Keystone's Morning Wake-Up 10/25/13; Durable Goods; Consumer Sentiment; UPS

Stocks stagger sideways in the Thursday session since UTIL stays above 498, SOX above 488.95 and VIX under 14.79, and, on the bear side, JJC under 40.19. Thus, status quo. The same parameters dictate market direction today; bears need lower utes, socks and vol while bulls need higher copper. Copper is lower in early trading today. Late-day yesterday, the bulls were pumping copper to create the market upside into the closing bell but are yet unable to attain JJC 40.19. Reference this morning's copper chart for further study. Watch UTIL closely this afternoon since for all of next week price must stay above 506.22, otherwise a ceiling is placed on the market upside. At 4 PM today, UTIL will tell a lot about the markets. If UTIL drops today and ends sub 500, this signals trouble ahead for stocks. If UTIL finishes at or near 506 today, then next week will likely see new all-time highs in the SPX. The bulls must maintain UTIL above the 503-506 level for the whole next month, otherwise, this will create a drag on equity markets. Keybot the Quant is short but if JJC moves above 40.19, and the SPX moves above 1754, and both remain above, Keybot will likely flip back to the long side.

For the SPX today starting at 1752, the bulls only need 2 points, to touch the 1754 handle, and an upside acceleration will occur to test the all-time high at 1759.33. The bears need to push under 1746 to accelerate the downside. A move through 1747-1751 is sideways action. S&P futures are flat at this writing about 2 hours before the opening bell. Durable Goods Orders are 8:30 AM. Consumer Sentiment at 9:55 AM will create a market pivot point. Ditto Wholesale Trade at 10 AM but it is unclear if this release and/or Durable Goods will occur due to the government shutdown. Notable earnings today are UPS, UPS and UPS. Did someone mention UPS? This global shipping bellwether will set the tone for markets. PG earnings are in line. ETN, NOV, SHW, SPG and WY are also of interest. The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead. Bears got nothing unless they can create a negative 8/34 cross on the 30-minute. Watch UTIL 498, UTIL 506, SOX 488.95, VIX 14.79 and JJC 40.19. There may be lots of drama with copper and utilities today. The SPX price is extended above all moving averages on daily, weekly and monthly charts signaling a need for a reversion to the mean (lower prices).

Note Added 11:20 AM:  Equities pivot lower at 10 AM. JJC is 39.99 under the critical 40.19 bull-bear line in the sand. UTIL is 503 above 498 creating market lift today but 3 points short of the 506+ needed by the closing bell today. SOX is higher above 489. VIX is 13.20 under the 14.79 bull-bear line (which is bullish for markets). Thus, all is status quo with the parameters remaining in their respective bull and bear camps. The SPX touched 1754 so it shot to higher to test the all-time high at 1759.33 falling less than one-point shy thus far today at a HOD at 1758.46. The beat goes on. Copper is key today. If JJC would move above 40.19, and now the SPX will need to move above 1759, and both stay above, Keybot the Quant will likely flip long.

Note Added on 10/26/13 at 5:00 AM: The bulls could not push copper above JJC 40.19 so the broad indexes stumbled sideways for much of the day. A late-day push higher occurred as utilities were goosed to target the UTIL 506.22 number that Keybot identified. The bulls close the session with UTIL above 506.22 which will help maintain market elevation come Monday, as long as UTIL can maintain the 35 cent advantage at 506.57. Isn't it amazing how Keybot can identify these areas and levels of interest before they occur? This little robot is the David Blaine of Wall Street. The SPX prints a new all-time intraday high at 1759.82 and new all-time closing high at 1759.77. JJC 40.19 and UTIL 506.22 are key market metrics for next week. The 8 MA remains above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead. The copper trading overnight Sunday will likely dictate the broad market direction after Monday's opening bell. If you are bullish the markets, you want to see higher copper since it will move the SPX another ten or so handles higher. Bears want to see weak copper and if the dollar bounces as the charts show (type 'USD' into the search box at the right to bring up the dollar charts for further study), this should weaken copper and commodities moving forward. GTX collapsed last week.  Keybot the Quant remains short through the weekend. Interestingly, UTIL above 506.22 does not really add bullish oomph to markets, it simply supports the elevated equity numbers. If UTIL drops under 506.22 on Monday, this would be gravy for bears creating negativity to start the ball rolling downhill. It is interesting to see new all-time highs print. If there was ever a time for a significant negative global event to occur to catch traders with their pants down, it would be this weekend. Next week's trading may write epic history as markets determine if they are at a multi-year high inflection point a la 2000 and 2007, or not.

