Friday, April 18, 2014

Keystone's Morning Wake-Up; Good Friday; US Markets Closed Until Monday

US markets are closed today in observance of Good Friday. Easter is Sunday. Markets reopen on Monday. This week results in a strong upside market move negating the downside action the previous week, however, on far lighter volume. The MS and GS earnings pre-market yesterday set the happy tone for financials which in turn set a happy mood for equities. SNDK earnings were better than expected so this pumps the chip stocks. Semiconductors catapult higher providing bull juice and slapping the bears in the face. The energy sector is the new favorite son jumping over +3% this week.

The 10-year yield pops 8 basis points to 2.73% settling at 2.72% representing a risk-on trade. Money flows out of notes and bonds (creating lower prices for Treasuries and correspondingly higher yields) and into stocks. A back kiss of the sideways triangle on the TNX daily chart (scroll back a few pages or type TNX into the search box at the right) at 2.67%-ish was expected, which creates a bounce, or die pivot, and yield decides to rocket launch higher back inside the safety of the sideways triangle. Looking at that chart, which shows the death cross, note how yield tagged the top of the triangle at 2.73% and fell. The range is 2.67%-2.73% of the triangle so note and bond bears, inflationists, will cheer for 2.73% and higher. Note and bond bulls, deflationists, will cheer for a drop under 2.67% again. The range keeps narrowing skinnier and skinnier to 2.68%-2.72%, then 2.69%-2.71%, and bingo, a decision has to be made next week for the 10-year Treasury.

The US and European docile approach to Ukraine causes traders to remain complacent concerning geopolitics. Apparently, Putin will be allowed to take East Ukraine since the West does not have the will to defend the region. Putin threatens to cut off natural gas supplies creating a wild +5% pop in natty gas. He says he will wait a month, however, jerking the string of the natty gas puppet any way he pleases. One-third of Europe's energy needs come from Russia.

The broad markets end mixed for Thursday. The Nasdaq and RUT small caps ran higher; biotech backed away but is up strongly for the week. IBM creates a drag on the Dow contributing 50 negative Dow points (take any Dow component point move and multiply by a rule of thumb of 8 to note its affect on the Dow). AXP and UNH blue chips also created weakness. The XLF stays above 21.77 so higher financials, along with higher semi's and lower volatility, all join to create a triumphant market rally this week.

The bulls are pushing copper higher already laying ground work for next week so start watching the 'other yellow metal' more closely in the days ahead. The SPX dropped into the 1858-1859 support zone that the bears needed and lower, but the bulls simply back tested and then ran higher to close the SPX at 1865. The SPX broke out above the 20-day MA at 1858.51. Also the 200 EMA on the 60-minute at 1854.78 which signals bullish markets for the hours and days ahead. Bears got nothing unless they push back under these critical 1858-1859 and 1855 support levels.

Bulls perform a strong comeback albeit on light volume and benefiting from the seasonal bullishness and happy talk concerning Ukraine. Last weekend the thought was raised about a wall-to-wall bull run, which occurred. The full moon was Tuesday and markets are typically bullish through the full moon nearly 70% of the time. During OpEx week the path from Tuesday to Wednesday is typically bullish. Markets are bullish the two days in front of a three-day holiday weekend. All true this time around. So seasonality favoritism overcomes the negativity associated with the up move on weaker volume. The BPSPX chart (see this morning's chart) remains on a sell signal.

On trades, Keystone added to the ongoing ARO (long retail), SSNI (long power), SMN (short basic materials) and SJB (short high-yield) long trades. ARO has to make a decision next week. Either it wants to perform a successful positive divergence bounce like JCP or will result in a crumbling mess like RSH. Note the ARO weekly chart shows a slipping money flow so some additional time, a few weeks, will be needed to place an official bottom. In the very short term, ARO should bounce from the daily chart. Also bot FUEL opening a new long position. FUEL is bludgeoned from 73 to 35 and is set up or setting up with positive divergence on the daily chart so it is sitting on the launch pad. How appropriate that its name is Rocket Fuel. A launch is expected, however, the weekly chart remains weak so in this trade timing is everything. A very short term bounce is expected then likely more weakness but FUEL should base as the weeks play out and recover higher and can likely be considered as a longer term hold moving through the year. Keystone is watching SDRL with interest for a potential long trade but give it a few more days to simmer and it can be considered next week.

