BABA Alibaba 2-Minute and 5-Minute Charts Largest IPO in History Begins Trading on NYSE Price Action is Explained

At 8:30 AM, US futures trade higher. S&P +5. Dow +65. Nasdaq +13. Dollar/yen 108.76. The 10-year yield relaxes to 2.61% and lower and the 2-year yield softens to 0.57%. The early buzz on the NYSE trading floor says the BABA IPO may not begin trading until one or two hours after the opening bell (the trading day begins at 9:30 AM EST).

The trading session begins with equities jumping strongly higher on the PBOC stimulus announcement last evening (more central banker easy money) and Scotland no vote. Volume is robust. The SPX trades at a new all-time high at 2019.26. The Dow prints a new all-time high at 17350.64. TRAN prints a new all-time high at 8713.27. The Nasdaq prints a new 14-1/2 year high at 4610.57.

The TRIN prints an uber multi-year low at 0.31 verifying the euphoric and ecstatic stock market sentiment. The VIX collapses to 11.52 showing a complete lack of fear in the markets. Complacency rules the markets since stocks will go up forever with unlimited central banker money. Traders are drunk off the Fed wine staggering around and raping stocks on the long side enjoying the never-ending Fed-fueled 5-1/2 year stock market rally.

The NYSE trading floor is one big party with the BABA IPO the next joyous offering on tap for the bulls. Jack Ma the CEO rockstar of Alibaba says, “I am honored and excited for the Alibaba IPO. I want out shareholders to make money.” SoftBank CEO and Alibaba Director Masayoshi Son is on the floor of the NYSE (Softbank owns about one-third of Alibaba) and says, “We will hold Alibaba as a core company and would like to own more.”

Equities remain at the highs for the first one-half hour of trading. Dollar/yen 108.87. The 10-year yield pops higher to 2.63%. The party atmosphere continues as traders await the initial pricing range for BABA. Folks are taking selfies and high-fiving each other already planning how to spend their new-found wealth. The first initial pricing indication for BABA should have occurred by now. NYSE officials say there are tens of millions wanting to buy shares. It is odd that the market makers have not at least provided a price range for BABA even if it is a wide range.

The first indication of BABA price occurs at 10:07 AM a bit later than expected and the range is set at 80 to 83. The market makers say it is too early to project when the opening print will occur. It is not surprising for an IPO of this magnitude to take an hour or more to zero in on the opening price. The 80-83 range will narrow down to a firm dollar handle then narrow down to identify the cents level as buyers and sellers are registered in the books. The funds and banks are providing strong support for the 68 price level for Alibaba and the initial expectations are that BABA will begin trading in the 80’s.

At 10:11 AM, equities remain elevated and the market tone remains optimistic and euphorically bullish. A few minutes ago, there was some anxiousness developing since an initial BABA price took a bit long to identify but traders and market participants are back on the party wagon with smiles all around and expectations high for a flawless start to the IPO’s trading. At 10:25 AM, the price range is bumped higher to 82-85 as the market makers are teasing out the sellers. If BABA prints at 90, that reflects a $222 billion market value. The pricing in the 80’s will already make BABA a larger company than FB.

At 10:32 AM, a third indication occurs with the price range bumped higher to 84-87 as the buyers are reduced from 40 million down to 28 million. The price range is jumping in three-dollar increments. BABA should be trading within about one-half hour as the range narrows. The smaller brokers are disappointed since the big boys kept most of the Alibaba allocation for themselves. Wall Street is a “big club and you ain’t in it” to paraphrase comedian George Carlin and sometimes the players in the regular big club are not even big enough to play in the top-tier big club. Traders that sold stocks early in the week to free up cash to buy Alibaba realized they would not receive an attractive entry price for BABA so they returned to the broad indexes which helped fuel yesterday’s stock rally and today’s upside joy. YHOO is up +1.2%. AMZN +2%.

At 10:44 AM, the BABA range is 86 to 88 now at a two-dollar range representing a $217 billion market cap. The market makers almost seem like they are targeting a 88.88 number since the Chinese love the 8’s as a good luck number. The 8’s would be icing on the cake for Jack Ma’s happy day. The broad indexes are retreating off the highs but remain positive on the session.

At 10:53 AM, a fifth indication sets the BABA price range at 87 to 89 but 15 million buyers continue to look for sellers so the price range keeps floating higher. The market makers say there is likely another one-half hour required to settle the price and allow BABA to begin trading. The broad indexes are leaking lower with the RUT small caps turning negative as the VIX recovers moving higher towards 12. WTIC crude oil drops under 92. Copper turns negative. Gold drops to 1217.