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

The bulls run higher yesterday and send the 8 MA above the 34 MA signaling bullish markets for the hours ahead. The bears are not allowed to shine this year. The negative 8/34 cross on Wednesday painted the way lower for markets. The bears popped the champagne corks but yesterday were frantically trying to place the corks back in the bottles as the positive 8/34 cross occurs crushing the bear's hopes and dreams. The SPX is drifting sideways currently. S&P futures are flat over the last few hours. The blue lines show a head and shoulders pattern in play with price printing the right shoulder currently. The H&S has two heads but sometimes you must roll with the flow for stock patterns. Besides, two heads are better than one, although Granny, on the Beverly Hillbillies television comedy from years ago would quip, "Not when one of them is Jethro's."

The neck line for the H&S is 1740-ish with head at 1759 so the downside target is 1723-ish if the 1740 level fails. Watch the 8/34 cross. Bulls are in control. Bears got nothing unless they receive a negative 8/34 cross today. 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.

USD US Dollar Weekly and Daily Charts Long-Term Sideways Channel Falling Wedge Oversold

These days, the euro is popping and the dollar dropping. The Fed's insistence on keeping the stock market elevated to benefit their rich friends through money-printing beats the dollar lower. Fed's Fisher, an avid hawk, now says QE will continue. The Washington political clown show continues into 2014 so traders are 100% convinced that QE tapering will not occur until March 2014 at the earliest; others are saying next summer. This is absolutely shameful, but, no one cares. The beating of the dollar then pops the euro. Europe will become concerned over the higher euro, now at 1.38, since this bites into the retail sales (Asian tourism drops off and thus luxury sales) and hurts the exporters and manufacturers, all at a time when Europe needs to dig out of a deep economic hole.

The weekly chart shows the long-term channel continuing through 79-84 for the last couple years; price now at the lower rail. The green falling wedges are a bullish set-up. The daily chart is positively diverged across the indicators, with oversold conditions, so a bounce in the dollar is expected in the daily time frame. On the weekly chart, however, the indicators remain weak. The stochastics are buried in the oversold area which will cause a bounce in agreement with the daily chart but then price will want to come back down again in the weekly time frame. The current dollar lows are not below the January lows as yet so positive divergence cannot exist, but the chart hints that the dollar will be basing in this 78.5-79.5 area over the next 1 to 3 weeks, perhaps one month. The ADX is subdued despite the big drop from 85 to 79. If this collapse in price was a strong trend, the ADX should be in the 20's and 30's right now but instead sits at a paltry 16. This hints that the down move is not a strong trend and makes sense since the beating in the dollar over the last 3 months is mainly due to the Washington and Fed clown follies.

Projection is for the dollar to base and move higher while the euro tops and rolls over to the downside. Keystone is currently in EUO which is a 2x ETF that shorts the euro. UUP is an ETF that longs the dollar and there are many other short euro and long dollar plays available in the stock and option markets. If the dollar does strengthen moving forward into the end of the year, this should maintain pressure on copper, commodities, oil and gold. Thus, a play like SMN, which is a 2x inverse ETF against basic materials, which Keystone holds long, would benefit with the stronger dollar. Keystone continues to project lots of sideways ahead for currencies and Treasury yields, perhaps for months and years 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.

JJC Copper ETF Daily Chart Sideways Symmetrical Triangle

Copper is a very important influence on market direction these days. Keybot the Quant, Keystone's trading algo, identifes 40.19 as the key bull-bear line in the sand. Equity markets should leak lower if JJC remains under 40.19 but the bulls will run above the all-time SPX high at 1759 if JJC moves above 40.19. The sideways triangle shows a price breakout to the upside 3 days ago but it was a false breakout; price returns to the triangle and then explores the lower trend line resulting in a bounce. Copper cannot make up its mind as verified by the indicators all funneling sideways. A big decision is at the doorstep. GTX (commodities) have collapsed in recent days and the CRB Rind Index remains bearish so these would prefer to see weaker copper. Worries are surfacing over slower Japan and China growth rates. The 20 MA is a hair under the 50 MA with a bearish cross.

