Keystone's Midday Market Action 7/6/12

SOX failed at the open.  Surprisingly, VIX is under 18 remaining bullish, and NYA is 7754 about 34 points above danger remaining bullish.  The SPX fell thru the 1363-1364 support which ushered in further selling.  Keystone took profits on overnight trades TECS and SPXS and will look to reenter. Keystone's APKT long trade is taking a beating today, down over two bucks after the company lowers guidance. APKT should base moving forward so the trade will require additional time in light of this morning's negative news. Keystone's SPX:VIX Ratio Indicator is at 75 above the 68 danger level so bulls are relieved to see that.  The SPX 30-minute chart shows the 8 MA moving down towards the 34 MA. If the 8 MA crosses down thru the 34 MA that is a bearish signal for the day or three ahead.

Note Added 7/6/12 at 10:09 AM:  Watch XLF 14.40, now at 14.44.  If the XLF loses 14.40, or if the NYA loses 7720, now at 7746, the market selling will accelerate and Keystone's proprietary algo, Keybot the Quant, will likely move to the short side if not already short.

Note Added 7/6/12 at 10:59 AM:  Keystone's algo, Keybot, flipped short at SPX 1354, stay on guard for a whipsaw.

Note Added 7/6/12 at 11:43 AM:  Quick update. Watch XLF 14.40 and NYA 7720. These are lines in the sand that will increase market selling if violated.  The VIX is remaining bullish at 18-ish, the bears need to see 18.75.  Without volatilty spiking higher, Keystone's SPX:VIX ratio is remaining above 68, now at 75, which keeps the bulls in the game.  The SPX 30-minute chart sees the 8 MA stab down thru the 34 MA at 10 AM which signals market bearishness for the days ahead.

Note Added 7/6/12 at 12:12 PM:  VIX remains at 18 not wanting to move upwards. NYA at 7730 only 10 points above danger. XLF only pennies above the 14.40 danger level. Keystone bot SPXL (long SPX 3x) for a quickie countertrend move, very dangerous trade. If XLF loses 14.40, the trade will be unwise.

Note Added 7/6/12 at 1:11 PM:  WTIC oil is down 3%. Gold is whacked 2%. CAT and AA are down 3%. Tech sector is leading the broad markets lower which allows the negativity to fester. VIX stays under 18, bullish, XLF stays above 14.40, barely, bullish, and NYA stays above 7720, bullish. Markets will move sideways to up if these three parameters do not fail. If any one of these three fail, another market leg lower will result. A countertrend move is occurring today off the 1349 intraday bottom at 12:30 PM. SPX S/R in this area is 1358, 1356, 1351, 1347, 1344 and 1343. Utes are weak three days in a row continuing to receive the negative divergence smack down.

Note Added 7/6/12 at 2:28 PM:  Markets are moving sideways today thru 1348-1356 after the initial drop. The 30-minute chart may be setting up a fractal as compared to the 6/28/12 and 6/29/12 launch so this needs to be watched.  XLF is a hair away from the 14.40 but still bullish.  Likewise VIX and NYA. If any of these three fail, there will be no launch, markets will sell off further instead.

Note Added 7/6/12 at 3:30 PM:  SPX received the launch move. Keystone took profits on the SPXL day trade, exiting the position.

Note Added 7/6/12 at 3:35 PM:  Note the drop at the open today, and the sideways action, that creates an island. Prices are testing the levels from the first few minutes of opening trading today. This may provide a nice area to add or bring on shorts. Care is required, however, since an island reversal, would blow out the position. For example, if SPXS 21.35-ish holds, that may provide an entry to hold some shorts over the weekend. The minute charts would like to see price come back down after a brief pop (for the short side, opposite for longs), here is the pop occurring (for shorts). See if SPXS comes back down to the 21.30's, or not.

Note Added 7/6/12 at 3:44 PM:  SPX 1356 is strong resistance. Placed order for SPXS at 21.37, now at 21.43, let's see if the market maker comes down to snag it.

Note Added 7/6/12 at 4:03 PM:  SPXS came down to 21.38 a penny shy of the target entry. What a wild week, fireworks every day. SPX 1356 resistance held.

Note Added 7/7/12 at 6:03 AM: An interesting tidbit from yesterday is that the NYA came down to print a 7722 handle at 2 PM-ish, only two points away from failure at Keystone's level of interest. This is when Jon Hilsenrath, a writer for the WSJ, known to be perhaps the main mounthpiece of the Fed, released an article "Weak Report Lifts Chance of Fed Action," so this likely helped add the late-day market oomph. Traders realize he has the Fed's ear so the mention of stimulus was enough to excite traders into the weekend. The interesting part is that the article was released just as the NYA was failing the 40-week MA, at 7720, one of Keystone's key cyclical indicators, that would have created a severe downleg in the markets. Stick save.