Happy Easter. Stomachs are already aching percolating from a mixture of chocolate, jelly beans, hard-boiled eggs, ham and peeps.

BPSPX Bullish Percent Daily Chart Maintains Market Sell Signal

The BPSPX is unimpressed with the strong upside market orgy this week. The broad indexes jump about +2.5% across the board in only four short days. Note, however, the BPSPX moving only a paltry amount higher, so far. When the BPSPX reverses six percentage-points it issues a market buy, or sell, signal depending on which way the reversal occurs. Then when price crosses the 70% level the move receives stronger strength in the same direction with a double-whammy buy, or sell signal. The bulls receive the BPSPX blessing in February and markets run higher into March. The bears are anointed in March and early April leading to the market collapse the previous week. This negative double-whammy sell signal (reverse from 76 and change down to 70 and change and the drop under 70) remains in play.

The BPSPX bottoms a couple days ago at 65, hence, 65 + 6 = 71 target for a bull reversal. Since the critical 70 level is nearer, the bulls will receive upside rally confirmation if the BPSPX moves above 70 and if price moves above 71 the path to new all-time highs and the SPX above 1900 will receive the go ahead. Bears need to keep the BPSPX under 70 and they are fine moving forward since the market rally will only be a simple relief rally that reverses with stronger downside action beginning again. So check the BPSPX each day next week after the closing bell to see who wins 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.

Wednesday, April 16, 2014

Keybot the Quant Turns Bullish

Keystone's trading algo, Keybot the Quant, flips bullish at SPX 1859 this afternoon. XLF 21.77 will be key at tomorrow's opening bell. VIX 14.77 and SOX 563.10 also remain important. All three leap into the bull camp today so higher financials, lower volatility and higher semiconductors created the upside orgy. As always stay alert for a whipsaw. More information is found at Keybot's site;

Keybot the Quant

Keystone's Midday Market Action 4/16/14: BAC; Housing Starts; Fed Chair Yellen Speaks; AXP; GOOG; IBM

Another high drama day occurs as Fed Chair Yellen does a song and dance in front of a cheering crowd. She promises more sugar candy just as traders hope but equity markets stall at their highs. Keybot the Quant remains short but is champing at the bit to go long. If the SPX moves above 1858.45, and this level holds for several minutes, Keybot will likely flip long. The algorithm is tracking three key components that dictate market direction today; VIX 14.77, SOX 563.10 and XLF 21.77. Lower volatilty and higher semiconductors, respectively, pump the stock market higher today. Financials cannot yet develop the strength to move above XLF 21.77 remaining in the bear camp mainly due to BAC laying an earnings egg this morning. Thus, the bears can stop the market upside and prevent Keybot from going long the market if either VIX moves above 14.77 and/or SOX under 563.10. The bulls wil receive further upside fuel if XLF moves above 21.77.

Housing Starts are disappointing remaining under the one million mark and may be stalling moving forward. The markets exhibit more drama and theatrics than a Broadway production. VIX 14.77, SOX 563.10 and XLF 21.77 dictate market direction.

Note Added 1:01 PM: Chair Yellen is taking Q&A right now spinning yarns. SPX is 1854.05 about four points under the 1858.45 target the bulls need to pop the champagne corks. VIX is 14.63 fourteen pennies under the 14.77 bull-bear line in the sand causing market bullishness. SOX is 563.83 above the critical 563.10 bull-bear line causing market bullishness. XLF is 21.73 only four pennies on the bear side of the important 21.77 bull-bear level causing market negativity. The dollar/yen remains elevated today at 102.30 which easily allows bulls to keep the stock market elevated. The beat goes on.

Note Added 1:07 PM:  VIX 14.79. See if the bears can maintain the higher volatility, if so, markets should drift lower. SOX moves lower and bounces off the 563.10 level remaining in the bull camp.

