Global cascading events occur after yesterday's sell off in the States. Japan's JGB 10-year bond yield jumps to 1% before pulling back to 0.86%. Nikkei Index crashes -7.3% and the Topix is down -6.9%, the worst falls since the tragic earthquake and tsunami in March 2011. The dollar/yen hit 103.74 and collapsed to under 101 overnight now at 101.74. Piling on more negativity, China manufacturing contracts, dropping under the 50% level. European manufacturing data remains weak as well. European auto stocks are slapped -5%. European stocks are down from -1 to -2%. Copper is taking the pipe this morning and this should sustain overall market weakness. S&P futures are down about -16 and Dow futures off about -120.
For today, watch JJC 41.77 where price should easily print far below judging by the overnight move. Watch VIX 13.12. Bears will continue to growl above 13.12. For the SPX starting at 1655, the bears need to push under the strong 1649-1650 support, if so, a test at 1633-1634 should be on tap. SPX S/R is 1687, 1680, 1675, 1667-1669, 1661, 1649-1650, 1633-1634 and 1626-1627. The 8 MA is below the 34 MA on the 30-minute chart signaling bearishness ahead but the SPX is above the 200 EMA at 1618.81 on the 60-minute chart signaling continued bullishness ahead. Play these two off each other. Market bears will drive markets far lower if the 200 EMA fails while the bulls will return to easy street if they push the 8 back above the 34 MA on the 30-minute chart. Pay attention to the 20-day MA at 1627.07 and rising.
New Home Sales are at 10 AM so a market pivot may occur. Also watch the ongoing daily pivots at the 2 PM EST time. Natty Gas Inventories are 10:30 AM. Kansas City Mfg Index is 11 AM. A 10-Year TIPS auction goes off at 1 PM. Markets typically print lower lows on a Thursday after a strong Wednesday sell off which appears to be the scenario this morning. Markets are bullish in front of the two-day holiday weekend which is today and tomorrow. Markets also tend to be bullish through the full moon which is tomorrow. These seasonality-type indicators, however, take a back seat to this ongoing market drama. In addition, many traders will likely run in to buy the initial low this morning anticipating a happier recovery into the Memorial Day weekend so that may not be the time to bite for a quickie long trade. Perhaps a better near-term low ahead of the weekend will be placed as the day plays out.
Note Added 9:35 AM: Utilities are having a mini-crash event, UTIL down -14% to 446. Something is going on there. Traders must anticipate higher yields ahead which will hurt utes, REIT's and telecom. Financials down -2%. SPX is dropping to test the 1633-1634 support. VIX 14.96. JJC 40.58. TRIN 1.23. The TRIN finally prints above one on the bear side. Interestingly, a 1.23 number is tame and not reflective of a panic (2, 3, 4 and higher) which encourages steady-eddy selling moving forward rather than a quick wash-out.
Note Added 9:43 AM: AEP and NEE utilities are halted due to order imbalances. The utilities sector is experiencing a mini flash crash. The robots and algorithms are acting up. Here's the recovery, UTIL now -1.3%.
Note Added 9:53 AM: AEP resumes trading. UTIL is -1.5% with things returning to normal. The mini flash crash events continue to occur with frequency. SPX LOD is 1635.53 thus far. VIX is above 15. TRIN 1.05 almost neutral. SPX is 1638.26 bouncing off the initial low. Keystone bot JO, a long coffee ETF, opening a new long position.
Note Added 10:07 AM: SPX continues to recover off the LOD now at 1641.40. Keystone took profits on TLL, the short telecom ETF, exiting the position. Will look to reenter. Also bot SLV, a long silver ETF, opening a new long position. Also added more XLV shorts to this ongoing short health care trade.
Note Added 10:14 AM: The SPX 20-day MA is now at 1630.05 so a back kiss of this key moving average is a distinct possibility today. SPX continues to recover tapping on 1646. VIX 14.64. TRIN 0.97. The drop in TRIN sending SPX higher. UTIL remains under 500 today and is now below the 50-day MA playing out the bear flag highlighted the other day. Type 'UTIL' into the search box at the right to bring up that chart for further study.
Note Added 11:09 AM: VIX 14.21 leaking lower but continuing to cause market negativity above 13.12. JJC is 40.69 far below the 41.77 bull-bear line causing negativity. Watch UTIL 481 as a bull-bear line in the sand. UTIL is at 497 on the bull side but a drop under 481 will increase market negativity. TRIN is 0.89 which helps the bulls recover after the initial drop. Bears need the TRIN back above one, if so, the markets will leak lower again. The lower numbers on Thursday after a strong Wednesday sell off print as forecasted. This is a handy tool to know since yesterday it was a calculated guess to hold shorts into today rather than exiting on yesterday's Wednesday sell off. Markets never bottom on a Wednesday. SPX continues to climb setting its sights on back kissing the strong 1649-1650 S/R from the underside. The 10-year yield is up to 2.05% now pressuring interest-rate sensitive sectors such as utilities.
Note Added 12:35 PM: VIX 14.09. Watch the VIX 200-day MA at 14.90 which serves as resistance today for volatility. JJC 40.94 remaining under 41. TRIN 0.77. Say no more. Bulls will not allow a TRIN above one which keeps the bears at bay. The 10-year yield is 2.03%. SPX plays around with 1649-1650 resistance for an hour, and punches up through. Now price is dropping down to this key S/R to back kiss from a support perspective. The 1649-1650 S/R carries clout and serves as a bull-bear indicator, happy bulls above 1650, happy bears under 1649. The beat goes on.
Note Added 1:49 PM: TRIN up to 1.11 so SPX drops under the critical S/R at 1649-1650 now printing a 1646 handle. The 10-year yield is 2.02%.
Note Added 2:33 PM: VIX 14.28. JJC 41.12 inching higher. TRIN 1.00 dead neutral unwilling to give the nod to bulls or bears today. SPX is 1649.42 continuing to play with the 1649-1650 magnet level. The LOD at 1635.53 continues to hold for today thus far. Volume is at an average run rate perhaps a touch below average. Dollar/yen 101.77. Euro 1.2933. 10-year yield 2.02%. Crude oil 94.13. Gold and silver inch higher today.
Note Added 2:42 PM: Quick change occurs. TRIN collapses to 0.74. VIX drops to 14.19. Hence, SPX leaps to 1652, 1653, 1654.... Dow and Nasdaq turn positive.
Note Added 3:08 PM: VIX 14.11 well above the 13.12 bull-bear line. JJC 41.12 well below the 41.77 bull-bear line. Hence, the market recovery today does not mean a whole lot. With higher volatility and lower copper, market weakness should linger. TRIN is 0.90. TRIN moves up a touch so note how the SPX moves down a couple handles, now at 1652.
Note Added 3:55 PM: Markets meander out on the flat side. Keystone bot PAAS opening a new long position.
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