Keystone's Trading Week in Review and Path Ahead for Markets 7/27/13

On Friday, 7/19/13, Asian markets are weak in light of the GOOG and MSFT earnings disappointment. G-20 leaders meet in Moscow.  Italy’s ruling coalition is fraying as the finance minister says the economy will turn around this quarter. Spain protests turn ugly as rioters clash with police. Merkel says stabilizing Europe will take years. Treasury Secretary Lew urges Europe to spur growth. Today is OpEx. Bellwether GE earnings beat on EPS but miss on top line revenue. HON beats and guides higher.  China will allow banks to set lending rates, a major policy change, which immediately sends futures higher from negative to flat. The markets drop at the opening bell but volatility is crushed hinting that markets will recover. Sure enough, the drop in the VIX allows markets to recover to the flat line.  The Fed can stick-save the markets by crushing volatility. The SEC files a civil law suit charging SAC’s Cohen with failing to properly supervise traders. The intent is to push Cohen into a family fund situation where he will not trade with client’s money ever again. MSFT is beaten mercilessly today losing -11%.  WTIC crude oil and Brent oil reach parity at 108.70 for the first time in 3 years. WTIC briefly moves above 109. Moody’s rating agency downgrades Chicago’s debt rating with a negative outlook. The SPX finishes the day at a new all-time closing high at 1692.09 but not a new all-time high, up +0.7% this week. Equities receive the expected push this week from Chairman Bernanke’s Congressional testimony. The Dow is up +0.5% this week to a new all-time closing high at 155543.74 and new all-time intraday high at 15589.40. RUT (small caps) print a new all-time closing high at 1050.48 but not a new all-time high, up +1.35% this week. The Nasdaq is down -0.4% this week. Trannies are printing new highs with the Dow Industrials which is bullish from a Dow Theory perspective. Small caps are leading higher which is bullish but tech is sick which is bearish and indicates potential trouble ahead for financials. Traders are likely chasing into small caps since they perceive a new bull economic cycle beginning, which would typically be a smart play, however, the economic data shows the opposite, and it may be a case of the tail trying to wag the dog.

On Saturday, 7/20/13, G-20 leaders pledge to emphasize growth over austerity moving forward. PBOC says China’s growth this year will be around 7.5% amazingly (said cynically) the same number that they predicted months prior. A bomb explodes at Beijing airport.

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On Sunday, 7/21/13, over 80 people are killed in escalating violence in Iraq.

On Monday, 7/22/13, the Fed and CFTC (Commodity Futures Trading Commission) begins an investigation into the warehousing of metals such as aluminum and copper by the Wall Street banks and other large trading organizations with the intent to manipulate price. No wonder average investors view the stock market as a corrupt casino. Japan’s Abe wins election so the move to weaken the yen will continue.  The dollar/yen pair, however, drops under 100, reflecting a stronger yen.       The markets start the day by printing new all-time highs. Existing Home Sales are weaker than expected questioning the strength of the housing recovery but traders ignore bad news since it means the Fed will always print more easy money. Copper jumps sharply higher and volatility drops which send equities higher. The day ends with the SPX at a new all-time closing high at 1695.53 and new all-time intraday high at 1697.61. Gold has its best day on a year moving above 1330. After the closing bell, NFLX earnings beat but new subscribers are far less than expected and guidance is reduced. NetFlix is beaten -6%. TXN sys it will beat estimates this earnings season so that helps minimize the tech damage from NFLX.

On Tuesday, 7/23/13, Japan finally admits that there is radioactive water leaking into the Pacific Ocean as a result of the Fukishima nuclear disaster.  China says they will maintain a 7% growth rate and will not tolerate slower growth. This hints that the PBOC will support the markets moving forward just like any other central banker, with easy money policies, so the S&P futures move higher on the news. Telecom M&A occurs boosting this sector. France business confidence hits a 15-month high. The Pope arrives in Brazil amidst the protests and riots. DD earnings are in line but the stock receives a sharp pop on news they may sell one of their units. Shipping bellwether UPS earnings are in line with their lowered preannouncements. UTX disappoints and is sold off. The top line revenue misses continue among the blue chips and stocks in general. Stocks jump higher at the opening bell with the SPX printing a new all-time intraday high at 1698.78 but the opening is sold. UTX recovers and drives the Dow higher. Markets finish flat on the day awaiting AAPL results. Global bellwethers DD and UPS both finish down after this morning’s optimism. After the closing bell, AAPL beats on earnings due to better than expected iPhone sales. iPad sales are far lower than expected. On closer inspection, the 4 and 4s iPhones account for the robust sales rather than the more expensive iPhone 5. Consumers prefer the less expensive phones. Apple jumps about +3% after hours. T earnings are in line; it trades flat. BRCM and JNPR sell off. PNRA misses and is sold off.