At 11:01 AM, the BABA pricing process continues with a new range of 88-90 with 10 million to buy. NYSE officials brag that the Alibaba pricing process is continuing smoothly and orderly. BABA CEO Jack Ma credits the NYSE with conducting a smooth process. At 11:08 AM, a seventh indication sets the BABA price at 89 to 91. Alibaba investors, traders and market participants are becoming nervous as the wait continues and the broad markets are already trading over one and one-half hours. Jack Ma is ushered off the NYSE trading floor temporarily as everyone awaits for the final opening price for BABA.

At 11:12 AM, the eighth BABA price indication is 90-91 now down to a one-dollar range. The market makers are identifying the cents range so Alibaba is very close to trading and will open between 90 and 91 at a market cap exceeding $220 billion on par with huge companies such as WMT. The tension mounts. At 11:21 AM, the ninth price indication for BABA is 91-92 so the cents level will be identified within this new one-dollar range. People are willing to buy at any price sending the stock higher. The valuation of Alibaba is becoming very rich above 90. The market makers would like to open the stock as soon as possible to leave room for an upside pop in BABA. NYSE officials say BABA should begin trading in 10 to 15 minutes.

At 11:28 AM, the tenth BABA price indication occurs at 92-93 zeroing in on 92.50. Jack Ma is returning to the trading floor so the opening for Alibaba is only minutes away. YHOO retreats from earlier gains and trades flat on the session. The Nadsaq turns negative joining the RUT. The VIX is above 12 creating selling pressure in equities and the 10-year Treasury yield is barely hanging on to 2.60%. The Dow is testing 17.3K support. At 11:42 AM EST, BABA is very close with buyers and sellers paired off at 93. The pricing process is taking longer than expected but the NYSE obviously does not want to drop the ball. Trading in Alibaba is imminent. The excitement reaches a crescendo as price zeroes in on 92.60-93.00. Here she goes. The price is frozen. “Open Sesame.”

At 11:53 AM, BABA, the largest IPO in history, begins trading with the opening print at 92.75 (the NYSE identifies 92.70 as the official opening price). Price rockets higher and is above 97 at 11:57 AM. The 98 level is hit at 11:57 AM with BABA up +45% (remember the base price is 68). Price hits 99 at 11:58 AM. Price hits 99.50 at 11:59 AM. The SPX and Dow remain a hair positive on the day while the Nasdaq and RUT indexes are negative. BABA prints a HOD at 99.68 at 12 noon (midnight time in China where Alibaba is based). The initial sellers come in and slap BABA lower to a 93 handle at 12:02 PM. BABA does not yet achieve the coveted 100 print in the opening minutes.

At 12:05 PM, BABA price drops to back kiss the opening price level. Boom. At 12:06 PM, price drops under the opening price at 92.75. BABA is trying to establish the 92 level as support. 100 million shares are traded within the first 10 minutes. The SPX turns negative joining the COMPQ and RUT. The Dow drops under 17.3K. Dollar/yen 108.97. The 10-year yield drops to 2.59%. The VIX climbs higher to 12.28 creating additional broad market selling pressure. Trannies turn negative. YHOO is tanking -2.7% now nearly a -5% turnaround off the intraday top.

At 12:13 PM, BABA holds the 92 support and stabilizes through 92-94. At 12:17 PM, BABA prints at the opening price at 92.60-92.75 deciding to bounce or die. The NYSE takes a bow saying that trading in BABA is orderly and all systems are fully operational. The shares traded in BABA already surpass TWTR’s entire opening day volume. At 12:23 PM, now trading for one-half hour, BABA is in a very narrow 92-93 range deciding whether to bounce or die from this support area.

Whoopsies daisies. At 12:28 PM, BABA loses the 92 support. Price loses the 91 and uses 90 as support. The yen is beaten lower sending the dollar/yen pair above 109 preventing the broad indexes from falling. At 12:38 PM, BABA prints the LOD at 90.04. The official opening print is 92.70 at 11:53 AM at 48.09 million shares. At 12:45 PM, BABA holds the 90 support level. YHOO is collapsing down -6%. The first hour of trading is complete for Alibaba at 12:53 PM with BABA using the 90 level as support. The IPO trades up +33% on its debut so far. The HOD is 99.70 and LOD 90.04. The day is young.

Note Added at 1:16 PM:  BABA falls through 90 support and prints an 89 handle with a LOD at 89.95. Price continue to fight to hold the 90 support.

Note Added 1:36 PM: BABA bounces off the 90 support and runs higher bumping up against the 92 resistance ceiling. Price is 91.27.

