Keystone's Evening Nightcap 11-15-11

What a day. The markets are a circus currently.  Keystone's algorithm came within seconds of flipping back to the long side at 3:30 PM but the bulls could not hold the 1264 level. From there the indexes collapsed into the close.  The XLF came down to print 13.03 at the close, the exact number Keystone told you to watch all day long. How does he know this stuff?  The number to watch tomorrow is XLF 13.04 so the 13.03 print favors market bears as traders try to sleep tonight. Sleep is difficult as France, Spain and Italy 10-year yields continue higher.

The volatility had a nutty day as well, falling well under 31.20 (market bullish) in the noon hour when the news hit that Mario Monti is making great progress in forming a new government for Italy.  Thus, the bulls threw a party today, and when the financials kicked in higher, the wine was flowing like water, and the bulls were drunk with upside.  The last half hour of trading, however, ended with price failure, the SPX dropping form the 1264 peak to print a 1257 handle at the closing bell.  The VIX prints a 31.22 after taking 15 minutes to settle after the bell rang. Although this is above the 31.20 level of interest today, Keystone's algo constantly recalculates the values and the new value to watch is VIX 31.25, thus, the market bulls have a feather in their cap to start tomorrow's session, but only by three measley pennies.

Markets remain at the mercy of Europe news.  Today was a perfect example where the indexes were rolling over going into sandwich time, but once the positive Italy news hit, it was off to the races for the bulls. This behavior makes trading extremely difficult and highlights the reason that seasoned pro's trade this action with less and smaller positions. We should see clarity with Europe, and the U.S. debt talks, over the next week or so, as Thanksgiving approaches. Time will show if we have to address more turkey's than the Butterball that is on the dining room table next week. One thing for certain is that there is a lot of six foot tall turkey's affecting these markets currently.

For Wednesday, watch XLF 13.04 and VIX 31.25 to determine broad market direction.  For the SPX, starting at 1258, if 1264.25 is touched, the bulls will throw a wild party, the upside will run lots higher and Keystone's algo will more than likely be back on the long side.  If the SPX moves lower and touches 1244.34, the sellers will beat the markets much lower with the bears growling strongly.  A move thru 1246-1263 is continued sideways indecision.