On Wednesday, 7/24/13, China Flash PMI contracts much more than expected showing that the slowdown is gaining momentum. Manufacturing hits an 11-month low. Banks and commodities are sold. Copper drops.  France PMI shows continued contraction. Germany, however, surprises with a 50.3 PMI, above 50, showing expansion.  Euro zone PMI is 50.1 also showing a hair of expansion. The euro pops to 1.3238 and copper recovers. S&P futures jump from flat to +4. The broad indexes pop at the open but within minutes reverse course to the downside falling on their sword. New Home Sales blow-out expectations but the sector and markets continue selling off.  Traders are likely thinking that the healthy numbers may bring on Fed tapering sooner than expected. Copper traded strongly earlier this morning but rolls over to the downside and takes the equity markets lower. The 10-year Treasury yield jumps above 2.60% so utilities, telecom and REIT’s are all sold off. President Obama speaks mid-day in front of a friendly crowd in a long rambling talk about the economy but offers nothing new. The markets weaken further for another leg down into the closing bell. The SPX drops about one-half percent today to 1686.  Congress prepares for a fight over raising the debt limit which is required in September.  Leaders Boehner and Reed begin saber rattling. QCOM reports blowout earnings and catapults higher in AH’s trading.  FB shocks the analysts with a beat on earnings and big gains in mobile advertising. FaceBook jumps +17%. V beats to complete a trifecta of bullish earnings after the bell which may add positivity to the markets tomorrow. The courts rule that public unions cannot pursue lawsuits concerning the Detroit bankruptcy. This frees up the bankruptcy proceedings to proceed forward in what may take one year to sort out. SAC Capital faces more charges which will likely lead to closure of the hedge fund. Interestingly, SAC accounts for huge amounts of daily trading volume (in this low volume environment) and its closure and wind-down may affect the stock market negatively as positions are exited in the coming weeks.

On Thursday, 7/25/13, German business confidence is up three months in a row. Spain unemployment falls for the first time in a couple years but a move to 26.3% from 27.2% is nothing to get excited back. Spain remains in depression. U.K. GDP is 0.6% showing growth for two consecutive months and hinting at a potential recovery beginning.  Dollar/yen is 99.63 dropping under 100 in tune with the S&P futures at -10 in the early morning hours on the East Coast. Copper is weak. The 10-year yield is 2.60%. The futures recover to -3 on positive earnings from DOW, GM and others. The broad indexes move higher at the opening bell but pivot lower on the better than expected Durable Goods numbers. The numbers are robust but upon closer inspection the BA airplane orders are the cause for the big jump, not the broader economy.  Markets produce a low at 11 AM when the daily Fed purchases take affect and send markets higher into the closing bell. Homebuilder’s are a casualty today on weaker than expected earnings and higher yields. PHM, DHI and others are bludgeoned from -5 to -10% and more. The SAC Capital indictment dominates the afternoon news. Traders discuss the negative affects anticipated with the loss of the SAC trading volume.  The SPX closes at 1690. After the bell, AMZN disappoints reporting a loss rather than a positive EPS. In addition, the top line is a shade light and Amazon guides lower. Three strikes and yer out; AMZN tumble -5% initially but then recovers to -1%.  SBUX results are better than expected and it jumps +6%.  ZNGA disappoints and it is bludgeoned AH’s.

On  Friday, 7/26/13, China cuts manufacturing capacity so copper takes a -1.1% dive. Japan data shows a hint of inflation. The Nikkei drops -3% and the dollar/yen pair drops under 99 to 98.69 showing that traders think the BOJ may pull back slightly on QE due to the inflation improvement. Global markets clearly move according to central banker actions.  GS’s Blankfein says the Fed stimulus will continue for a ‘considerable time’.  The weaker dollar and higher euro keep the stock market elevated in recent days.  UBS Bank pays a 900 million settlement to Fed regulators for missteps during the 2008 housing and financial bubble.  The new Fed Chairman talk increases with Yellen favored over Summers currently. The Whitehouse tries to tamp down all the talk as it takes on a life of its own, releasing a statement that a list of potential candidates to replace Bernanke has not been finalized and the selection will not be until the Fall.  S&P futures steadily drift lower all morning long to -7 one hour before the opening bell.  Equities sell off at the opening bell.  Consumer Sentiment is better than expected, at a six-year high.  Markets drift lower but at 11 AM, just like yesterday, recover and move higher into the closing bell. The Fed POMO pumps kick in at that time. The Fed is the market. Semiconductors and copper are very weak today. Europe approves 4 billion more in aid for Greece which will keep them afloat until Fall when they will need more money.   The SPX finishes at 1692 and Dow at 15559, flat on the week. The Nasdaq (tech) is up +0.6% for the week. Trannies (TRAN), RUT (small caps) and financials (XLF) are all down on the week from -0.6% to -1.8% and should be up like the Nasdaq for a robust market rally. Equities are now rallying for about 1600 days, almost 4 ½ years, the fifth longest bull market in history. At 6 PM EST, midnight Cairo time, riots continue in Egypt.  The streets are filled with protestors, both for and against Mursi, and vehicle traffic is unable to move. The army continues to detain Mursi and is on the side of the anti-Mursi protestors. Many street battles develop with the pro and anti-Mursi protestors fighting one another setting the stage for a civil war. The army drops leaflets on the pro-Mursi protestors requesting restraint from any violence and states a deadline for tomorrow evening where these protestors must ‘calm down, or else’. Oil price has dropped in recent days. JPM announces plan to sell its commodity business as regulators scrutinize the operation. Detroit retirees request help from the president but any city bailout or aid package will set a precedent for all the other cities facing bankruptcy.