Note Added 2:00 PM:  BABA trades sideways supported by 90 below and resisted by 92 above. Price is 91.83 near the top of this range. The sideways 90-92 channel is key. BABA bulls win above 92. Bears win below 90. Price now at 91.98 testing 92 R so it is time to bounce or die.

Note Added 3:00 PM: Bounce. Price moves above the 92 resistance at 2:05 PM that now becomes support. Price back tests the 92.70 opening price resistance and rolls over to the downside. At 2:47 PM, whoopsies daisies. BABA loses the 92 support that now becomes resistance again. Price is 91.32. Key S/R is 92.70, 92.00 and 90.00.

Note Added 3:45 PM:  BABA breaks up through 92 and runs higher to try and punch through the 92.70 resistance. Price is 92.81. BABA wants to end the first day of trading strong and on an up note so price is pushing higher to print above the opening bell price at 92.70. The market makers will likely keep the price above 92.70 through the closing bell to avoid any embarassment.

Note Added 3:51 PM: Bingo. Price moves above 93 to 93.50.

Note Added 3:54 PM: The Alibaba magic carpet ride continues into the closing bell with price running towards 94.

Note Added 4:02 PM: Alibaba survives the first day of trading. The market genie fulfills Jack Ma's wish. BABA settles out ending the day at 93.17. The starting IPO price is 68 and the opening price is 92.70. HOD is 99.70 that occurred in the opening minutes. BABA fell 30 cents short of the 100 price level. LOD is 89.95 so BABA printed an 89 handle and the overall range is 89-100 today. BABA gains +38% on its first day of trading. YHOO tumbles nearly -3%. AMZN +2%. GOOGL +1.3%. FB +1.1%. AAPL -0.6%. BIDU -1.5%. EBAY -0.6%. Alibaba is valued at over $230 billion market cap. The chart is only trading for a few hours so using technical's may seem like folly but in the 5-minute time frame a few interesting ideas surface. The BABA key S/R is 99.70, 99.0, 95.0, 94.0, 93.0, 92.70, 92.0 and 90.0. The 90 support held today. The blue lines on the 5-minute chart show a C&H (cup & handle) pattern so the base of the cup at 90 and breakout level at 92.70 targets the 95.0-95.4 area. The stochastics (overbot) are negatively diverged and content with seeing price move lower going forward and wants to create a spank down. The other indicators are long and strong (green lines) wanting to see higher highs in price after any pull back in this 5-minute time frame and the RSI has not reached overbot territory. So the projection is for a continued sideways up move likely to the 95-ish C&H target in early Monday trading. At that time the neggie d should form for the indicators to create a roll over to the downside. Remember, these are only 5-minute candlesticks so the thought is that the 95+ may print on Monday morning followed by a topping out and roll over. Price may simply stumble through 93-95 in the early going. A break up through 95.0-95.4 would send price to 99 so BABA bears will need to hold the line at 95 and BABA bulls will want to break up through 95. Bears win under 90. The Alibaba IPO is successful after its first day of trading.

TNX 10-Year Treasury Note Yield Negative Divergence Developing

Similar to the USD dollar chart, the yield is moving higher with negative divergence (red lines) creating an initial pull back. Overnight, the yield has dropped from 2.64% down to 2.60% currently. The 200-day MA at 2.65% creates overhead resistance. The MACD line remains long and strong so yield will want to print another higher high before the MACD goes neggie d and the firm near-term top in yield occurs.

Keystone highlighted the TNX daily chart with the green falling wedge, oversold conditions and positive divergence (green lines) three weeks ago forecasting the up in yields, which occurs. The pink dots show how yield is extended to the downside with the moving average ribbon indicating that price is overextended to the downside requiring a mean reversion, which occurs. The 20-day MA is crossing above the 50-day MA which is bullish for yields (bearish for note and bond prices) but as often occurs with moving average crosses, they by nature lag, so yield is actually topping out in the near term.

Into early next week the expectation is that yield will come back up and attack the 2.65% resistance level which is both the 200-day MA and strong overhead horizontal resistance over the last few months. The yield should stall at 2.65%-2.67% and then trail lower for a few days or week or two. The TNX weekly chart continues to show some long and strong juice, like the weekly dollar chart, so after a near term pull back in yields, the yield should venture higher again in the weeks ahead. The 2.75%-2.80% resistance level is very important where the game would change and the 3% and higher yields will be on the way as the inflationists have projected for the last few years. The disinflationary and deflationary funk remains as long as the 10-year yield remains under the 2.65%-2.80% area. Yields may move higher to test the 2.75%-2.80% area into the end of the year but the current expectation is that the higher resistance levels will hold and then yield will resume the sideways to sideways lower path ahead for 2015.