Watch the RSI and stochastic 50% levels and MACD zero line as the pivot points that provide the answer. The RSI is under 50 giving the bears the nod but the stochastics are above 50 giving the bulls the nod. The way JJC moves in relation to 40.19 today dictates market direction. Copper is weak in early trading today. 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 Morning Wake-Up 10/24/13; AMZN; F; MO; MMM; MSFT

The market saga continues. The bulls run all year long and here we are in October nearing Halloween at all-time market highs. The 18-year stock cycle is the most reliable cycle and markets remain in a secular bear from 2000-2018. Sure does not feel like it considering the over 4-1/2 year bull rally now in place. This type of countertrend cyclical behavior is common within the larger secular moves. This rally is one of the top five longest bull rallies in the history of the stock market. It is reminiscent of the October 2007 top that peaked after a 4-1/2 year run from the March 2003 bottom that was marked by the start of the Iraq War. Yes, sadly, war is bullish. The current secular bear market has 5 more years of life in it despite this continuing over extension to the upside due to the Fed and other global central banker money-printing. No one knows exactly how much fluff and air is under the markets; somewhere between 0 and 50%. The obscene market pumping actions by Fed Chairman's Greenspan and Bernanke have several more years to play out. We have only seen the positive side so far. QE Infinity is losing its effectiveness and is now increasing the debt while doing nothing for the economy as evidenced by the ongoing structural unemployment. The Fed knows this. But, as Alfred E. Neuman says, "What, me worry?"

The low CPC and CPCE put/all ratio charts highlighted on the weekend signal a significant market top at hand and must be respected. Type 'CPC' or 'CPCE' into the search box to the right to bring those charts up for continued study. The VIX was under 13 over the last four days and closed at the lows yesterday at 13.42. No one is bearish the markets. Even those pundits, analysts or traders that wax worry in the media are buying stocks on the long side 10 minutes after their interview ends. Ma and Pa are jumping on board all the market hype placing their life savings into dividend stocks. SDY and DVY charts illustrate the current dividend stock bubble that is long in the tooth and prime for popping. Thus, the anticipation is for markets to place a top over the coming days.

This paragraph is very important. When the markets top off and begin to sell off over the next couple weeks, watch the utilities. If UTIL stays above 500, the market move lower will be tame, similar to September's drop, perhaps 80 or so SPX handles then recovery. This is a good outcome for bulls since equities will recover and probably finish the year strong. Conversely, as equities begin to sell off, if UTIL drops under 500 and heads lower, under 490, and lower under the 50-week MA  now at 485-ish, big trouble is ahead for the broad indexes and this pending market sell off is likely the real deal with -5%, -10%, -15% and even a lot more likely ahead. So monitor the concept in this paragraph over the next month. Of course, if UTIL loses ground at any time moving forward, today and forward, that will bolster the bear case. Watch the 10-year Treasury yield, now at 2.50%. A move higher in yields will typically send utes lower while a drop in yields will send utes higher.

Returning to earth and addressing the day at hand, utilities, semiconductors and copper are dictating market direction. Watch UTIL 498.03 (now above causing bullishness), SOX 488.95 (now above causing bullishness) and JJC 40.19 (now below causing bearishness). Thus, bulls need higher copper for party time while bears need lower utilities and semiconductors to accelerate the market downside. If all 3 parameters remain status quo, the markets will stagger along sideways. Keybot the Quant is short the markets. If JJC moves above 40.19, and SPX moves above 1752, and both remain above, Keybot will likely flip back to the long side. Copper is up a touch in early trading. For the SPX starting at 1746, the bulls need to push above 1752 to ignite an upside par-tay back to the all-time high at 1759. The bears need to push under 1741 to accelerate the downside. A move through 1742-1751 is sideways action today.

China PMI is better than expected. Eurozone, France and Germany PMI's are above the 50 level showing expansion but a touch weaker than expected. The euro pops above 1.38 overnight, then dropped back under, now back above at 1.3804. International Trade and Jobless Claims are 8:30 AM. The JOLTS Job Openings Report is 10 AM. New Home Sales were scheduled for today at 10 AM which would create a market pivot point, but it is unknown whether this release will occur today due to the shutdown?  Natty Gas Inventories 10:30 AM. Kansas City Fed Mfg Index 11 AM. 30-Year TIPS Auction at 1 PM. Notable earnings are AMZN, CERN, CL, DO, DOW, EMN, FLS, F, HSY, IP, LUV, MTW, MO, MMM, MSFT, NBR, PHM, RYN, RTN, RS and UA, so a great cross-section of tech, chemicals, auto's, paper, blue chips, defense, steel and retail.