On Saturday, 7/27/13, 16 people die in Egypt violence overnight.

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On Sunday, 7/28/13, …

On Monday, 7/29/13, Pending Home Sales.

On Tuesday, 7/30/13, FOMC Meeting begins. Consumer Confidence. MRK. PFE.

On Wednesday, 7/31/13, EOM.  ADP Jobs Report. GDP. Chicago PMI. Oil Inventories. FOMC Meeting Announcement. MA

On Thursday, 8/1/13, BOE Rate Decision. ECB Rate Decision and Press Conference. Jobless Claims. PMI Indexes.  ISM Mfg Index. CLX. K.

On  Friday, 8/2/13, Monthly Jobs Report. Personal Income and Outlays. Factory Orders.

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On Monday, 8/5/13, ISM Non-Mfg Index.  Congress is in recess until 9/6/13. Watch for potential market turmoil as politicians rattle swords ahead of vacation.

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In September, the Debt Ceiling limit and CR resolution to fund the U.S. government deadlines occur.  Can the politicians reach an agreement within 9 weeks, while they are on vacation recess for 4 weeks during the month of August?  The Whitehouse scandals and Obamacare problems are distracting politicians from properly addressing the countries financial problems.

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

In Q4 2013, European bank stress tests will occur.

On Friday, 1/31/14, Chairman Bernanke’s term ends at the Fed, unless there is news during Q4 2013 that he will stay on. Yellen and Summers are the front-runners; Yellen is very dovish and will likely continue QE.

On Friday, 2/7/14, Winter Olympics begin in Sochi, Russia, through 2/23/14.

In February/March 2014, the new Fed Head testifies before Congress.

In March 2014, the ESM is officially “fully operational.” The banking union schedule has been delayed from January 2013 to January 2014 and now to March 2014.

Keystone's Morning Wake-Up and Midday Market Action 7/26/13; Consumer Sentiment

China cuts manufacturing capacity. Copper is weak all morning long now near the lows down -1.1%. Japan data shows a hint of inflation so interestingly, the Nikkei drops -3%, with the dollar/yen pair dropping to 98.69 now through the 99 level (stronger yen). Traders must think that the BOJ may pull back on QE since there are signs it is working and creating inflation. Global markets are clearly manipulated 24/7 by central banker actions. GS's Blankfein says the Fed will continue stimulus for a 'considerable time'. 

Next week is a central banker parade with the FOMC, BOE and ECB all on tap. The Fed is all-in so anything new is unlikely. The risk would appear to be on the downside. Chairman Bernanke's main goal with all the Fed shenanigans is 'time'. Time heals all wounds and if Bernanke can keep the stock market elevated, he believes that the entire economy and job market will recover. One thing is for certain is that this will not occur on his watch. The Fed would be very content if the SPX bounced between 1600 and 1700 for the next few years since time should eventually lead to a stable economy. Next week will be interesting to see if the word taper appears again. The Fed may be playing a game of moving the equity markets up and down through SPX 1600-1700 to keep allowing time to pass. The Fed may have to utter the word taper since Bernanke must prevent the new asset bubbles, that he is causing, in the stock market, to not get too out of hand at the same time. Traders are likely thinking a lot about the central banker drama next week. Consumer Confidence, GDP, ISM Mfg and Monthly Jobs Report are on tap and the EOM as well. It will be a big week for markets.

The weaker dollar as a result of the Fed's QE talk during July has sent commodities and the stock market higher. At the same time the weaker dollar elevates the euro to 1.3272 near 1.33. Europe actually needs a weaker euro to help their economy. The dollar is key in the days ahead. The 10-year yield is 2.57% five bips off the 2.62% for much of the day yesterday. Utilities are interesting. Type 'UTIL' in the search box at the right to bring up the last chart. The UTIL 523 level was of interest this week and next week the number only increases to 528. UTIL is at 502 so as long as price stays under the 528 through next week, the utility sector weekly downtrend is ongoing and typically forecasts trouble for equities. As highlighted recently, the NYMO, SPXA150R and CPC and CPCE put/call charts all also hint that a market pull back is near. The bulls have remained bullish, even through the May-June sell off, since the financials have remained buoyant. As pointed out with the XLF chart a short while back, negative divergence on the daily and weekly charts point to a spank down and the recent action starts to show price rolling over. If the financials start selling off and falling, many bulls will rethink their approach to the markets. Financials and tech should lead higher, they always did in the past. Tech is lackluster and if financials lose their shine, market bulls will become disappointed.

