Markets are churning sideways, remaining elevated due to the two-day momo, and now above where the fiscal cliff drama took hold in mid to late December. The SPX is at the September-October market highs. The markets may idle into the FOMC Minutes at 2 PM which would be expected to be a market pivot point. Yesterday was a historic upside day. The three key sectors now influencing the markets to the greatest extent are utilities, commodities and volatility. UTIL is under 466 and GTX is under 4958 maintaining market bearishness. VIX is under 16.50 helping the market bulls maintain the punch bowl at the party. The VIX has now moved to lows, at 14.56, which identified the September-October market top (13.6-14.6).
The charts this morning highlight the NYAD and TRIN hinting at a market top currently forming. The CPC put/call ratio continues to show a complete lack of fear or panic in the markets. In fact, the markets have not experienced fear since the May 2012 selloff and August-November 2011 selloff period which includes the waterfall crash in August. This is eight months of complacency in markets, where the "don't fight the Fed" mantra is firmly followed by nearly all traders--and this has worked out since the SPX is at matching highs currently. Complacency eventually leads to fear, however. All the way thru the fiscal cliff drama over the last month, despite any hand-wringing displayed by spine-less politico's, trader's were fearless and complacent fully expecting a positive solution, which occurred. A very attractive entry point for long plays occurs when panic and fear is rampant when the CPC is above 1.20 but alas, this continues to appear on a milk carton, and the markets decided to rally anyways.
The 10-year yield is 1.86% so there is money flowing from bonds to stocks but the yield did pop to 1.85%-ish right away yesterday and flat line which shows that those willing to move out of bonds did it quickly and ran into stocks, but that trend is not continuing to any great extent, so far. In a nutshell, watch UTIL 466, GTX 4958 and VIX 16.50 to determine broad index direction. The FOMC Minutes at 2 PM will create a market pivot point. Due to the two-day bull orgy momo, price may stay elevated a couple days to burn off the bullish energy.
Note Added 1/3/13 at 11:46 AM: The SPX is at 1464 printing a HOD at 1464.55. The resistance above is 1460-1461, 1465, 1465.77 (closing high for 2012), 1468, 1472, 1474.51 (intraday high for 2012), and 1476. Thus, the SPX is teasing the 2012 highs currently held back by 1465 R. The 1-hour and minute charts are all negatively diverged now. The 2-hour chart is squeezing out its high now, so considering each candle is two hours, it would be anticipated to roll over with the other very short term charts in the 2 to 4 hours ahead which would be before the closing bell. The 10-year is at 1.86%. If the equities markets want to run higher you will see the 10-year yield climb. UTIL is now over 462. VIX at the lows at 14.40. The euro fell thru 1.32 today but has since recovered slightly above. Time for a slice of blueberry pie.
Note Added 1/3/13 at 1:07 PM: The SPX 1465 resistance continues to hold. UTIL approaching 463. The 10-year remains at 1.86%. VIX in the cellar. Volume is lackluster. The SPX hour and minute charts are all lined up with negative divergence as previously mentioned, two-hour is just getting there, going into the FOMC minutes at 2 PM so the guess would be selling ahead with price receiving a spank down from the negative divergence and the FOMC minutes perhaps serving as a catalyst. The 8 MA is moving sideways on the 30-minute chart but not yet curling over.
Note Added 1/3/13 at 3:14 PM: The SPX punches out a high at 1465.47, thirty pennies shy of the closing high in 2012 listed above. The FOMC Minutes were a catalyst surprising traders to find out that half the Fed members are feeling uneasy about all the QE bond-buying. They should. However, all the doves, Bernanke, Yellen, Dudley, Evans, they are too busy to listen since they are concentrating on keeping the printing presses going. That is why the move down for equities, as the negative divergence kicks in, is limited for now, since most traders know that Helicopter Ben will print money all the way thru QE17 when it all falls apart. The 10-year leaped over 1.90% and the dollar jumped higher. The Fed news may change asset relationships but, again, knowing the Fed will print until the cows come home lessens the importance of the news. UTIL, GTX and VIX have not changed their stripes today so the markets continue along in a flat line. Keystone took profits on the EUO trade exiting the position. That was the short euro trade. Will look to reenter. Keystone bot SJB which is an ETF that shorts high-yield. It is thinly-traded so that must be a consideration but the positive divergence on both the daily and weekly charts is very attractive for this knife-catch. Note the negative divergence shown for the HYG ETF which is a nice short set-up. Keystone also bot more FAZ adding to that ongoing long position.
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