Note Added 1:10 PM: VIX 14.71. The SPX is playing around at the S/R levels mentioned in the previous missive. Note how the 1859 resistance ceiling has held so far today. The 200 EMA on the 60-minute chart is 1853.94. The SPX is 1853.41. How about that? A dramatic bull-bear fight is occurring today. The SPX is smack-dab between the 20-day MA at 1858.42 above (another upside resistance level that has held today with HOD at 1858.45 almost to the penny back kissing this critical moving average) and the 50-day MA at 1848.72 below. The year began at 1848. Bulls win if price jumps up through the 20-day and upper resistance at 1858-1859 while bears win if price drops under the 50-day MA and starting year number at 1848-1849. The theatrics continue.

Note Added 1:20 PM: Yellen finishes the Q&A and is carried off on the shoulders of analysts, traders and journalists to resounding applause. SPX is 1854.77. Okay market, what is your decision?

Note Added 1:24 PM: VIX is 14.49. SOX is 565.66. XLF is 21.74. Dollar/yen 102.27. SPX 1855.95. So same-o same-o. Lower volatility, higher semi's and stable dollar/yen at elevated levels all create market lift todayFinancials create market weakness. The SPX must decide to poke above 1858-1859, or, collapse under 1848-1849. Flip a coin.

Note Added 7:44 PM: The XLF punched up through 21.77 creating the afternoon upside orgy. Keybot the Quant turns bullish at SPX 1859. The bulls win punching up through the critical upside resistance at 1858-1859 as highlighted above. This level remains key. Since tomorrow is the last day of trading for the week the bulls may simply try to slide the markets out sideways into the holiday weekend. Bears need to push the SPX back under 1858-1859 and their only chance is tomorrow. If the bulls remain above, the SPX will likely head another ten or twenty handles higher. OpEx may cause some craziness; volume at the open and close should be robust. The bulls came to play today. The bears put up a noble fight but once the financials turned bullish it was over. Interestingly, traders do not care about geopolitics. Ukraine, schmoocraine. Will they care if Putin takes over East Ukraine just like Crimea?.

SPX 60-Minute Chart 200 EMA Cross

The SPX remains under the 200 EMA on the 60-minute at 1854.00 signaling bearish markets for the hours and days ahead. S&P futures are +9 projecting a strong open which will attack this key level. Bulls got nothing unless they punch up through the 200 EMA at 1854 and if so, will chart a path up to the all-time highs. The red lines show the negative divergence spank down highlighted a few days ago and textbook tweezer top (red circle). The green falling wedge, oversold conditions and positive divergence create the bounce off the bottom. Note how the MACD line and money flow are not happy with price moving higher but other market forces and the positive RSI, stochastics and histogram push price higher anyway.

Price prints a higher high during yesterday's session and that comes with all indicators long and strong so more highs are anticipated. There is no sign of negative divergence so at least one to four or more candlesticks may be needed to create neggie d. This would take markets into this afternoon and tomorrow morning. Since seasonality and OpEx factors favor bulls to end the holiday-shortened week the bulls may have an easy time to keep markets elevated into the Easter weekend. Markets are typically bullish the two days leading into a three-day holiday weekend.

The year began at 1848. The 200 EMA is 1854. The 50-day MA is 1846.75 and rising. The 20-day MA is 1858.79 and falling. The big picture S/R is 1897, 1891, 1884, 1878, 1874, 1868, 1859, 1848, 1841, 1828, 1808, 1803, 1800 and 1796. Price favored a sideways channel at 1816-1834 for the last three days with price breaking up and out of this channel yesterday. As price elevates today watch S/R at 1841, 1847-1848, 1854 and 1859. The bulls will be popping champagne corks if they move above 1854. A move through 1841-1854, or even 1841-1859 today and tomorrow into the holiday weekend will place the markets on hold until next week where the firm commitment on direction would be decided. 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.