Markets are a deer in the headlights this week, frozen in place and ready to leap one way or the other. Copper and volatility remain the key market drivers right now. Watch JJC 39.22 and VIX 14.18. JJC is only pennies away from returning to the bull camp, however, as mentioned above, copper is getting slapped today so JJC will fall at the opening bell. Bulls win with JJC 39.22. Bears win with VIX 14.18.  Everything else is noise and the markets will stagger sideways until one of these two flinch. Semiconductors are very important now as well. If SOX falls under 470.70, that signals lots of market downside ahead. Keybot the Quant remains long but the markets appear very shaky and if either VIX or SOX joins the bear camp, the algo may flip short.

For the SPX, starting at 1690, the bulls need to move above 1691, only one point higher, to accelerate a move 1700. The bears need to push under 1680 to accelerate the downside. If the sub 1680 occurs and VIX moves above 14.18 and/or SOX under 370.70, the equity downside ahead is very real and sustainable. A move through 1681-1690 is sideways action to end the week. S&P futures are -6 but the bears will need more juice than that. About 68% of the earnings are beating the lowered EPS estimates with top line revenue remaining weak.  SWK, TYC and WY (lumber) earnings are of interest as a gauge for housing and industrial sector strength, or lack thereof. Consumer Sentiment at 10 AM will create a market pivot point. JJC 39.22, VIX 14.18, SOX 470.70 and SPX 1691 and 1680 dictate market direction today.

Note Added 9:22 AM:  S&P's -7. Dow -76. Nasdaq -8. Dollar/yen 98.28. Euro 1.3273. The 10-year yield is 2.54%. Gold, oil, silver, copper are all down.  Looks like a move towards VIX 14.18, SOX 470.70 and SPX 1680 may occur but bears will need more gas. Markets will not settle in today until after the 10 AM pivot. Markets will meander until either copper, volatility or semi's make a decision.

Note Added 10:18 AM:  Consumer Sentiment is at a six-year high and slightly exceeding the 85-ish highs in early November 2012 and May 2013. Interestingly, the sentiment readings in the 80's occurred October 2012 into early November which identified the market top with the happy sentiment. Sentiment then fell into the 70's again until May through now with sentiment back in the 80's again. Equities pivot to the downside at 10 AM since traders think the Fed may taper due to rosy sentiment. The central bankers are the third man on the field now fully intertwined with markets. SPX 1683.69. Note the SPX drop at the opening bell was sufficient enough to send the 8 MA lower and maintain the negative 8/34 cross on the 30-minute chart signaling bearish markets for the hours ahead. Looks like it is the bears turn to tease with potential 8/34 crosses only to maintain a lower trend and frustrate the bulls. Bulls got nothing unless they move the 8 MA above the 34 MA on the 30-minute chart. JJC is 38.09 collapsing over one dollar under the 39.22 bull-bear line so copper may be cooked. VIX 13.28 remaining under the 14.18 bull-bear line.  SOX 472.77 now recovering off the LOD at 471.59. This is inching very close to the SOX 470.70 bull-bear line and semiconductors may very well be the decider for markets moving forward. TRIN is 1.00 unable to choose a side today.  Markets stumble sideways into the weekend since JJC, VIX or SOX will not make a decision. Watch SOX today; semi's may make a bearish statement. Dollar/yen 98.10 now about to drop through 98. Lower dollar/yen should mean lower equities. Euro 1.3276 flat. The 10-year yield is 2.57%. The asset relationship, at least over the last few hours, appears to be lower dollar/yen (stronger yen) = lower equities = lower commodities = lower yields (higher Treasury prices), a disinflationary vibe.

Note Added 10:41 AM:  SOX 470.70 is key. Price is coming down for another look with SOX now at 471.77.  If the bulls hold 470.70, markets will recover today into the weekend. If SOX loses 470.70, only one point away now, equities will fall apart and selling will enter the markets in force. A SOX failure would likely occur in concert with the SPX 1680 failure, today's support target. So semi's are the key today, as SOX goes, so goes the markets.

Note Added 11:08 AM:  SOX is teasing 370.70 but for now the bulls are holding the line preventing failure. SPX 1680 failed so price lost four handles to a LOD at 1676.03 but the semi's are holding so price recovers. SOX 470.70 holds the power of up or down today. Pay attention to the LOD at 1676.03 moving forward. VIX 13.59. TRIN 1.30, bearish for today. Perhaps the TRIN may make its move higher after the unprecedented 11 consecutive days of sub one closing prices supporting the bullish case. JJC loses the 38 level.