The 50-week MA is also at 2.65% so in the very near term this is an important land in the sand. The expectation is that 2.65% will be tested early next week and hold with yields dropping back to 2.50%-2.55% but then for the weeks ahead more upside in yields should occur with the 2.65% level giving way to set up the test of the 2.75%-2.80% as the year moves towards an end. 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 5:02 PM:  TNX drops today to 2.59% but the MACD line remains long and strong so the anticipation remains that yield should move back up to test the 2.65% resistance so the MACD line can negatively diverge.

USD US Dollar Weekly Chart Sideways Symmetrical Triangle

The dollar spike since May is remarkable. The thick green lines show a sideways symmetrical triangle pattern with vertical side of about 16 handles. Price breaks up and out of the triangle at 80 so 96 is the upside target. The stochastics are overbot and will help create a near-term pull back in concert with the dollar daily chart (see previous chart). The green lines show a long and strong profile wanting to see higher highs for the dollar after any pull back occurs and the dollar desperately needs to take a breather from the obscene spike higher. The 10-year yield has been moving up with the higher dollar so any dollar softness in the near term would send the yield slightly lower. The 10-year yield drops from 2.64% to 2.60% over the last few hours.

The RSI and stochastics are in overbot territory. The move has such strength that the dollar would be expected to remain elevated in the 83-87 area for the months ahead. Moving into the end of the year and start of 2015, the 85.5-86.0 area is targeted. The dollar may spend many weeks and months moving sideways with the sideways up bias and ultimately target the 88 resistance in 2015 and 2016, or far sooner if a negative market event occurs. If 88 is taken out then the path to the 96 triangle target will be firmly in play.

For the weeks forward the dollar will likely trade sideways choppy with higher highs expected. A more extended pull back and softness and sideways to sideways lower bias may occur moving towards the end of the year and into early 2015 but the chart is very favorable for the dollar bulls in the intermediate and longer terms. If deflation bites the US as it is biting Europe and infecting other parts of the globe, the dollar move higher would occur in concert with deflation but the yields would not be expected to rise as traders and analysts expect. The path will need to be reassessed every couple weeks. 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 Daily Chart Overbot Rising Wedge Negative Divergence

The explosive move higher in the dollar basket is astounding. ECB President Draghi is starting to fire the QE money bazooka and is promising big stimulus in 2015 which beats the euro lower and provides more dollar upside fuel. The dollar moves from 79 to 85, +7.6%, in only 18 weeks time; a pace of +0.4% per week. From the 79.7 low in early July, the dollar leaps +6.7% in only 11 weeks; a pace of +0.6% per week. The stronger dollar is pounding oil, gold, silver, platinum, copper and commodities lower.

The overbot conditions, rising wedge pattern and negative divergence create the initial spank down. Price is now at 84.56 (brown dot). The MACD line is rolling over and watch for the negative cross (red circle) to verify an ongoing pull back in the dollar. The ROC is already printing a weak and bleak profile wanting to see lower lows for the dollar after any bounce occurs. The blue channel is in play and a move back to 84-ish is a reasonable expectation over the near term. The 10-year yield, TNX, is rising with the rising dollar so a near-term pull back in the dollar may soften the yield rise.

The channel lines show the wild move occurring in the dollar with a sideways channel in play in May-June, then the launch develops legs in June-July with a breakout in late July. Then the dollar runs up an even steeper channel during July-August and starting late August goes parabolic running vertically higher to the current top.

The weekly chart is topping out but it still has some long and strong strength in the indicators so the daily chart should keep the dollar in check at 84.0-84.5 for a few days or week or two, then the upside should continue to print new highs, albeit not continuing the parabolic run, and then roll over in the weeks ahead. There remains dollar strength on the weekly basis but as the chart above shows, the dollar should pull back and digest the obscene move higher in the near term. 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 5:04 PM:  USD comes up today to print at 84.86 another equal or higher price with all indicators negatively diverged so the dollar would be expected to pull back for a much needed rest.

SPX Daily Chart New All-Time Record Highs Tight Band Squeeze Bull Flag Pattern Negative Divergence Developing

The central banks are relentless beating the bears senseless day after day. The PBOC announces more China stimulus this evening adding to the liquidity injections announced earlier this week. Global markets are floating in a sea of free and easy money courtesy of the PBPC, BOJ, Fed and ECB. US futures are strongly higher. Copper is higher. The broad indexes are already champing at the bit to explode higher in Friday trading. The SPX prints a new all-time high at 2012.34 and new all-time closing high at 2011.36.

