Keystone's Midday Market Action 7/31/12

Copper, JJC, is flat, remaining under 44.20, preventing further market upside. Note the VIX coming up to test the 18.75-18.80 level highlighted this morning.  The market bears did not have the strength to push up thru, however, at least so far today, the VIX now printing 18.40.  Thus, the bears want to see 40 cents more (18.80) to start moving the broad indexes lower.  If the VIX stays under 18.80, the markets will languish sideways and the bulls are fine.  Keystone's SPX:VIX Ratio Indicator is 75.18 remaining seven points above the critical 68 level showing that the bulls maintain a firm market grasp. Tech (Nasdaq) is a hair positive on the day while the broad markets (SPX) are a hair lower, thus, tech is leading the upside favoring the bullish side. The 10 AM ConCon number did provide a pivot, which was down for markets, but the jaggy sideways action today is not committing to either side. SPX continues to hug the 1385 level, now moving in a sideways range overall thru 1381-1391 for almost two days. Bulls will win at 1392 and higher, bears will win under 1381. VIX 18.80, and SPX 1392 and 1381 holds the key today. If the status quo remains, with VIX under 18.80 and SPX between 1381 and 1392, then markets will languish sideways and traders are content to wait on Chairman Bernanke when he brings the tablets down from on high tomorrow and provides the market answer.

Note Added 7/31/12 at 11:17 AM:  Several tickers have Keystone's interest today as possible plays but the choppy nature of markets perhaps places hammock time ahead of trading time.  Adding more RIMM (long) is of interest, more CEP (long), maybe buying GNK (long), maybe a CTRP long, utilities are attractive shorts, WMT as a short now since it displays attractive negative divergence on daily and weekly charts, maybe DNDN as a long off their earnings beating, also a pull back in energy may come so perhaps an energy short.  All are very short term trading considerations.  For now, watching, paying attention to VIX 18.75-18.80 where the bulls and bears will fight for market control. FB is puking again down 5% today, the chart is ugly, Keystone's 80/20 rule says 2's move to 8's, so if FB closes under 22, that would hint that 18 may be on the way.  An FB long is perhaps not a consideration until 17.70-18.20 but even then, the stock is damaged goods and best avoided. Other than that, perhaps a slice of pie then some hammock time.

Note Added 7/31/12 at 12:26 PM:  Bears are attacking SPX 1381 but the bulls are preventing failure so far.  Specifically, watch 1381.37 as the line in the sand. If the SPX stays under 1381.37 for a few minutes, the markets will take a leg lower.  The VIX is at 18.60, under the critical 18.80 level the bears need.  This morning, as the SPX moved lower, the VIX had spiked higher to test higher levels than now, which hints that perhaps this market weakness will not have legs.  SPX 1381.37 and VIX 18.80 will tell you the answer in the minutes ahead.

Note Added 7/31/12 at 12:35 PM:  SPX is under 1381.37, see if it holds. The VIX, however, is at 18.66.  The bears are a hair away from victory if they can muster up 14 more cents in the VIX (18.80), otherwise, the market bulls will recover today.

Note Added 7/31/12 at 12:44 PM:  Watch Keystone's SPX 30-Minute Chart with 8 MA and 34 MA Cross indicator showing the 8 MA at 1384 heading down and the 34 MA at 1382 heading up.  Perhaps a cross is in order in the coming hour, watch it closely. The bears will be favored for the days ahead if the 8 MA stabs down thru the 34 MA.  If a cross does not occur, markets will have to spike higher to avoid the cross. So there is some drama ahead. SPX:VIX ratio has a 73 handle remaining above 68. SPX recoverred above 1381 but now is in trouble again.  Copper is negative. VIX is at 18.67; bears got nothing unless they move the VIX above 18.80.

Note Added 7/31/12 at 12:56 PM:  VIX 18.71 .... 18.73 ... well, bears, do you got what it takes?

Note Added 7/31/12 at 1:02 PM:  SPX 1379 handle but VIX at 18.74. Keystone took profits on TWM exiting the trade.

Note Added 7/31/12 at 1:27 PM:  Keystone bot DNDN opening up a new long position; the stock is receiving a beating after earnings but the charts are positively diverged; this is an extremely speculative and dangerous trade.

Note Added 7/31/12 at 1:42 PM:  Tech continues to lead the upside which helps stall any bearish market move.  SPX is now back above 1381.37. VIX is 18.65, the bears did not have the juice to move up thru 18.80, at least so far. Keep watching SPX 1381.37 and VIX 18.80, and the SPX 30-minute chart, the 8 MA now a hair away from crossing down thru the 34 MA which would usher in bearishness for the days ahead.  The markets should either bounce strongly and move up, or the SPX will collapse down thru 1381, in the minutes ahead, say over the next hour or so.

Note Added 7/31/12 at 1:53 PM:  Keystone bot TWM reopening this trade.

Note Added 7/31/12 at 1:55 PM:  Bears are making a run lower again; SPX near 1381.37 and VIX is at 18.71. Do you got what it takes this time bears?

Note Added 7/31/12 at 2:06 PM:  Bingo. The 8 MA moves down thru the 34 MA on the SPX 30-minute chart; this is very bear favorable moving forward. Reference the Turn Signal page on this site for more information and the previous signals.  Let some time pass to see if the 8 MA stays under the 34 MA, if so, the bears will gather strength.

Note Added 7/31/12 at 2:36 PM:  Keystone added more TWM but the bear side cannot gain steam to the downside unless the VIX moves above 18.80.

Note Added 7/31/12 at 3:07 PM:  VIX is at 18.64, the bears cannot move the volatility above 18.80 no matter how hard they try. Perhaps they need Popeye's spinach. The 8 MA remains under the 34 MA on the SPX 30-minute chart so this is a significant bearish development, as long as it holds thru the close. VIX moving above 18.80 would seal the deal for the bears, until then, markets remain in limbo. SPX is at 1381.45 a hair above the important 1381.37 for today.

Note Added 7/31/12 at 3:40 PM:  The last twenty minutes are providing drama; SPX 1381.37 and VIX 18.80 is where the action is.

Note Added 7/31/12 at 3:48 PM:  SPX failed thru 1381.37 but the VIX continues to favor the bulls at 18.60.

Note Added 7/31/12 at 3:59 PM:  Keystone took profits on the TWM day trade exiting.  Also added more DNDN.  Also bot CTRP opening up a new long position.

Note Added 7/31/12 at 4:02 PM:  Look at the VIX playing its games all day long until the final minute.  Things are settling out, VIX at 18.88. A very interesting finish, best to let the smoke clear and see if there is any more of the blueberry pie remaining in the frige.