Note Added 2:05 AM:  The 11 AM excitement was the bottom in equities for today thus far. The TICK a few minutes before 11 AM is -1000 signaling overdone selling and bounce time. Interestingly, the SOX prints a LOD at 470.47 a touch under the critical 470.70 but the bears could not hold the negativity. Bulls have the SOX at 372.02 right now, in the bull camp, but this drama has only started today. VIX is crushed again today. What else is new? VIXis now printing 13.15 dropping from 13.70+ this morning so any drop in volatility sends equities higher. TRIN 1.26 remaining in the bear camp today. Copper is takin' the pipe with JJC at 38.05. For bulls to gain upside market fuel, higher copper and utilities are needed. Neither appears to be cooperating. Both appear weak. The bears have their own problems needing to push volatility higher and semiconductors lower. The SOX 470.70 parameter is the nearest bull-bear danger line so use that as the main rudder into the closing bell and for Monday morning. Bulls win keeping SOX above 470.70. Bears will start selling the markets in force if SOX 470.70 fails.

Note Added 2:16 PM: SPX 1687.26 now only down a couple. Dollar/yen 98.10. SOX 471.65. Semi's now within a buck of failure again. VIX 13.07. TRIN 1.15. Lower volatility and TRIN so SPX floats up a handle or two.

Note Added 3:23 PM:  SOX moves higher to 472.23. VIX moves lower under 13. TRIN at 1.04 down towards neutral.  Higher semi's, lower volatility and lower TRIN takes the wind out of the bear sails and pushes equities higher. Short sellers pare back positions on Friday afternoons for concern over positive news events on the weekend providing market lift. SPX is above 1689 at the highs for today. Dollar/yen 98.27 agreeing with the move up in equities. Nasdaq is positive. Today is a repeat of yesterday with markets dropping until 11 AM when the POMO pump kicks in and floats the markets higher the remainder of the day. The Fed is the market.

Note Added 3:38 PM:  Trannies (TRAN) are down -1.8% this week with the Dow and SPX flat. Small caps (RUT) down -0.3% this week. Tech (Nasdaq) the strongest but with mixed signals up +0.6%. XLF (financials) down -0.6% this week. Trannies, small caps and financials should all be where tech is if the markets are in a healthy robust up move.

Note Added 7/27/13 at 6:29 AM: The 8 MA crossed above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours and days ahead. Looks like the bulls have legs with the late day crush of volatility and the run to SPX 1700+ early next week is back on the table. The bears are foiled again. The Fed will not allow the stock market to correct.

NYMO McClellan Oscillator Daily Chart

When the NYMO moves above +40 the markets are topping and when price moves under -40 the markets are bottoming. The red boxes show the current price behavior following the pattern of the May fractal. Markets are at a key inflection right now (the maroon circle). Note how the NYMO topped two weeks ahead of the May top at 5/22/13 and the timing of the market top coincided with the NYMO failure through the zero line and the 55 MA. The NYMO topped two weeks ago and the SPX remains at elevated levels only a few points from the highs, a very similar set-up to May. In May, this behavior is where the SPX started dropping and fell from 1687 to 1600, almost 90 handles, in 11 days. It will be interesting to see if the same behavior of May occurs moving forward. We do not have to wait long. The answer will occur in the days ahead. Even if the NYMO heads higher, this will simply continue to set things up for a market pull back. The indicators are weak and bleak favoring more downside for the NYMO moving forward. 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.

Keystone's Midday Market Action 7/25/13; AMZN; SBUX; DECK

The bulls try to pump copper today but they are having trouble lifting this metal. JJC 39.05. Nonetheless, the SPX recovers off the LOD at 1680.07 up to a HOD at 1689.42. This is accomplished by beating volatility and the TRIN lower. VIX 13.06. TRIN 0.89. SOX 476.28 so the semi's are remaining in the bull camp. UTIL (utilities) sits at 502 not moving today due to the 10-year Treasury yield stuck at 2.62%.  The bulls are curling the 8 MA upwards on the SPX 30-minute chart but currently the 8 remains under the 34 signaling bearish markets for the hours ahead.  Dollar/yen is 99.61 flat all day so equities are not receiving upside help from the yen or from copper. With the JJC not moving up, the higher move in equities is under question. It is an uneventful day overall with sideways posturing but none of the parameters (JJC, VIX, SOX) want to make a change so the sideways shuffle continues with traders waiting for the next shoe to drop. Perhaps it will be an Ugg's that drops tonight with DECK earnings. CROX did not do well in the shoe department tripping -21% today.

Note Added 2:48 PM: SPX 1686.36. JJC 39.04.  VIX 13.10.  TRIN 0.96. The beat goes on.

