Keystone's Midday Market Action 7/9/12

A check of today's metrics show the XLF jumping higher like a scalded cat, above 14.40, bullish for markets. The VIX is higher, above 18, but below the critical 18.75, bullish for markets.  The NYA is  ...... note the 40-week MA, which is the measuring pole for the NYA, is now at 7738. NYA price is 7738. This is the fight today, just like Friday afternoon when the WSJ article pumping QE saved the day.  There she goes, NYA at 7736 dropped under the 40-week MA at 7738. This is very bearish for markets, if it holds.

Note Added 7/9/12 at 9:42 AM:  NYA stumbling now, like a drunk falling down the steps. NYA is at 7717 well under 7737, very bearish for markets. Here comes XLF, now printing 14.44... 14.42..... this is the next fight.  Bulls can try to hold the markets here if they stop XLF 14.40 from failiing. If XLF drops under 14.40 you will notice a strong drop in the broad indexes. VIX is 18.18 not yet near the 18.75 that signals strong selling on tap. The SPX has not tested the 1348 support, yet; losing 1348 will create a strong downside acceleration.

Note Added 7/9/12 at 10:11 AM:  NYA is at 7713 well under 7737, a huge knife sticking out of the bulls back, creating downside.  XLF, however, is not losing the 14.40 level, now printing 14.43, holding three pennies above, so the markets languish.  SPX performed one test of 1348 thus far, it held, the LOD is 1348.10. The COMPQ is down a bit more than the SPX so tech is leading the downside which provides bear street cred.  Keystone's SPX:VIX Ratio Indicator, however, is at 75 remainig above 68, which favors bulls.  Bears need to see a higher VIX above 18.75, this will bring the SPX:VIX ratio lower, and for the XLF to lose 14.40, otherwise, the markets will languish in this zone.

Note Added 7/9/12 at 10:22 AM:  XLF tets 14.40 as the SPX tests 1348, major decision time. The TICK prints under -800 showing the uber bearishness. Markets are holding steady so far. VIX is printing the highs at 18.29 but still far below the 18.75 the bears need. If XLF 14.40 and/or SPX 1348 does not fail, the bears got nothing today. Traders may have jumped the gun rushing in to short after the open. The original thinking before the weak futures markets was that markets would bounce allowing for a nice short entry. Lots of other traders were probably thinking the same thing. Instead, markets opened lower, and some traders chase the downside. If markets bounce off the XLF 14.40 and SPX 1348 right now, it may be best to wait for a second pulse higher to short since the same short players may be eager to add to shorts again. This may create further upward buoyancy so it may be best to simply sit back and observe for a while using the XLF 14.40, SPX 1348 and VIX 18.75 as a gauge.

Note Added 7/9/12 at 10:32 AM:  Here is another test, XLF 14.40, SPX ruptured 1348, see if the bearish move holds for a few minutes, or not. If so, the downside will accelerate strongly.

Note Added 7/9/12 at 10:38 AM:  SPX bounces higher, XLF is at 14.41, perhaps a couple upside pulse moves will occur to set things up for the bears to get a running start, since the bears do not appear capable so far to drop under XLF 14.40 or SPX 1348. Perhaps wait for an upside +1000 TICK to identify a shorting opportunity.

Note Added 7/9/12 at 10:49 AM:  Another bounce by XLF, now at 14.43, and SPX now at 1351. The bulls are not going down easy. Since the VIX does not want to climb or spike higher, the bulls can keep the bears on a leash, preventing the 1348 failure today. A +1000 TICK just occurred. A lot of the shorts were probably thrown back causing the market pop. The NYA is now important again, watch 7737, now at 7729. The bears are in command for the coming days and weeks as long as the NYA stays under 7737. If the bulls move it back above right now, the markets will recover strongly and bear hope will evaporate.

Note Added 7/9/12 at 11:19 AM:  Tech is no longer leading the broad markets lower so this helps to stall the downside. Markets took a first pulse up today peaking at 10:50 AM, about one-half hour ago.  A second pulse move upwards, along with a +1000 TICK may provide an interesting short possibility.  XLF 14.40 is the cliff edge with the bulls walking along without stumbling as yet. The market bears will maintain market weakness over the short term (coming days and weeks) if NYA stays under 7737. Note that XLF is at 14.41 not wanting to come back up like the SPX currently. A +1000 TICK would be nice about now. Utilities, UTIL, are now down four days in a row; it is very ominous for the utes to lead the broad markets lower.

Note Added 7/9/12 at 12:53 PM:  XLF sitting at 14.41.  SPX came back up to the earlier high today.  TICK just printed +800.  This may set up for a short if the TICK can hit +1000. However, it is starting to look like an extended sideways move in the time ahead thru 1348-1356.

Note Added 7/9/12 at 1:40 PM:  VIX is now under 18. NYA is coming back up for a look at that 40-week MA at 7738, now printing 7736.  Bear hopes will disappear like sand flowing thru fingers if the NYA moves back above 7738.

Note Added 7/9/12 at 2:07 PM:  NYA receives a spankdown at 1:44 PM from 7736-ish verifying the importance of the 40-week MA bull-bear line in the sand.  NYA now printing 7729 so the bears breathe a sigh of relief, for now. XLF is at 14.41 sitting on the fence all day long. Volume remains extremely light, trading on vapors; the NYSE is at a run rate of only 55% of a day's average expected volume.

Note Added 7/9/12 at 3:23 PM:  The SPX minute charts continue to show a sideways vibe and the SPX continues to skip along between 1348 and 1352 ever since the open. XLF is sitting on the fence at 14.40 not willing to make a decision. NYA is at 7721 favoring bears. VIX is 18.15 favoring bulls. Today is like one of those slow-motion car chases seen on television occasionally. The drama is low-key but you simply do not know yet what the ending will be. XLF will decide.

Note Added 7/9/12 at 4:00 PM:  Volatility is worth buying. VIX remains under 18.75 helping bulls. XLF remains above 14.40 after the fence-sitting all day long helping bulls. Whoa. NYA closes at 7736.18, only one point below the 40-week MA at 7737.66, but under nonetheless helping bears. How do you like them apples? Now you understand why this is a key cyclical indicator for Keystone. So the bears are happy but a single point victory can disappear in a heartbeat at tomorrow's open.  AA earnings hit and beats estmates, revenue appears lower than last year. AA is trading up slightly. The con call will probably provide a more firm idea.