Tuesday, April 15, 2014

Keystone's Evening Nightcap 4/15/14; Housing Starts

The SPX covers 80 points distance today, 3% of its total value, in the up and down roller coaster ride. This is unique behavior for a broad market index. Equities recover strongly off their lows but the 10-year yield remains subdued at 2.63% indicating a weak economy despite the bullish euphoria. Copper and gold collapsed today. Traders ignore Dr Copper as well as the Ukraine turmoil. All that matters to bullish traders is the Fed and BOJ money printing. The BOJ stabs the yen this afternoon so the jump in dollar/yen from 101.50 to 101.85 provides the bull fuel. The VIX drops from above 17 to under 16 providing bull fuel. The RUT and Nasdaq continue to threaten their respective 200-day MA's as described in today's charts but the bulls are able to keep the party going.

Semiconductors and financials provide the bull fuel. The SOX drops under 563.10 creating negativity but the bulls sent SOX back above 563.10 to create market upside. Bears need SOX under 563.10 to create market weakness or they got nothing. The XLF is 21.65 under the 21.77 line in the sand identified by Keybot. The market rally will be sustainable if XLF moves above 231.77. Keybot the Quant is short but if the XLF moves above 21.77 and the SPX above 1844, Keybot will likely flip long confirming a sustainable rally. This does not require much effort so the bulls have the markets on a silver platter to begin the Wednesday session.

For the SPX in the Wednesday session starting at 1843, bulls only need one point, to push up through 1844 and the upside will accelerate to tackle the strong 1848-1851 resistance level. The year began at 1848. The 1841 is strong support. The 50-day MA is 1846.75 so the bears have a tiny feather in their caps for holding this resistance, so far. The 20-week MA is 1831.19 so the bulls win big today regaining this level. The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead (reference today's chart for further study). The SPX is below the 200 EMA on the 60-minute chart at 1854 signalling bearish markets for the hours and days ahead. As long as the bears remain under 1854 they are fine. Above 1854 and the bulls will be charging back to the all-time highs.

The BPSPX remains on a market sell signal and continues lower despite the up moves in the indexes this week. Copper collapsed today but traders do not pay any attention to Dr Copper the key indicator for the global economy. Traders also continue to ignore geopolitical events. Watch the overnight S&P futures since a +1 is all it takes for the bulls to launch higher with an upside market orgy for Wednesday. Watch SOX 563.10 and XLF 21.77 in the Wednesday session too see who wins moving forward. Housing Starts in the morning are a key market barometer and will set the market tone.

On trades, Keybot took profits on the TWTR bounce today closing this long position. The positive divergence highlighted a few days ago creates the rocket launch. Twitter likely has more upside ahead; sideways to sideways up. Keystone also bot more ARO for this ongoing long trade. Also bot more SSNI. Also bot more MGPHF. Keystone will likely hold SSNI and MGPHF indefinitely so they will be added to and simply left on the back burner as time moves along.

COMPQ Nasdaq Composite Daily Chart Nears the 200-Day MA for First Time in 14 Months Channel Failure

The COMPQ teases near the critical 200-day MA that has not been touched for 14 months. This behavior is extremely uncharacteristic for the market going that long without touching the 200-day. Even the drops through the 200-day MA in the back half of 2012 are paltry that never allowed price to truly clear. A mean reversion always occurs just as winter follows summer and summer follows winter. The COMPQ has fallen out of the multi-month upward-sloping channel. The intraday top occurred on 3/6/14 at 4371.71. An official market correction is -10% so that would be a drop of 437 points off the top and place the COMPQ at 3934.54 so pay attention to this number going forward. The February low occurred on 2/5/14 at 3968.19 which has now failed.

