Keystone's Midday Market Action 1/20/12

Do the bulls have the continued oomph to carry markets into the weekend?  The CRB is under 311.50, and also sliding under 311, so this takes the wind out of further bull hopes and will provide the bears some weaponry. The dollar is stronger today weakening copper and commodities, and in turn, equities.  The Nasdaq is down -0.29% while the S&P is down -0.18%. Holy smokes, Keystone says check that twice and sure enough the Nasdaq is leading down today.  This entire recent rally was led by the Nasdaq, today is the first day this has now changed, and the Nasdaq is now leading to the downside. This is a feather in the bears cap.

Utes are a smidge weaker today, watch UTIL 439 today thru next Friday, only 8 points under the current price. If this gives way, the markets will be undergoing strong selling pressure.  Keystone's SPX 12-month MA cross indicator identifies 1283 as a critical level.  If lost, accelerated bearishness would enter the markets.  NYA 7690 same story, and in fact, the NYA would be expected to fail prior to the SPX failing 1283. Therefore, focus on CRB 311.50, UTIL 439, SPX 1283 and NYA 7690 for the days ahead.

For today, watch SPX 1315.50 and 1308.  If bulls touch 1315.50, the party rages on into the weekend. If bears can lose the 1308 handle, accelerated selling will enter the broad markets.  A move thru  1309-1314, which is currently occurring, is sideways action.

Note Added 1/20/12 at 9:53 AM: The S&P is down -0.17% and Nasdaq is down -0.33% favoring bears today. TRIN is 1.97 which heavily favors the sell side today. CRB is very weak today which will weaken the broad markets. Existing Home Sales are hitting now which will be a potential market pivot.........

Note Added 1/20/12 at 11:35 AM: The S&P is down -0.32% and Nasdaq is down -0.27% so the Nasdaq leadership to the downside has faded.  This stops the downward push.  Volatility, VIX, has moved slightly lower this morning helping the market bulls hang on to gains. CRB is collapsing under 310 now and this feather in the bears cap grows bigger. Utes are weak with UTIL down a half percent, at 446, 7 points away from danger at 439. For now, bulls and bears have a tug-o-war today, SPX moving sideways thru 1309-1314. Bears are coming down for a look at the critical 1308 level.......1309.59.........about to print a new LOD.....there it is......1305.39.  If market bears can lose the 1308 handle, a point and a half further down, the large block sellers will enter the markets in force and the selling will accelerate in the indexes.

Note Added 1/20/12 at 11:44 AM: The Nasdaq and SPX are both down about -0.33% so see if the Nasdaq wants to lead down again, or not.  The bears need the Nasdaq to lead lower, which in turn weakens the broad markets, and will allow the SPX to test 1308. Otherwise, markets will continue to drift sideways.

Note Added 1/20/12 at 1:03 PM: The Nasdaq is down -0.18% and the SPX is down -0.18%. If the Nas leads lower from here the bears will push markets lower.  If the SPX leads lower, markets will continue along sideways. VIX printing the LOD now with the charts remaining positively diverged indicating that a bounce in volatilty is near.

Note Added 1/20/12 at 3:38 PM: The Nasdaq is down -0.29% and the SPX is down -0.19%. The trading day is winding down but the Nasdaq is leading the downside again into the close.  The bears may make a push.  VIX is under 19 continuing to print new lows, however, favoring bulls. CRB gave up the ghost today which helped the bears.

Note Added 1/21/12 at 7:51 AM: The bulls pushed higher into the close yesterday.  Note that the bulls needed to touch 1315.50 to trigger extended upside but languished under there all day long, until the final minutes to close at the high of the day at 1315.38, falling short.  CRB collapsed yesterday and remains under 311.50 so this favors market bears.  Considering the bullish finish to Friday, and the upside push, markets tend to move on Monday the opposite direction they move on OpEx Friday. Thus, this seasonality indicator hints at market weakness Monday morning. The SPX Friday candle printed a hanging man hinting at a possible trend change, but confimation would be needed Monday. UTIL 439 is a big deal for next week, write this number down and watch it like a hawk. The weakness, or strength, in the utilities sector next week will lead the broad markets.

The anticipation of China easing is the main cause of this recent rally.  As serious and dire the Euro situation is, the Greece drama is ongoing as this is typed, the anticipated easing of the banking reserve requirement ratio's by China is overriding any market negativity.  Markets are junkies and stimulus and quantitative easing provides the fix--for the short-term high.  China lowered triple R's on 11/30/11 and this marked the bottom of the November slide in the markets. In mid-December, the China rumors concerning future eases is very prevalent in the news and this marked the beginning of this 5 week copper, commodities and indexes rally.  The commodities have petered out the last few days (CRB failed Keystone's algo number of 311.50), and copper logged its first negative day on Friday after seven consecutive up days.  This smells like buy the rumor and sell the news.  As soon as China eases the triple R's, a muted move at best would be expected and perhaps, markets weakening since the cow that supplied the milk is now in the barn.

Therefore, the announcement of the China triple R easing is a key element for next week.  China officials said they plan to conduct five triple R easings by next Fall.  Thus, this sets up an ease every two months. The last ease was 11/30/12 so the logical target time for the announcement is now thru the end of the month.  Last year, China was in a raising mode, and they acted two days after the start of the New Year, thus, Keystone is highlighting Wednesday, 1/25/12, as a target date.  Markets always provide surprises, however.  Keystone's thinking is that selling should enter the markets now and that a temporary bottom can be placed when China announces the triple R ease (markets will rally). Interestingly, however, the markets continue to float upwards already pricing in the whole ease, if not more? If markets maintain these current elevated highs, the China announcement will probably be a sell the news event.  If the markets sell off early next week and take a rest from this phenomenal push higher, then the China ease will probably serve as a temporary bottom.

The SPX is chomping thru that 1314-1318 resistance gauntlet.  1314, 1316, and 1318 are extremely strong resistance levels, but price has already managed to turn 1314 into support with the 1315.38 close on Friday.

Greece talks are the drama ongoing this weekend. A happy result is expected and both sides say things look good for an agreement.  Finnish elections are on tap as well but many of those folks are not fans of the handling of the Euro mess.  And comically, Croatia is fighting to get into the euro.  For next week, the euro and dollar behavior, UTIL 439, and an upcoming China easing announcement will all play important roles in this ongoing soap opera. Also, the politicians return to work in Washington D.C., freshly tanned and relaxed from their vacations in the warm climates, living the life of luxury, as millions of Americans remain jobless. Markets are typically bullish when Congress is not in session and bearish when Congress is in session.  Note the recent buoyancy in the broad markets since the Congress clowns were away from the steering wheel.  This week, the clowns are back on the bus. The new moon is Sunday into Monday, 1/23/12, and typically corresponds to bearish markets.  The full moon typically corresponds to bullish markets as evidenced by the rally action in and around 1/9/12.