The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours ahead. Bulls will try to create a positive 8/34 cross at the bell this morning to win back control. S&P futures are +7 and a gap-up would create the positive 8/34 cross. Watch the 8/34 cross, UTIL 498, SOX 488.95, JJC 40.19 and SPX 1752 and 1741 since these parameters dictate today's market direction. Keystone updated the Positions and Picks page mid-week and, perhaps not too surprisingly considering the leaning-bearish meme, there are more potential short plays rather than longs. Interesting and attractive potential short picks moving forward include AMZN, CELG, PXD, DG, LKND, FB, NFLX, IYZ, DPZ, LMT, LOW, CBS and BSX, if they exceed their short entry targets.

SPX Daily Chart Overbot Negative Divergence Gaps

The low CPC and CPCE put/call ratio charts on the weekend identify a significant market top currently in progress that is finishing up this week or next. Looking at the price action in the SPX, the red lines show negative divergence across the board which wants to create the smack down, sans the MACD line. The bears have the pesky MACD thorn in their sides since it wants to see another high in price. Note that the MACD line is negatively diverged across the three month time frame; it is only the VST (days) that hints at another test of the all-time highs at 1752-ish and 1759-ish. The volume yesterday was a hair under the buying volume the day before so this hints that price may want to test the upper side once more to lock in the neggie d for the MACD line.

If price does rise, watch the indicators to see if they maintain the negative divergence profile which will lock in the downside moving forward. The stochastics are overbot and clearly negatively diverged in all time frames now and the neggie d over the last 3 days causes the spank down in price off the top yesterday. Note the juicy gaps below at 1745, 1733-1737, 1656-1660 and 1640 which will need filled at some point. Key support is 1745, 1737, 1733, 1730, 1726, 1722, 1720, 1710, 1706 and 1697-1698. S&P futures are +6 at this writing about 5 hours before the opening bell which targets 1652 to begin the day.

Projection remains that a significant market top is now printing. The top may occur today, tomorrow, or next week, but very, very soon, within days. Cash is an attractive position nowadays and a lightening up on longs and preference for the short side is a prudent strategy going forward. The bulls may always have one last goose up their sleeves with an upside spurt but the charts show that we are very close to the top at this time.  The blue line in the margin shows a potential path forward with a test of the upper trend line that should lock in the MACD neggie d. The other potential path would simply be down from here. 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 on 10/25/13 at 5:44 AM: The SPX teases the 1752-1754 area yesterday afternoon.

SPX 30-Minute Chart 8/34 MA Cross Channel Failure Potential Bear Flag

The 8 MA finally stabs down through the 34 MA on the 30-minute chart signaling bearish markets for the hours ahead, however, these two critical moving averages are traveling sideways with only a point or so of space between them. The opening bell is very important today. The bulls must create a gap-up open to try and create a positive 8/34 cross and regain market control. Otherwise, the bears will continue taking equities lower. Note the blue channel failure at yesterday's opening bell caused by the negative divergence (red lines). This behavior set up the negative 8/34 cross mid-morning yesterday.

The thin green lines for the indicators are sloping up but this is not positive divergence. Bulls would have been better off to allow price to drop to 1740-ish or lower since the lower low in price, with the positively-sloped indicators would assure a positive divergence bounce, but alas, this is not the current case. The stochastics dropped immediately into oversold territory which created yesterday morning's price bottom. The indicators are not tipping their hand currently, it is a toss-up to begin the day. The blue bear flag is in play with a drop from 1759 to 1740 for the first leg, 19 handles, and then price consolidates with a slight upward bias, textbook action for a bear flag, thus, if a move lower begins from, say 1748, the target is 1729. The 1730 is a support level so this provides street cred for the bear flag projection.

Note the juicy gap at 1733-1737 which will need filled at some point. Key support is 1745, 1737, 1733, 1730, 1726, 1722, 1720, 1710, 1706 and 1697-1698. S&P futures are +6 at this writing about 5 hours before the opening bell which targets 1652 to begin the day. The 8 MA is 1746-ish so any print above will move this important MA higher while price prints under 1746 will move the 8 MA lower and maintain the negative 8/34 cross. SPX is stumbling sideways for now. Watch the 8/34 cross since it tells you who is winning for the road 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 10/23/13

Watch UTIL 498, JJC 40.21, SOX 488.95 and VIX 14.79. Semiconductors collapse today which is ushering in market weakness. Utilities continue higher on lower Treasury yields. Keybot the Quant flips to the short side today but the move is tentative so far. SOX is already staging a come-back above 488.95, see if the bulls can recover semi's today, or not. Keystone took profits on the SSG long trade (short semi's) exiting the position that was entered yesterday for an overnight +6% profit. Will look to reenter.