Placing this central bank money pumping aside for a second, let's assess the technicals. The previous daily chart shows the tight standard deviation bands (pink arrows) squeezing out a huge move ahead. We identified the prior moves of from 80 to 90 handles and from the bottom in the 1970's, the SPX would target 2050 and higher if the upside squeeze continues. Note that price is exactly at the top band and the bands are moving out locking in the upside move, however, the bears have a tiny window tomorrow to pull a hard reversal. If the markets continue higher as futures indicate the bulls are going to target the 2050.

The blue lines show a potential bull flag pattern. The first leg is from 1910 to 2000-ish, call it 90 points, then a sideways to sideways lower consolidation occurs, then the second leg begins from the 1970's also targeting the 2050-2070 area. Volume should be a bit more robust to confirm the bullish rally. It looks like nothing but blue skies for the market bulls. Are there any flies in the ointment?

The indicators are not enthusiastic at all about the market rally. The red and maroon lines show universal negative divergence across all time frames except the VST where the bulls are creating energy. The Fed dovishness and Chinese stimulus are creating one heck of a party the last three days. Price would be expected to bump along the upper trend line until the very short term indicators negatively diverge.

The purple boxes for the ADX are interesting since the last strong trend for the SPX was actually the downtrend in late July and early August which ended not due to technicals but due to news; just like this week's rally is caused by all the central banker easy money news. President Putin announced a desire to calm the Ukraine civil war which created the early August bottom. The move up for six weeks, as impressive as it is, only results in an ADX of 17 which indicates that the move up is surprisingly not a strong trend at all. If the tight bands were not squeezing out a strong move, the projection would be a topping out at 2010-2015 in the coming days and a roll over to the downside.

Tomorrow is an important day since it will provide further insight concerning the tight band squeeze. Considering the Chinese stimulus orgy occurring tonight (Thursday evening), the bulls have to be given the upper hand with the 2020-2070 area targeted. If the Scotland vote surprises, that would help the bears but that is unlikely. If the bears are going to stop the upside they have to make a stand on Friday. Otherwise, the bulls will run strongly higher through next week. 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 2-Hour Chart New All-Time Record High Sideways Channels Expansion Pattern Negative Divergence Developing

The SPX runs higher this week fueled by the Fed, China stimulus, the BABA hype and the Scotland vote that appears to be maintaining the UK union. The SPX prints a new all-time high never seen before in history at 2011.79.

The neon blue expansion pattern is in play with the upper rail targeting 2020-2030 but the current status of the chart indicators are not enthusiastic for this level. The red lines show universal negative divergence across all indicators for the last month. The very near term RSI, histogram and stochastics are in negative divergence but the RSI can easily poke above the high from three candlesticks ago and also has not yet printed in overbot territory. The MACD line and money flow are long and strong in the VST so a higher high is desired after any pull back. Thus, 1 to 4 candlesticks are likely required to create the neggie d in the very short term (2 to 8 hours trading time; today or tomorrow) which will create the near term top.

Key S/R is 2011, 2007, 2005, 2002-2003, 1998, 1991, 1988, 1985-1986 and 1973. Price is currently favoring the sideways channel through 1985-2011. The expectation would be for the SPX to top out in the current 2010-2015 area and roll over to the downside either this afternoon or tomorrow. If price overtakes the all-time high at 2011.79 extra upside juice will help the bulls.

Bring up the SPX daily chart and study the tight standard deviation bands previously mentioned. The SPX is exactly at the upper band at 2011 so this is the last chance for bears. Either price has to reverse hard today or tomorrow, otherwise, the SPX is going to likely target 2050. The trading action is very important today and tomorrow. The firm result of the Scotland vote should be known around midnight or 1 AM EST. The BABA IPO prices this evening and begins trading tomorrow. OpEx Quadruple Witching occurs tomorrow so volume will be very high at the market open and at the close. 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 10:03 PM:  The bulls are running for another day with the SPX printing new all-time highs. The futures are higher this evening after China adds more stimulus hours ago. So the bears are smacked in the face again today and perhaps tomorrow. The RSI is up a touch higher and the MACD line and money flow are long and strong so price will want to make another higher high after any pull back so the chart still needs 1 to 4 candlesticks to roll over, about 2 to 8 hours, which is tomorrow or Monday. The 1-hour and 30-minute charts are already agreeable to rolling over.

Note Added 10:15 AM EST on Friday, 9/19/14: The stock market pops higher on the China stimulus and Scotland no vote. The SPX hits 2018 the top rail of the expansion pattern highlighted above.

