Keystone's Midday Market Action 12/19/11

The SPX 1215 and 1231 levels are important today; in between is sideways action.  Market bulls need the XLF to move up and over 12.82 for a Santa Claus Rally to occur.  Market bears want to move the RTH under 109.40 to accelerate broad market selling and negative technical damage for markets. The Nasdaq is up a higher percentage than the SPX so this gives the bulls some street cred currently.

The RTH is 110.40 a buck above the critical 109.40.  XLF is 12.56 well below the 12.82 level. VIX is under 25. The SPX 30-minute chart shows the 8 and 34 MA on top of each other. If the 8 MA moves above the 34 MA, the market bulls win today. If the 8 drops under the 34 MA, the bears will win.

Note Added 12/19/11 at 11:02 AM:  Markets drifitng lower, even the elevated utilities turned red. The weak financials are demoralizing the market bulls taking away the upside today; the XLF is now at 12.35. RTH is printing 109.78 remaining above the 109.40 level so the bulls are okay for now.  Also, the Nasdaq is down 0.26% while the SPX is down 0.41% so this should limit the broad market downside move. Markets will not sell off strongly unless RTH 109.40 fails. SPX dropped out of that tight 1216-1220 range, now printing a 1214 handle, losing 1215 so a few more handles down is in order, the sideways range of 1209-1226 (1210-1225) for four days is back in place.

Note Added 12/19/11 at 12:15 PM:  RTH remains above 109.40 so the downside remains limited and thus, the SPX is holding the lower rail of the sideways 1209-1226 range thus far today. XLF is 12.31; financials are slapping the markets; C is down over 5%; BAC trying to hang on at 5.01; GS now printing 87.38 but it is actually setting up with positive divergence on the daily chart. Keep watching RTH, now printing 109.88 which will maintain a buoyancy in the broad markets.

Note Added 12/19/11 at 1:34 PM:  Markets meandering sideways with SPX respecting 1209 support thus far today. RTH level of interest increased to 109.62. RTH now just ruptured this level, the retail sector is failing, now printing 109.61.  This is important since if RTH holds here or lower, the broad markets will weaken significantly.

Note Added 12/19/11 at 1:37 PM:  RTH at 109.62 on top of Keystone's current algorithm number. This is determining the broad markets fate right now. If RTH moves up from 109.62 the markets will rally.  If RTH loses the 109.62 and moves lower, the broad markets will selloff. Hang on........

Note Added 12/19/11 at 1:40 PM:  RTH failure, now printing 109.57....now 109.50.  Markets will sell off for another broad market leg lower now unless the market bulls can save it all in the next few minutes...........

Note Added 12/19/11 at 2:00 PM:  RTH regained 109.62 at 1:50 PM, so the market bulls have some breathing room again. Keep watching RTH 109.62.

Note Added 12/19/11 at 3:11 PM:  RTH dropped under 109.62 again.  Retail sector failure is ushering in broad market weakness. BAC lost the 5 level, now printing 4.95, darkening traders' attitudes. SPX lost the critical 1209 support.  Next strong support level is 1204.

Note Added 12/19/11 at 3:41 PM:  RTH dropped under 109, now printing 108.86. BAC now printing 4.95 but the daily and weekly charts are now positively diverged. SPX trying to hold 1204 support into the close.

Note Added 12/19/11 at 4:14 PM:  The three-legged stool that was supporting the market bulls were utilities, retail and lower volatility.  The RTH retail leg broke today. SPX 1204 support held. Volatility, VIX, remained calm today, relatively, up 2.5%.  Considering the large market drop, VIX should have been up over twice that pecentage, so many traders continue to believe in a Santa Claus rally.