 AM:  Yesterday afternoon, the markets became excited over a possible fiscal cliff resolution coming on Sunday evening, since the House is reconvening, so the SPX catapults higher recovering from the days losses, but, as the final print is placed, the SPX is 1418.10 under the 200 EMA at 1418.44, bearish. The first close under the 200 EMA in one month. Watch this closely in the days ahead.

Keystone's SPX:VIX Ratio Indicator

In the summer, as the rally continued in earnest, Keystone said the 68 will come again and perhaps the days and weeks ahead will provide that drama.  Keystone uses the 68 level as a key bull-bear line in the sand for the SPX:VIX ratio.  As price moves up thru, the bulls are rockin' higher without worry. As the ratio stumbles lower, there are problems afoot, and if the 68 fails, the bears will rule the roost moving forward. In addition, the day the rupture thru 68 occurs will typically correspond to a triple digit down day for the Dow Industrials. If the trip digit down day does not occur, it will likely occur the following day.

This year is very straight forward.  In January, at the time of the blow-out AAPL earnings that catapulted the markets higher, the ratio moved above 68 to signal that any bear hopes should be tossed aside to instead jump on the bull train.  The party continues until the May selloff when the ratio dropped under 68 indicating big trouble ahead.  However, the bears were stuffed again as the ratio confirmed the new bull rally in June. The party continues up thru today with the ratio spending the last one-half year above 68. The wine is flowing like water as the bulls throw confetti each day knowing that the Fed will always be there to pat their behinds.

However, at 72.89, the lowest print in five months, the luster is off the rose, and the once blossoming rally is now becoming the stinking pile of leftover flowers laying in the dumpster out back.  As long as the market bulls can keep the ratio above 68, the party will continue.  If the SPX:VIX ratio drops under 68, the party is over for the markets, and far lower numbers are ahead. The broad indexes will experience a large drop when 68 ruptures and a triple digit loss on the Dow would be expected. Now that VIX is climbing higher the ratio is dropping more quickly.  The only question is will the ratio drop thru 68 today, tomorrow, next week, or next month? This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

Note Added 12/27/12 at 1:16 PM:  Lots of excitement today. The SPX:VIX ratio collapsed thru 68 at 12:30 PM signaling lots of bad stuff ahead for markets including a crash alert, but, alas, the ratio popped back above 68 at 1 PM. Watch the ratio moving forward.

Note Added 12/28/12 at 6:22 AM:  The day ended with the ratio at 72.84 so the bulls are holding on. The 68 level, as seen from yesterday's market action, brings on a wrath of negativity should it fail.

Note Added 12/30/12 at 4:12 AM:  On Friday, 12/28/12, the ratio collapsed thru 68 closing at 61. The Dow dropped 158 points.

Keystone's Midday Market Action 12/26/12

Happy Kwanzaa and Boxing Day.  The wrapping paper is all that remains of Santa's deeds, the holiday gives way to either contentment or disappointment.  The markets are set for action for the final four trading days of the year.  Retail sales are weaker than expected for the holidays, on-line sales are no longer a double-digit grower. Watch RTH 43.65, now at 43.82 contributing bullishly to the markets. The broad indexes will noticeably weaken if RTH 43.65 fails. Watch VIX 16.05, UTIL 465.87 and XLF 15.88.  Copper is very strong today so if the bulls run copper will likely provide much of the oomph.  The S&P futures are up three but tech is not leading the upside so the bulls may not have a lot of gas.

Low volume action is expected today with traders continuing to provide the benefit of the doubt for a positive fiscal cliff resolution. The president and Congress will be back in town tomorrow. Watch the 10-year yield 1.77% level as a pivot point for equity bulls versus bears. Ditto the euro 1.32 level. Here is the opening bell.

Note Added 12/26/12 at 11:22 AM:  Copper and commodities are goosed today which created the early market buoyancy.  Watch JJC 45.38 and RTH 43.65. Both are contributing bearishly to markets.  Both the 20-day MA at 1422.27 and 20-week MA at 1422.02 failed. AAPL is negative. Tech is leading the broad market lower. The VIX is over 19. The 0-year yield is 1.75%, under 1.77% favoring equity bears.  The euro is holding up, however, remaining above 1.32 at 1.3240.  The SPX is testing the strong 1419 support. Watch the 200 EMA on the 60-minute chart at 1418.88, a critical bull-bear indicator.  Markets will become much more negative should 1419 fail.  Keystone took profits on the one-day USG short trade exiting the position as the TICK printed -900 a short while ago. Will look to reenter the trade.

Note Added 12/26/12 at 11:30 AM:  SPX is testing the critical 1418.88, this is big-time important. Markets will bounce, or die.

Note Added 12/26/12 at 11:42 AM:  Perhaps die was the answer as the broad indexes flop around like a fish out of water, the SPX at 1418 punching out a LOD at 1416.43.  The 1418.88 is what matters, if price stays under 1418.88, the markets will grow far more negative. Bulls must push the SPX back above 1418.88 asap or they will lose control. Financials, XLF, are holding up today. WTIC oil is 91. Copper and gold higher.  Utilities are weak. The euro remains above 1.32 providing the market bulls hope at 1.3218.