The central banker easy money pumped markets higher all the way through 2013. Companies use cash on hand and the Fed's low rates to buyback stock and pump the stock price higher to make the wealthy wealthier. The idea is for companies to take the easy money terms and invest in capital equipment and jobs to create a robust recovery but instead CEO's say forget that and prefer to pump the stock price higher since they receive bigger bonuses. The funny part is the common citizen is the sucka paying for the rich to become richer with their tax money. At the same time these middle class and poor folks cannot find jobs and years down the road when the inflation and hyperinflation hits they will be screwed further. You have to love it. If you are wealthy and own stocks you are swimming in luxury buying high-priced property, art, collectibles and other fun things while laughing at the idiot masses that foot the bill. The Fed is collusive to this behavior since they are rewarded for their money printing. Ex-Chairman Bernanke now receives $250K per 45-minute speech to reward him for pumping the stock market the last few years in collusion with the large banks and influential top wealthy 1% of America.

Tech and small caps lead the broader market. Watch the 200-day MA at 3942-3944 like a hawk going forward. The COMPQ is at 3964 twenty points above hanging on to the bullish side. Serious market trouble begins when the COMPQ collapses below the 200-day 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 1:10 PM: The COMPQ is 3956.11 with a LOD at 3946.03 teasing ever closer to the 200-day MA at 3942.12 and -10% official correction number at 3934.54.

Note Added 2:35 PM: Markets recover big intraday over the last hour the Nasdaq now above 4010 after printing the LOD at 3946.03. Markets are very erratic and unstable.

RUT Russell 2000 Small Caps Daily Chart Pierces 200-Day MA for First Time in 18 Months Channel Failure

The RUT has teased under the critical 200-day MA for the last couple days finally creating a touch that has not been seen for one and one-half years. This behavior is extremely uncharacteristic for the market going that long without touching the 200-day. Even the drops through the 200-day MA in the back half of 2012 are paltry that never allowed price to truly clear. A mean reversion always occurs just as winter follows summer and summer follows winter. The RUT has fallen out of the multi-month upward-sloping channel. The intraday top occurred on 3/7/14 at 1210.58. An official market correction is -10% so that would be a drop of 121 points off the top and place the RUT at 1089.52 so pay attention to this number going forward. The February low occurred at 2/5/14 at 1082.72.

The central banker easy money pumped markets higher all the way through 2013. Companies use cash on hand and the Fed's low rates to buyback stock and pump the stock price higher to make the wealthy wealthier. The idea is for companies to take the easy money terms and invest in capital equipment and jobs to create a robust recovery but instead CEO's say forget that and prefer to pump the stock price higher since they receive bigger bonuses. The funny part is the common citizen is the sucka paying for the rich to become richer with their tax money. At the same time these middle class and poor folks cannot find jobs and years down the road when the inflation and hyperinflation hits they will be screwed further. You have to love it. If you are wealthy and own stocks you are swimming in luxury buying high-priced property, art, collectibles and other fun things while laughing at the idiot masses that foot the bill. The Fed is collusive to this behavior since they are rewarded for their money printing. Ex-Chairman Bernanke now receives $250K per 45-minute speech to reward him for pumping the stock market the last few years in collusion with the large banks and influential top wealthy 1% of America.

Tech and small caps lead the broader market. Watch the 200-day MA at 1106-1108 like a hawk going forward. The SPX is at 1110 a couple points above hanging on to the bullish side. Serious market trouble begins when the RUT collapses below the 200-day 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 10:57 AM: Whoopsies daisies. The RUT is printing 1106.16. The 200-day MA is 1106.67. "Houston, we have a problem."

Note Added 11:03 AM: RUT price 1103.18. "Houston, we have a problem, where are you? Send the Calvary--quick! Tell BOJ Governor Kuroda to stab the yen so the party can continue." Instead, the dollar/yen is dropping to 101.61 reflecting a stronger yen, which sends stocks lower.

Note Added 11:51 AM: RUT 1102.57. LOD 1102.17.

Note Added 12:23 PM: RUT 1099.14. LOD 1098.78.

Note Added 1:10 PM: The RUT is 1097.77 with a LOD at 1095.79 under the 200-day MA at 1106.63 and approaching the -10% official correction number at 1089.52 and the February low at 1082.72.

Note Added 2:26 PM: Equities recover from the lows at 1 PM and the RUT recovers above the 200-day MA to 1109.39. The market roller coaster ride continues.