Note Added 11:32 AM:  SOX 489.49 above the 488.95 bull-bear line in the sand. Bulls are trying to recover. JJC 40.13 under the 40.21 bull-bear line in the sand. TRIN 1.34.

Note Added 12:05 PM:  UTIL 503.93. SOX 491.09. JJC 40.05. VIX 13.90. Market bears stay in the game on the short side and are not concerned as long as copper remains weak (JJC under 40.21). Bears need to turn the green parameters red to push markets lower while the bulls need to push JJC above 40.21 and they can pop the corks on the wine bottles again.

Note Added 12:13 PM:  The 8 MA drops under the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours ahead. Monitor this cross to see if it holds today, or not. JJC 40.05.  SOX 490.86 one-point on the bull side supporting the broad indexes, like a lamppost propping up a drunk on the street corner.

Note Added 2:48 PM:  UTIL 504.37. SOX 490.04. JJC 40.00. VIX 13.54. Status quo. Markets will not leak lower with SOX above 488.95. Chairman Bernanke keeps the VIX beach ball underwater today (reference Keystone's Sunday Funnies comic by typing 'vix beachball' into the search box to the right) which is the main goal of the Fed--crushing volatility to keep equities pumped up.  Note the drop in the VIX over the last hour that creates the slight buoyancy in equities. SPX 1748. The bulls are turning the 8 MA upwards on the SPX 30-minute to try and create a positive 8/34 MA cross, but, for now, the 8 remains under the 34 signaling bearishness for the hours ahead. Bears need SOX 488.95. Bulls need JJC 40.21.

Note Added 3:31 PM:  SPX 1745. A standoff between copper and semi's continues. Keystone shorted RTH opening a new short position that shorts the retail sector.

Note Added 3:36 PM:  Keystone bot EUO opening a new long position which is a 2x inverse ETF that shorts the euro. Reference this morning's chart for the euro ($XEU). The weekly chart on the euro likely wants another high ($XEU) which corresponds to another low for EUO, and the dollar likely wants another low ($USD) to correspond to the higher high for the euro, however, a quickie bounce is perhaps on tap for EUO (spank down for euro, pop for dollar). EUO would have to be a nimble trade, looking for a bounce, then exit, then reload maybe a week from now. If the trade goes the wrong way (if the euro keeps going higher to 1.38, 1.39 non-stop), then likely hold EUO and add to it a week or two from now.

Note Added 3:43 PM:  UTIL 502 on verge of a 501 handle. If you are bearish the markets, you want SOX under 488.95, but also, you want UTIL sub 500, and sub 498, and lower, into the 480's, since this will indicate major trouble for equities moving forward. If bullish, you need to keep pumping semi's, utes and copper higher and crushing volatility lower. The 8 MA remains under the 34 MA on the 30-minute signaling bearishness ahead but it is touch and go with both moving averages traveling parallel to each other. This means the opening bell tomorrow will have huge importance for markets. SPX sits at 1746. SOX 489.99.

Keybot the Quant Turns Bearish

Keystone's trading algo, Keybot the Quant, flips bearish at SPX 1746 this morning. JJC is under 40.21 and SOX is under 488.95 causing the negativity but watch these closely since they may create a whipsaw back to the long side today or tomorrow. For now, the bears are running. More details are found at Keybot's site;

Keybot the Quant

SPX Monthly Weekly and Daily Charts All Violating Upper Standard Deviation Bands

The SPX monthly, weekly and daily charts all tag their upper standard deviation bands. Once this occurs, a move to the middle band, at a minimum, would be expected moving forward. For the daily this is 1701 and rising; for the weekly this is 1676 and rising; for the monthly this is 1507 and rising. The 1706 level is strong support and serves as an initial downside target. Price typically moves to the opposite band after the middle band is touched. Bulls will be hoping that the drop stops at the middle band. Note that the lower band on the monthly is 1256 and rising. 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.