Keybot the Quant Turns Bullish

Keystone's proprietary trading algorithm, Keybot the Quant, flips to the bull side at SPX 2005 this afternoon as Fed Chair Yellen creates the typical upside rally. VIX 12.37 is the key tomorrow. Bulls cleverly used a drop in volatility to pump the stock market higher but into the close the VIX regains 12.37 closing at 12.65 back in the bear camp so a bull-bear fight continues. Stay alert for a potential whipsaw tomorrow. Watch VIX 12.37. More information is found at Keybot's site;

Keybot the Quant

SPX 30-Minute Chart 8/34 MA Cross

The 8 MA remains above the 34 MA signaling bullish markets for the hours ahead. The 8 MA is at 1999-2000 so bears need to keep price below this level to curl the 8 MA downwards for a potential negative 8/34 cross either late today or tomorrow. If Fed Chair Yellen speaks dovishly this afternoon the bulls will likely keep running higher. The stochastics and ROC are negatively diverged creating the spank down in this 30-minute time frame but price will likely want to come back up again to the strong 2002-2003 zone to take another look. When that occurs watch to see if negative divergence forms as the thin lines in the right margin illustrate.

The brown lines show key S/R at 2011, 2007, 2005, 2002-2003, 1998, 1991, 1988 and 1985-1986. 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 9:39 AM: SPX above 2003 threatening a break out and next target is 2005 R.

Note Added 9:40 AM:  Bring up the 30-minute chart; price prints a HOD at 2003.47 thus far. So 2005 is on the table. With the new price high, all indicators are negatively diverged except for the MACD line squeezing out some more juice so another higher high is likely in this time frame. Thus, perhaps a half hour or hour sideways, then half hour or hour down, then back up for a half hour or hour to satisfy the MACD long and strong profile, then potential roll over. You get the picture. Markets will probably play around and simply stagger into the Fed drama beginning at 2 PM EST (7 PM London time) when the story will be written.

XJY Japanese Yen Daily Chart Lower Band Violation Price Extended

Banzai!! BOJ Governor Kuroda has been working overtime printing yen like there is no tomorrow. The yen collapses as the money supply floods into markets sending the dollar/yen currency pair up through 107 and Japan and US stocks higher. The yen chart is a direct inverse of the SPX chart so make no mistake, a weaker yen fuels the stock market upside. The dollar/yen moves from 101 to 107 as the yen moves from 99 to 93.

The drastic drop in the yen basket is remarkable and definitely an infrequent event. Look at price sliding down the lower standard deviation band (pink) and only takes a dead-cat bounce three days ago (chart is not updated for today). The indicators are in the basement and still want another lower low. Price will want to seek the middle band now at 95.15 and falling. The pink dots show how price is far extended under the moving averages requiring a mean reversion. The stochastics are on the floor and helped price create the dead-cat bounce.

The yen will likely bounce around sideways from here and want to test the low again. The drop lower creates a gap at 95.4-96.2 and the yen now sits on an island. So when the yen recovers higher an island reversal pattern will be in play with a potential move back up through the gap but this may not develop for a couple weeks. It appears that much of the downside has played out but the yen should stabilize sideways for a few days or week or two before mounting a comeback. The weaker yen from early August exactly correlates and creates the stock market upside from the early August bottom. Banzai! When Kuroda stops or slows the BOJ money printing, the yen will recover and stocks will drop. The central bankers are the market. 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 10:30 AM on Thursday 9/18/14: The yen prints the lower low collapsing to 92.02. The collapse in the yen is remarkable with the dollar/yen teasing near 109 today.

Keystone's Midday Market Action 9/16/14

The markets stumble sideways into the Fed announcements tomorrow afternoon at 2 PM (7 PM London time) with the SPX threatening to squeeze out a strong move higher out of the tight standard deviation bands. The SPX 1988 resistance is holding price back for now. The 8 MA remains below the 34 MA on the SPX 30-minute chart forecasting bearishness for the hours ahead, however, the 8 MA is rising rapidly and should make a positive 8/34 bull cross over the next hour or so. The market bears must punch the SPX price lower right away to prevent the positive 8/34 cross otherwise they will fold like cheap tent. The SPX remains above the 200 EMA on the 60-minute chart at 1983.70 signaling bullish markets for the hours and days ahead. Bears got nothing until they break below the 200 EMA at 1984-ish.