Note Added 3:34 PM:  There's the late-day goose of copper and beating of VIX under 13 to send the SPX to a new HOD at 1690.27. JJC 39.14 now only 7 pennies from the 39.21 bull-bear line in the sand. VIX 12.95. TRIN 0.91.

Note Added 3:43 PM: SPX 1690.27. JJC 39.16.  VIX 12.94.  TRIN 0.85. Dollar/yen 99.20 moving lower so it is surprising to see equities move higher. The higher copper and lower volatility and TRIN intraday supply the bull fuel into the close. The 8 MA is heading upwards to cross the 34 MA for the bulls but this may end the day remaining bearish. The opening bell will be very important tomorrow since bears will have to push the SPX sharply lower directly at the open to save the 8/34 negative cross, otherwise, the bears will fold like a cheap suit, and, if copper, JJC, moves above 39.21, the upside is in full play again. This scenario places a lot of pressure on AMZN this evening.

Note Added 4:02 PM:  JJC will dictate market direction in the morning. AMZN reports a loss instead of a gain on lighter than expected top line and guidance is lower, three strikes and you're out. Amazon is getting beaten -4.3% on the initial reaction AH's.

SPX 30-Minute Chart 8/34 MA Cross Downward-Sloping Channel

The SPX recovers off the LOD at 1680.07 today. The histogram, stochastics and money flow create the bounce with positive divergence (green lines) but the RSI and MACD line are not as agreeable to the move higher. The spike is sharp, about 10 handles in one and one-half hour, three candlesticks. That spike curls the 8 MA to the upside. The 8 is under the 34 signaling bearish markets ahead, however, the 8 is starting to angle towards the 34. Bears will need to push price under the 8 MA at 1685.58 as soon as possible to turn the 8 MA lower again. The longer that the SPX stays above 1685.58, the more strength the bulls will gain. Note how on the way up that when price crosses the 34 MA that will lead to an 8/34 cross. Price is at the 34 MA right now, so bears need to hold the line at 1689 maintaining this level as a ceiling. Price is playing around at the top rail of the blue channel so the bears need to keep price inside the channel as well.  Watch the 8 and 34 MA. Bulls got nothing unless they can push the 8 MA up through the 34 MA. 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 7/26/13 at 6:38 AM:  The bulls ran higher into the closing bell to 1690-1691 with the 8 MA now very near a positive cross with the 34 MA to signal the all-clear for market upside again. The bears must jam markets lower at the opening bell today to prevent the 8/34 cross and keep the 8 under the 34 to maintain bearish markets. The S&P futures are -5.

Keystone's Morning Wake-Up 7/25/13; Durable Goods; DOW; GM; CL; DHI; PHM; AMZN; SBUX; DECK

The U.K. GDP, German sentiment and Spain unemployment are better than expected overnight. There is nothing to be excited about, however, since the U.K. growth is a paltry 0.6%, lower than the U.S., and Spain unemployment remains about 27%, a country mired in depression. The futures and metals dropped in the 5 and 6 AM EST hours this morning with the S&P's at -10 but they have since recovered. The Durable Goods number is stronger than expected due to BA airplane orders. The S&P's are now -6 and factoring in fair value points to a two or three point drop in the SPX after the opening bell, no biggie.  Markets continue to idle along trying to make a decision on which way to run.

QCOM, FB and V all posted positive earnings last evening. The happiness continues today with DOW, GM and MMM waving the bullish flag. Home builders such as PHM are more lackluster hinting at continued challenges ahead for this hot sector.  After the bell, AMZN, SBUX and DECK report. SBUX should change the name of the company to Ten Bucks since every time you walk in you spend $10.  Natty Gas Inventories are at 10:30 AM and Kansas City Fed is 11 AM. The 7-Year Note Auction is 1 PM.

The broken record continues over the last few days; copper and volatility are the two main market drivers right now. Watch JJC 39.21 and VIX 14.18. JJC is below the number listed so this creates market bearishness. VIX is below the number listed so this creates market bullishness. Bulls need to push JJC above 39.21 today to signal the all-clear for markets and the trek to SPX 1700 can resume. If JJC stays under 39.21, the top is likely in for the SPX.  Copper was flat hours ago but then took a large drop with futures, now recovering to about -0.2% currently. Nonetheless, this will send JJC lower to begin the day. Bears need to push VIX above 14.18 to create stronger bearishness in the markets. Keybot the Quant remains long but may flip short if volatility rises. Watch semiconductors today, SOX 470.90. Price is above this level creating market positivity but any drop under SOX 470.90 will increase market selling. The QCOM happy earnings may actually send the SOX higher today. Thus, bulls need to move copper higher while keeping volatility low and semiconductors elevated. Conversely, the bears need to keep copper under JJC 39.21 while moving volatility higher and semi's lower.

