Keystone's Midday Market Action 8/13/12

U.K.'s King says the euro problems are ongoing with 'no end in sight'. Gasoline price takes the biggest two-week jump of the year thus far.  NOOK prices are slashed as the back-to-school sales fizzle rather than sizzle? Retail Sales data tomorrow morning is uber important as well as retail earnings this week with HD, TGT, WMT and many others reporting. China's hopes of a sustainable domestic recovery, replacing the slackening global demand, continue to falter as China automobile sales languish. Buyers are becoming increasingly turned off by high-pressure sales tactics, no doubt a function of desperation to spur the domestic economy.

Copper remains weak and without the doctor cooperating with the bulls, the market upside is limited.  Watch JJC 43.75; bulls got nothing unless they can punch up thru which would signal an extended rally forward. Watch the utilities sector since any continued weakness will signal bearishness for the broad markets moving forward. Use UTIL 470-ish as a line in the sand for markets. The soap opera with the SPX 30-minute chart with 8 MA and 34 MA cross continues today starting with the bears in charge. SPX:VIX ratio signals that a significant market top is in progress now. VIX has a 14 handle signaling a significant market top now forming.

For the SPX today, the bulls only need a tinge of green in the futures, to move up and over 1406, to launch an upside move, likely to 1410 and 1413, but the markets are showing a flat posture into the open. Tech is leading the broad market on the upside which would mute any down move. The markets are starting the week very much like they ended last week, indecisive and sideways.  The market bears need to push the SPX under 1396 to accelerate a downside move, likely to 1391 in quick order. A move thru 1397-1405 is sideways action today.

Oil is moving up today, WTIC is up a buck, perhaps SCO, the short inverse ETF will be worth a look as the day develops. There is a gap fill needed at 38.5-39.0 which may provide an attractive entry for an SCO bounce which would correspond to an oil sell off. The low volume will continue to cause the markets to be jumpy, take profits when you have them, you can always reload later. The opening bell is a few minutes away.

Note Added 8/13/12 at 12:06 PM:  Copper is negative. Utes are negative with UTIL at 482. In addition to watching UTIL 470-ish over the next couple weeks, also watch the 50-day MA at 481.67. A move below 481.67 will indicate that the market bears got game. VIX dropped to a LOD of 14.07, almost at a 13 handle. A test of the March lows were anticipated (see this morning's VIX chart) but instead of a move there over the next couple weeks, today's print is a matching low of these previous numbers today.  The daily VIX chart shows the falling wedge, overbot stochastics and positive divergence in place. Thus, volatility edges closer to a bounce. Volume is very low today, fumes. The NYSE is trading at a run rate of only 60% of an average days volume. The SPX 30-minute chart shows the 8 MA under the 34 MA so the market bears are favored moving forward.  The RUT is under 800, and at 792, perhaps ready to drop under 790.   The COMPQ is a hair stronger to the downside compared to the SPX so tech is leading to the downside by a smidge, which favors bears; watch this relationship closely today. All and all, the bears are feeling their oats to the downside, but without tech convincingly leading the broad indexes lower, the downside move is stalled. The market bears need to push under SPX 1396 which would kick in the downside bus strongly, a move to 1391 would follow in short order. Without reaching 1396, bears got nothing. German and European leaders are voicing concerns over the pending German vote in September concerning the ESM so this is likely causing some market weakness today.  Oil moved higher this morning and then fell on its sword, now negative on the day, lining up with the downward-moving equity markets. The dollar, $USD, is printing 82.381, watch the 50-day MA at 82.65, if below, like now, the weaker dollar favors bulls, if above 82.65, the stronger dollar will favor bears.

Note Added 8/13/12 at 12:40 PM:  The 10-year Treasury yield is 1.63% down from the 1.66% before the market opened. As yield moves lower, market bears are favored in the stock market; as the ten-year yield moves higher, market bulls would be favored.  Merkel is back from vacation, no doubt bringing home a new dominatrix outfit with whip, ready to handle Hollande and Rajoy. VIX is at 14.22. TRIN is 1.16 favoring sellers, finally showing some readings above one. NYAD prints a low around -1500 so considering the TRIN and NYAD, the selling is orderly and steady-eddy today, not panic-type selling. This hints that it will continue. AAPL is up one percent today but the daily and weeklly charts show it to be an attractive short play moving forward.  Tech and the broad indexes are moving down at the same pace, so the bears cannot gain traction to attack the important 1396 level today.

Note Added 8/13/12 at 12:52 PM: Note on the SPX 30-minute chart how each time the 8 MA exhibits failure thru the 34 MA, the only way the bulls can stop the downward slide is with a strong upward market spike. This causes the 8 MA to curl around and recover and move higher. You see this behavior after Wednesday's open, after Thursday's open, Thursday afternoon, Friday afternoon, and perhaps now as the SPX moves back above 1400 in recent minutes. Watch to see if the bulls run out of gas this time, or not. Bulls will need a thrust to 1403 and higher to turn today around. Trannies are negative today, the Dow Theory non-confirmation continues, the Dow Industrials and Transportation Average continue to diverge continuing to place the market rally into question. Remember that Dr. Copper is not a fan of the market rally either, so far.

Note Added 8/13/12 at 1:06 PM:  The VIX minute charts, 5, 10, 15, 30, and 60 are all setting up with positive divergence as price prints a matching low compared to the open today. This afternoon will be interesting.

Note Added 8/13/12 at 3:31 PM:  Bulls receive the thrust to 1403 to reverse the 8 MA on the SPX 30-minute chart. And in the last minute, the 8 MA pokes above the 34 MA by six pennies, both moving averages at 1401.50-ish. More drama like last week as markets trend sideways. Watch how the 8 and 34 MA cross plays out to finish the day. The SPX is shaping a hanging man candlestick today just like Friday, plus the two doji's the days before that, all continue to hint that a trend change is near. VIX now has a 13 handle, printing 13.98.

Note Added 8.13.12 at 3:53 PM:  The OpEx Monday bullishness surfaced today. VIX is at 13.89. Keystone's 80/20 rule says 2's lead to 8's, so the move under 14.22 for the VIX points towards the 13.8's, so that would satisfy the target in quick order. Markets continue sideways overall but the bulls regain the slight advantage as the session draws to a close.