Keystone's Market Action 8-12-11

The media talking heads, one after another, keep telling folks to buy into these markets at these levels since they are the bargain of the century.  Not so fast. You need to watch a few of Keystone’s tools to determine if these pump pundits are correct, or if they are blowing the typical hot air.

The failure of the utes on Thursday, 8/4/11, were the final nail in the coffin that caused the crash in equities.  You must look for them to regain their posture first to signal that a recovery rally is at hand.  Using UTIL, watch the 50 week MA, now at 413.70-ish. At this writing, UTIL is playing on each side, today crossing this vital level 11 times in the first hour of trading! Do you think this level is important? Broad market bears are in full control under UTIL 413.70, the bull rally is beginning with a move above 413.70. Keep watching.

Watch the SPX:VIX ratio, now with a 32 handle.  If price can move above 35, this signals a large up day on tap for the indexes and the market bulls will be running. At three points below, the bears remain in full control of these markets and expect continued sideways to sideways down action until the 35 level can be regained.

For the SPX today, 1186 is key.  It was touched for one minute today, but quickly retreated.  For the bulls to confirm a more sustained rally, they must move above 1186 today.  This will usher in substantial buying and you will see the indexes jump higher. If the 1186 level cannot be achieved today, the bulls got nothing.

Thus, turn the tv on mute, or better yet turn on the PGA Championship, kick back, and simply focus on three tools today; UTIL 413.70, SPX:VIX 35, and SPX 1186. These three compadres will tell you everything you need to know for today’s action. Also, use these UTIL and SPX:VIX ratio levels for the trade early next week as well.