NYMO finally dropped from its high perch hinting that the market selling should continue. The TRIN chart and SPXA150R are another couple of tools forecasting a market top at hand. For the SPX today beginning at 1686, the bulls need to move above 1698 and the 1700's will occur quickly.  Bears need to push the SPX only three points lower under 1683 to accelerate the downside. Note that the futures would place price at this level for a support test at 1683 directly after the opening bell. A move through 1684-1697 is sideways action today. The 8 MA is under the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours and days ahead. As copper goes, so goes the markets. Watch JJC 39.21 closely. There are five trading days remaining in July and the month began at SPX 1606.

Note Added 9:50 AM: SPX LOD 1680.31 falling through the 1683 support that is important for today, to gain three more handles lower, however, the bears cannot hold the lower levels and price recovers back to 1685.  JJC is 39.01. VIX 13.31. SOX 474.03. Thus, status quo with bearish copper and bullish volatility and semi's. TRIN is 0.90, the tie-breaker, which is leaning bullish for equities today. TRIN did spike to 1.65 at the open but quickly reversed to the bull side now. The beat goes on. Markets stagger sideways and needs either copper, volatility and/or semi's to make a decision which would send markets in that respective direction. Dollar/yen is 99.76 moving back under the 100 level and in concert with lower equities. The 10-year yield is 2.62% which should pressure utes, telecom, home builders and REIT's.

Note Added 10:15 AM:  Traders were tripping over each other buying the dip after the opening bell so now markets float along sideways to absorb the action. SPX 1686.51. JJC 38.85. VIX 13.26. SOX 474.46.  TRIN 0.89. Status quo. The beat goes on. It is developing into a slow watching-paint-dry type day, the long-drying paint, porch and floor enamel.  FB tags the 33-ish C&H break-out level as described in this morning's chart.

Note Added 12:00 PM:  SPX 1681.77. Bulls are pumping copper, now positive, trying to mount a comeback in the broad indexes. JJC 39.07 inching higher. VIX 13.39.  SOX 473.33. TRIN 0.99 dead neutral unable to favor a side today. Dollar/yen 99.60, lower than a couple hours ago, in concert with equities a bit lower. The 10-year yield is 2.62%.

Note Added 12:10 PM:  The 8 MA remains under the 34 MA on the SPX 30-minute signaling bearish markets for the hours ahead. Note the 30-minute chart a couple posts back that discusses the H&S with neck line at 1684. The neckline ruptured today, price is now at 1682. So look for a back kiss of the neck line at 1684 where a bounce or die decision would be made. A successful back test will collapse price from 1684 and send it towards the H&S lower target area at 1670-1672. The bulls need higher copper to launch the SPX above 1684 and take equities higher. JJC 39.07.

TRIN Arms Index Daily Chart Forecasting Tool

The TRIN is referenced daily and is a vital tool if day-trading. The TICK and TRIN have to be monitored continuously during the day to gauge the ebb and flow of markets. A TRIN above one says the bears rule that day while a TRIN below one says the bulls rule. Uber low TRIN's of 0.7, or 0.6 and lower signal over-the-top bullishness and markets will reverse to the downside to relieve this bullish pressure. Conversely, high TRIN's over 2, 3, 5, and higher signal panic selling occurring and this will identify a bottom. The April and June market bottoms are easy to see on the chart with TRIN's at 3.0 and 2.5, respectively. A TRIN between 1.00 and say 1.60-ish is steady eddy market selling and hints that more selling is likely in the hours or days ahead. Conversely, a TRIN from 0.80 to 1.00 signals steady-eddy buying that may continue.

When many consecutive days occur with low TRIN's, this behavior begs for a market pull back to relieve this euphoric bullishness. The red boxes show the low TRIN behavior which all led to market sell offs. The behavior lately takes the cake since the TRIN has ended the day under one for about nine days in a row and if you include the spike a couple weeks ago, you may as well call it three weeks. This bullish pressure must be relieved. Interestingly, the TRIN is narrowing into a decision point now as shown by the lower highs and higher lows over the last three months. For the six prior red squares, the SPX sold off -45, -20, -60, -35, -90 and -95 handles. This is an average spank down of -58 points with a minimum drop of -20 and maximum drop of -95. The move off the 1698 top over the last day is about -12 SPX points not yet reaching the minimum threshold projection.

Currently the TRIN is like a beach ball held underwater, eventually, whoosh, it explodes up and out with a spike in the TRIN a la April, May and June spikes which correspond to market drops. Projection is for the TRIN to start printing above one in the days and week or two ahead, to relieve the three week of bullish euphoria, which corresponds to the broad indexes selling off. If the average -60 handle drop occurs, that would place the SPX in the 1630's or 1640's when the TRIN would be expected to be at 2 or 3 or higher and identify a market bottom. This is only one tool which must be used in conjunction with all the other ongoing tools on this site. 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.