Key S/R is 2011, 2007, 2005, 2002-2003, 1998, 1991, 1988, 1985-1986, 1973, 1968 and 1963. The market is staggering around in front of the Fed with utilities, semiconductors and volatility most affecting market direction. Keybot the Quant remains short but the algo is on the verge of flipping long. The bulls need VIX under 12.39 and Keybot will likely flip long. The bears need to push UTIL under 550 and/or SOX under 632.81 to get their mojo back. UTIL is 555.25 testing its 200-day MA at 555.02 from the underside. SOX is 636.13 also testing its 200-day MA at 636.72 from the underside.

VIX is 14.06 well above the 12.39 danger line identified by the quant creating negativity. VIX also remains above the critical 200-day MA bull-bear signal line at 13.58. Considering where the parameters mentioned above are trading, each well within their respective camps, the VIX 13.58 will provide important insight for today. Market bears are fine with VIX remaining above 13.58. If the VIX drops under 13.58, the bulls receive some juice, enough to push through SPX 1988 resistance and move towards 1991. The SPX is banging up against 1988 R as this is typed so the 1991 may come regardless then the lower volatility would create the move higher to 1998. Market bears will continue growling moving forward if the VIX moves above 14 and higher.

The tight bands on the SPX daily chart sets up high drama for the Fed announcements. The Scotland vote occurs Thursday as well as the important Housing Starts data in the States on Thursday that will move markets. The much-awaited and hyped BABA IPO will trade Friday morning. This is OpEx week so higher volume at the opening and close on Friday may create further volatility. Typically, stocks move higher from Tuesday into Wednesday during OpEx week and today is playing that pattern out with the SPX creating a low at 1979 and moving up ever since, so far. Congress is in session for another week or so until Rosh Hashanah next Thursday and markets are typically bearish when in session and bullish when not in session. Next week, the week after OpEx in October, the market are typically down 80% of the time so the bears are favored strongly for next week.

The confessional season begins as Q2 earnings reports dwindle to an end. Companies that expect lower earnings will pre-announce to take some of the surprise out of the game when Q3 earnings hit in October and November. Of course the number of pre-announcements, or lack thereof, will provide insight into the intermediate trend for stocks. Other upcoming events are the European bank stress test results due in October where the ECB will throw a token handful of banks under the bus to create the illusion that the house is cleaned-up but in reality it is smoke and mirrors like the Fed stress tests in the States. The mid-term elections occur in the States the first week of November, now only 7 weeks away, where the Senate may turn to a republic majority that may lift stocks since republicans are perceived as more business-friendly. (The House already has a republican majority. There are two branches of Congress in the US; the Senate and the House).

The Fed circus is tomorrow. The two-day FOMC meeting begins today. The previous message describes the current market zeitgeist around the "considerable time" phrase so there is no use to beat that dead horse here. While everyone is thinking about a word change, the wind down of QE Infinity is very near and may create the actual surprise in its projected wind down. Fed Chair Yellen said that QE will end in October. The current rate of Fed money printing is $25 billion per month (these are the POMO pumps that occur each day between 10 AM and 11 AM that goose the stock market higher) and must go to zero by the end of October. Yellen previously said she would drop another $10 billion to bring QE down to $15 billion (tomorrows meeting) and this is the last $15 billion that will disappear in October-November ending QE Infinity forever. If Yellen wants to appease the hawks, she can always reduce QE by $15 billion instead, a simple token move but it would satisfy the hawkish narrative in the press over the last few days and allow only $10 billion in money printing to finish out October. The Fed can be tricky sometimes so everyone simply has to wait for Yellen to bring the tablets down from on high tomorrow and tell the markets which direction to go.

Stocks have rallied 5-1/2 years off the March 2009 bottom due to the pure belief in the Fed, like a cult following a charismatic leader. As long as traders believe in the Fed's easy money stocks go higher. Up through the present, the economic data keeps teasing that a recovery is in place, only to disappoint, and now it is at another inflection where the couple months of encouragement may be squashed again like an ant at a summer picnic. Keystone wrote at the start of the year that the end game occurs when confidence in the Fed is lost. How many more fits and starts in economic data can be tolerated before traders realize that if the recovery is not here after six years of money printing it is never coming? This realization would be devastating for stocks. Will this occur if Yellen remains dovish tomorrow and maintains the excessively accomodative and loose monetary policy? Will all confidence in the Fed finally be lost? She can keep printing money but if it has not worked in six years, it will not work, and at the same time the Fed has created a deep hole of debt. On top of that the rich have become wealthy beyond their wildest dreams by raping the stock market upside while the middle and lower class, and poor, suffer through structural unemployment watching their hopes and dreams squashed under the wealthy's expensive wingtip shoes.