Note Added 12/26/12 at 11:56 AM:  The bulls recover the 1418.88 level, can they hold it?  Bulls breathe a temporary sigh of relief, wiping beads of sweat from the forehead with a handkerchief that is sporting gravy stains from yesterday's feast. SPX 1418.88, RTH 43.65, JJC 45.38 and euro 1.32 dictate market direction today. The TICK prints -1100 at 11:30 AM which identifies today's low.

Note Added 12/26/12 at 1:44 PM: SPX remains under the 20-day and 20-week MA's but above the critical 1418.88. The beat goes on. Keystone is searching for an implement to cut the holiday fruitcake since it has taken on the appearance of concrete. Perhaps the fruitcake can instead serve as a door stop or wheel chock.

Note Added 12/26/12 at 2:19 PM:  SPX is now trying to regain the 20-week MA at 1421.90. Copper strength is creating the market strength, JJC now at 45.33, only a hair under the bull-bear line. If the bulls can push the JJC up thru 45.35, 45.38 and higher, the markets will move far higher.  For now, markets continue to meander slightly higher from the low -1100 TICK print before lunch time. Keystone bot BBY opening a new long position. This is a very dangerous and speculative trade especially with news that retail sales are weaker than hoped.  BBY is setting up with attractive positive divergence on the daily and weekly charts, however, the stock receives incoming tape bombs so it is a wild roller coaster ride fraught with danger.

Note Added 12/26/12 at 3:55 PM:  SPX is staggering sideways at 1420. The 10-year is 1.75%.  The euro is 1.3226.  WTIC oil is 91. VIX is 19.29. JJC is 45.28, bearish. RTH is 43.34, bearish. Keystone added more BBY.

Note Added 12/26/12 at 4:01 PM:  The SPX closes above the critical 1418.88, cheating the devil once again.  The snowstorm is moving thru the Pennsylvania hills all day long, time to start digging out.

TNX 10-Year Treasury Note Yield Daily Chart Sideways Channel

The 10-year continues sideways moving thru the channel exploring 1.85% on the top side and 1.55% on the bottom side.  The 200-day MA is sloping down, a negative sign. The 20-day is under the 50-day is under the 200-day, bearish. The red lines show negative divergence as price printed the matching high and also overbot stochastics, bearish.  The green lines show some short-term momo so a move higher for another matching high cannot be ignored, but overall, the yield should likely stumble lower towards the bottom part of the channel moving forward.

The TBT ETF moves in the same manner as the TNX. TBT is the ultrashort for 20+ year Treasury price. If TNX is moving higher in yield, with equities moving higher, the Treasury price is moving lower. Thus, TBT, is an ultrashort, so it moves opposite to the Treasury price, so Treasury price moving lower causes TBT to move higher. That's why TNX and TBT move coincidentally. Then TLT moves opposite TNX. So when equities are moving up, Treasury yields are moving up, note and bond prices down, TBT up, and TLT down.  And visa versa.

The 10-year yield is motoring along sideways and may continue in that manner for the foreseeable future. The 10-year yield sits at 1.77% as this is typed on 12/26/12. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

Death Crosses for 2012 AAPL Apple COMPQ Nasdaq UTIL Utilities CRB Commodities Daily Charts

Merry Christmas.  On this joyous day, here is a look at the dark-side death crosses for 2012 where the 50-day MA stabs down thru the 200-day MA. The death cross verifies ongoing bearishness but overall is not that important of a technical indicator for the die-hard technical analysts. In fact, typically when the death cross occurs, there will be price buoyancy for a few weeks afterwards. The death crosses, and golden crosses (where the 50-day crosses up thru the 200-day to signal bullishness ahead), are more of a media event that provides journalists something to write about and wannabe technicians a flag to wave.  Nonetheless, the last few weeks show a few notable death crosses of interest.

AAPL failed a couple weeks ago. The mighty apple has fallen from the tree.  Since such a large portion of the Nasdaq consists of Apple, it is not surprising to see the Nasdaq capitulate with a death cross.  Tech leads the broad indexes so the breakdown of tech is important.  Small caps are also an important leader so watch the RUT to see if the death cross occurs in coming weeks, or not.  The utilities often go unnoticed since they are not as sexy as tech or other exciting stocks but they do forecast broad market direction and the death cross in UTIL is important.  Also of interest is the drift lower in the commodities sector, with CRB crossing back down into a death cross after recovering with a golden cross only three months ago.  The firm confirmation of a global economic slowdown is shown by a death cross in commodities and copper. Copper has been in a death cross for a few months attempting a recover but is now slipping away once again, its chart is very similar to commodities.  Dr. Copper leads the markets, especially since housing and automobiles are the two largest users of copper. If these two markets are rocking, the economy is running forward to great things, if copper is in retreat, an economic malaise continues.

The copper and commodity weakness hints that perhaps the auto and housing mini-recoveries in recent months may be an illusion. The housing sector will likely run out of wealthy folks that are building the new homes while the shadow housing inventory is exposed at the same time.  Hurricane Sandy should create a need for vehicles but overall, the global automobile picture is not rosie. European auto sales plummeted over the last month although the German manufacturers are running on all cylinders.

Of the four main indexes to watch, SPX, INDU, COMPQ and RUT, where the SPX and Dow Industrials are the broad market, COMPQ a gauge for tech, and RUT a gauge for the small caps, the death cross has only afflicted tech thus far.  Watch the other three in early 2013 to see if any further death crosses pound nails in the market coffin, or not. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.