FB FaceBook Daily Chart Cup and Handle (C&H) Patterns

FB surprised the analysts last evening with blow-out earnings and gains in mobile advertising. The stock should pop to 30-33 today. Last year we monitored the C&H during August through November. The blue lines show the initial C&H back then that failed to breakout. It formed a double handle and the lighter lines show the overall C&H.  A base of the cup at 18 and breakout line at 23, or 24, targets the 28-30 level which was achieved as this year began. The price action over the last two years, since the FB IPO disaster hit at 45 in May 2012, is now showing a much larger and textbook style C&H. The base of the cup is 18 and breakout line at 32-33. This yields a target of 45-49--the IPO price, if price breaks up through the 32-33 level.

The thin red lines for the indicators are all negatively sloped, however, not negatively diverged since price has not made a high above the price two weeks ago or six months ago. This changes today since price will leap to test the prior highs from January. This price match and higher action will lock in negative divergence for the indicators and the thick short red lines will likely verify the short term negative divergence. Thus, the chart is not particularly enthusiastic about breaking out above to satisfy the C&H upside targets as yet. Price may sneak above but the projection would be for more of a sideways move through 28-36 moving forward for the weeks and months ahead. The confirmed breakout above the C&H line at 32-33 may not occur for a few weeks or months, however, you never know. Perhaps the positive data last evening will be a game-changer and encourage more lofty prints.

Projection is lots of sideways ahead for FB after it jumps to the 30-33 area today. The breakout for the C&H should occur but it may be a few weeks or months away. Price should return to the IPO price but it may take a year or more. For long term holders, it appears that patience is required but price should return to the IPO price in the future perhaps in 2014.  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 9:44 AM:  FB catapults higher at the opening bell now printing 33.06 up a huge +28%. The HOD in these opening minutes is a spike to 34.96. As shown above, price is now testing the breakout line of the C&H at 33-ish.

SPX 30-Minute Chart 8/34 MA Cross H&S

The bears finally receive the 8/34 negative cross today signaling bearish markets for the hours and days ahead. The 30-minute receives four negative divergence spank downs over the last five days and the last one was the charm for the bears creating the cross. Price dropped to 1682-1685 today to satisfy the H&S pattern shown on the 10-minute chart this morning. This chart would turn into more chicken scratch if that was shown so reference that chart.  The brown lines now show another H&S pattern with head at 1698-ish, neckline at 1684, which targets the 1670-1672 landing zone if 1684 fails. The green falling wedge helped price to recover Wednesday afternoon. The basing pattern at 1684 is cheesy with only the stochastics reaching oversold territory. Nonetheless, price may want to move higher to create a more substantive right shoulder for the H&S.

The purple boxes show how the bears were frustrated over the last week, teased with a negative 8/34 cross only to see a spike in price send the 8 MA higher once again. Perhaps it will be the bears turn to frustrate the bulls with teases from the bottom side of the 34 MA. The SPX is a hair above the 8 MA so this will cause the 8 to curl upwards. Note the behavior on 7/17/13 last Wednesday, same set up as now, where the bulls came in with a huge opening bell spike that ram-rodded the 8 straight back up through the 34 MA to signal bull times ahead spoiling the bear's fun. This makes tomorrow's behavior after the opening bell very important.

The bear's are driving this bus now. The projection would be a move higher by a few handles followed by another roll over and failure of the 1684 support targeting a move to 1670-1672. Of course if the bulls come loaded for bear tomorrow and blast off higher after the opening bell reversing the 8/34 negative cross, then SPX 1700 would be back on the table. Copper is key. If JJC stays under 39.21 it is very likely that the top is in for the SPX. Watch copper overnight since the broad markets will move in the direction of copper tomorrow independent on how equities may initially move at the opening bell. 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.

SPX 10-Minute Chart Head and Shoulders (H&S) Pattern

The H&S on the 10-minute is an interesting pattern to watch as the day begins. Note how price bounced off the neckline in the final one-half hour of trading yesterday afternoon. So price will tease this neckline this morning and either bounce, or die.  The S&P futures have been buoyant all morning so at least initially, bounce appears to be the answer. A failure of the 1691-1692 neckline will target the 1683-1685 landing zone and, lo and behold, this lines up with the prior support from Friday morning. The indicators are a mixed bag. The RSI  and money flow never reached oversold territory. Despite the higher futures, the projection is for the neck line to fail and for price to venture towards the mid 1680's. Perhaps another right shoulder will form in the mid 1690's after the bell and maybe the 10 AM pivot on New Home Sales data will create the neck line failure. The bulls remain in control of the markets and are using lower volatility and higher copper as the two main fuel sources the last few days. 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 4:01 PM:  The H&S plays out in textbook fashion today. Price fails the neckline at 1690-1691 and dropped to 1688 after the opening bell. A bounce occurs ffrom 1688 back up for a back kiss of the neckline, which was successful, resulting in collapse. Price fell to a LOD at 1682.57 satisfying the H&S target to complete the pattern.