The RUT small caps are threatening a death cross pattern where the 50-day stabs down through the 200-day MA indicating bearish markets for the weeks and months ahead. The death cross should occur tomorrow. The 150-day MA slope is far more important. The 150-day is at 1155 and flattening and moving sideways. If the 150-day MA continues to roll over to the downside a cyclical bear market in small caps is guaranteed and the broad indexes will likely follow suit. Thus, use 1155 on the RUT as a key indicator. Each day the RUT is under 1155 is another nail in the bulls coffin. If the RUT moves above 1155 going forward, the bears got nothing. The RUT is currently printing 1142. The death cross should be taken with a grain of salt; technicians do not pay it much attention. Typically price will actually bounce when a death cross occurs and drop when a golden cross occurs but overall, the crosses do point the path forward for the weeks and months ahead.

So bulls want to maintain UTIL above 550 and SOX above 632.81 while pushing VIX under 12.39. Bears need to push UTIL under 550 and SOX under 632.81 while maintaining high volatility with VIX above 12.39. The VIX 13.58 is also a key bull-bear gauge. The direction forward the remainder of the week is key since it will verify the direction out of the tight standard deviation bands on the SPX daily chart and equities will likely continue in that direction for 80 or 90 handles.

On the esoteric side, yesterday was a key date for Keystone's Eclipse Indicator that is used to forecast potential major sell off windows. Over the next couple weeks, a window is open for a major market sell off to begin. If the bears are unable to move lower as October begins then the next eclipse sell off window is between late October and late November. Although esoteric in nature, the eclipse indicator has quite a good track record. The forecast jives with the 80% down week seasonality projected for next week. With volatility hinting that it wants to start moving higher, the markets may take on larger and larger intraday and day to day point swings going forward. All eyes and ears are waiting for the Fed circus to come to town tomorrow.

Note Added 11:38 AM: Utilities and semi's are catapulting higher sending equities higher. VIX is 13.71 teasing the 13.58 support and bull-bear line explained above. The SPX keeps running higher with its OpEx Tuesday to Wednesday rally move with price piercing through the 1991 R to 1993 so 1998 resistance is on the table. If the VIX loses 13.58, the SPX will likely print and test the 1998. If VIX bounces and refuses to give up the 13.58, stocks should drift lower. Traders are pricing in the thought that Keystone has discussed this morning that the Fed will likely not change the "considerable time" wording in the statement. The strong pop in the stock market over the last one-half hour is due to Jon Hilsenrath, a journalist at the WSJ that is perceived to be a mouth-piece of the Fed, saying the Fed statement will likely stay as is. By Hilsenrath providing his blessing, the stock market is off and running higher. The thought of continuing easy money policy and ZIRP Forever creates the stock market bounce and joy. The central bankers are the market. Watch the VIX 13.58 level as a key market metric today.

Note Added 11:50 AM:  VIX 13.60 only pennies from the 200-day MA bull-bear line in the sand now at 13.57. VIX must bounce or die and whichever way it goes the SPX will move opposite. What say you VIX? Bounce or die.

Note Added 11:52 AM: VIX collapses to 13.41. Boiiiinnnggg. The SPX launches to towards the 1998 R. So the VIX 13.57 remains key. Bears must focus on pushing VIX above 13.57 as soon as possible. Each minute that goes by with the VIX under 13.57 hurts the bear case. Bingo. The 8 MA crosses above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead. Everything is going the bulls way ahead of the Fed announcements. The thought of the Fed changing the "considerable time" phrase is tossed out the window as traders drink from the Fed punch bowl staggering around buying stocks and singing songs. The bond market remains calm, steady and flat through all this circus-like action at 2.58%.

Note Added 12:01 PM: The SPX breaks above the 20-day MA at 1995.24 another feather for the bull's cap. HOD is 1997.44 stopping at the 1998 resistance, for now. All Hail the Fed and Hilsenrath! All Hail the Fed and Hilsenrath!! Shamefully, the Fed and other central bankers remain in full control of the non-free markets pumping stocks higher for nearly six years. Watch the 20-day into the closing bell.

Note Added 12:17 PM:  VIX 13.50. SPX 1996.46. 20-day MA 1995.24. The TRIN is bullish under one by a wide margin down at an uber low at 0.60 fueling the upside.

Note Added 12:17 PM:  VIX 13.34. SPX 1998.34 so the door is open to the 2002-2003 R. The bears are falling down the steps and need to push the VIX above 13.57 to fight back. The Dow is up 110 points. Today is a wild bull party with Hilsenrath handing out the Fed booze to everyone.