Keystone's Midday Market Action 10-3-11

New month but same old stuff. Since the futures were red, and the indexes closed at the lows of the day on Friday, the bears drove the markets lower out of the gate.  In addition, comparing the indexes, the Nasdaq percentage was lower than the S&P percentage which typically indicates weaker markets.

ISM Manufacturing and Construction Spending data just released at 10 AM and appear a bit better than expected.  We targeted this time as a potential market pivot point, and there she goes. Instant recovery rally.  SPX moved from 1122 to 1132 in two minutes, high volatility continuing to play a major role with markets.  Dollar continues its upswing.  The 79 level on the $USD was Keystone's initial inverted H&S target from two or three months ago.

On a sour note, Keystone's Inflation Deflation Indicator now has slipped thru Disinflation into Deflation. The dreaded "D" word is here. Chairman Bernanke will now ready the plans for QE3.

Watching the technicals, we lost SPX 1131 so the flush down to 1122 occurred, then a bounce off the data release that created a pivot point.  The RTH, retail sector, is at 103.31 last print, below Keystone's algo number of 103.60, but not by much.  If RTH moves above 103.60 today, the market bulls will be running the markets higher. The utes remain the only bullish sector currently. UTIL, now at 434, is comfortably above the danger level for this week at 424.

The Nasdaq is up 0.14% and the S&P is up 0.08%, thus, a flip flop from the futures and opening numbers. Even though it is only a smidge above, the Nasdaq above the S&P means the bulls are making  a run currently. Watch RTH closely, it will dictate the broad markets. RTH last print is 103.52, a few more pennies higher will give the market bulls some further upside. This will be a critical test for today.

Note Added 10/3/11 at 10:30 AM EST:  See how the RTH got rejected at 103.60-ish? The market bulls did not have the juice to get her up thru, so the markets weakened. Keep watching RTH 103.60 today to see if the market bulls develop any oomph. If the bulls cannot move the RTH above 103.60, the day will finish flat or in the bears favor. The Nasdaq percentage is down 0.10% and the S&P is flat, thus, the temporary momo favors the bears.  Operation Twist starts shortly so watch the effects of the POMO moves on the markets, especially 10:45 AM thru 11:30 AM.