SPX 30-Minute Chart 8/34 MA Cross Sideways Channel

The 8 MA remains below the 34 MA signaling bearish markets for the hours ahead. The 8 threatened to punch above the 34 yesterday afternoon but the late-day swoon, then quick market recovery, results in the negative 8/34 cross remaining in play. The Tuesday session begins on a positive note and a break up through the sideways channel at the upper rail at 1834-ish would give the bulls the nod today. The indicators are more favorable to a continued sideways move. The RSI, MACD line and money flow are long and strong wanting to see higher highs but the histogram and stochastics want to see price stall after it prints a few morning highs.

Bulls got nothing until they receive the positive 8/34 cross to confirm a sustainable rally. As this missive is typed, the SPX explodes higher to 1838 breaking up and out of the sideways channel. The bulls are making a run higher. Watch to see if they receive confirmation of the rally with the positive 8/34 MA cross. 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 10:18 AM: Markets leap higher with the SPX printing a HOD at 1843.77 using the 1834-1844 level as a resistance ceiling. The 1841 and 1848 levels are very strong overhead resistance. The year began at 1848The move reverses as the erratic market circus plays out for another day. Current prints are SPX 1834.08 with the 8 MA at 1828.93 and 34 MA at 1829.18. The bulls are so close to the 8/34 positive cross they can taste it, only a quarter, 25 cents, away. A new candlestick is printed for the 30-minute chart above in less than 10 minutes time at 10:30 AM. Bulls must keep pushing to receive the 8/34 buy signal but they are slipping on a banana peel.

Note Added 10:30 AM: The 8 MA is 1828.74. The 34 MA is 1828.74. How is that for market drama? The major indexes are all now negative. Bulls are losing ground. Those that chased the upside out of the gate are now receiving their heads on a platter. The day is young, however. Since the 8 and 34 MA both printed 1828.74 simultaneously that is your pivot today. Bulls win big above 1828.74. Bears win big if price stays under 1828.74.

Note Added 10:36 AM: Bulls receive the positive 8/34 cross; 8 MA is 1828.83; 34 MA is 1828.77. SPX is 1831.43 pushing higher again. The bulls are in charge for the hours ahead unless the bears can spank price down in quick order to reverse the 8/34 cross.

Note Added 2:30 PM: The market circus continues. The 8 MA drops under the 34 MA giving the bears the nod again but the broad indexes are in recovery mode over the last hour and the bulls will try to create the positive 8/34 cross again before the closing bell. The SPX is at 1834, recovering from the intraday low at 1816.29, now back at the top rail of the sideways channel. Flip a coin.

Note Added 6:12 PM: After the smoke clears today the bulls win finishing at the highs today. The 8 MA is above the 34 MA signaling bullish markets for the hours ahead.

March 2014 Market Chronology Available on Amazon Kindle

The Daily Chronology of Global Markets and World Economics March 2014-03 issue is available on Amazon's Kindle. A handy link is provided in the left margin. All the recent eBook links are provided in the margins.

If you are a seasoned professional trader or a novice wanting to learn how and why markets move in real-time, the daily chronology series are the books for you. The eBooks detail market reactions to the Monthly Jobs Reports, Fed meetings, economic data, earnings releases and geopolitical events. Business and economic teachers and students enjoy the chronologies since textbook theory comes to life. Read about how the IPO frenzy is affecting markets. Study the impact of the recent copper collapse on markets. Become educated on how Ukraine turmoil affects global markets and currencies.

As always, special thanks to the international support for the K E Stone Blog Series of Web Sites especially the strong following from major money centers in New York, Chicago, London, Frankfurt, Paris, Singapore, Hong Kong, Tokyo and Sydney and the loyal following from the US, Canada, Mexico, Australia, UK, Germany, France, Russia, China (yes, Russia and China) and Malaysia. The blog sites only continue with the ongoing support of all followers large and small, professional and novice. Keystone the Scribe is the respected world leader in providing historical context for global markets and world economics. Read the Daily Chronology of Global Markets and World Economics March 2014-03 issue today to gain a vital market edge. Thank you for the support.