Keystone's Midday Market Action 8/30/12

Watch JJC 43.70, VIX 18.35, SOX 391, UTIL 464 and NYA 7837.  All are contributing bullishly to the markets except for copper, JJC, which starts the day under 43.70, watch this closely.  If JJC stays under 43.70 and one of the other parameters fail, Keystone's algo, Keybot the Quant, wil likely flip to the short side. Otherwise, more sideways action into Chairman Bernanke at 10 AM EST tomorrow. For the SPX, bulls need to see 1414 (note that yesterday the high printed at 1413.95 running out of gas a nickel short) to launch an upside acceleration. The bears need to see sub 1407, if so, the strong 1406 support should give way accelerating the downside, as well as 1403 and price will be on its way below 1400 in short order.  A move thru 1408-1412 is sideways action. The futures show that a test of the 1406-1407 is on tap for the open. Watch the SPX 30-minute chart to see if the 8 MA curls over and stabs back down thru the 34 MA to verify bearishness for the hours and days ahead, or not. The day begins with the 8 above the 34 MA which is bull friendly.

Note Added 8/30/12 at 9:37 AM:  Utilities are collapsing out of the gate, UTIL printing 468 moving closer to the 464 danger line. JJC recovers today, now over 44 again, back in the bull camp. SOX is at 393 also edging close to its danger signal at 391. VIX is 17.60. The SPX prints a LOD of 1401.86 thus far, the 1406-1407 collapsing in the opening minutes. All of the parameters on watch are in the bull camp so the downside would be limited. Tech is leading the downside so this does provide bearish strength.  The 8 MA just stabbed down thru the 34 MA on the SPX 30-minute chart which signals market bearishness for the hours and days ahead, if it holds. Gold is 1664 above the 65-week MA at 1659 favoring the gold bulls.

Note Added 8/30/12 at 10:09 AM:  Tech continues to lead the broad markets lower, a sea change from the continuous tech bullishness throughout the recent rally. The 8 MA is back under the 34 MA as described above favoring the bears. However, none of the parameters listed in the first line of this missive are bearish, a couple are in the neighborhood, but all remain bullish which will create underlying bullishness in the broad indexes. Therefore, a standoff occurs at the SPX 1402-1403 area, the 1403 resistance is holding for now. 1399 serves as the next support level.  The broad indexes will not be able to develop downside oomph unless at least one of the parameters listed in the first line fails. The NYA has slipped under 8K. Perhaps it is a good time to tend to the garden, the cucumbers are the size of watermelons.

Note Added 8/30/12 at 12:42 PM:  The SPX falls lower as per the bear game plan this morning and continues to play around with 1399 support. The LOD is 1397.01 so this level takes on importance for today and tomorrow. The COMPQ leads the SPX lower today which is a large feather in the bear's cap. Tech leading the broad markets lower has been missing in action for the last month so this is a key development.  The 8 MA is down thru the 34 MA on the SPX 30-miniute chart is a very bearish indication.  JJC stays under 43.70, although it is only a couple pennies as this is typed. The SOX level to watch now is 390, rather than the 391 mentioned this morning. At the opening bell, Keystone's algo recalculated the SOX number, and the algo continuously adjusts the semi number, so at a LOD of 390.33, the semiconductors were only 33 pennies away from verifying a more extensive bearish move lower and causing Keybot the Quant to go short. Watch SOX 390 closely as well as JJC 43.70 since they are most greatly effecting the broad market direction right now.  VIX fell under 18 but the elevated readings portend larger movements up and down in the broad markets going forward. Thus, JJC 43.70 and SOX 390 directly tell you market direction today. JJC is now printing 43.70 on the dot.......if JJC moves above 43.70 there will be a noticeable lift to the broad indexes. If JJC fails from this 43.70, that portends more serious downside on tap for today, and, if SOX loses 390, Katy bar the door. Otherwise, the markets keep sliding sideways from here into Bernake Friday. Gold is 1658 wrestling with the descending triangle trend line and 65-week MA as per this morning's chart.

Note Added 8/30/12 at 1:06 PM:  Note how the JJC back tested the 43.70 and fell on its sword, now down at 43.59. This sets the table for the semiconductors. If SOX loses 390, the broad indexes will slip on a banana peel and fall all the way down the steps. With copper recommitting lower, SOX 390 is the most important thing to watch the remainder of the day. The Fed's Lockhart, in a television interview on CNBC Business channel this morning talks of the need to see deflationary forces in play to initiate quantitative easing.  This is Keystone's mantra. Chairman Bernanke will not announce QE3 unless the CRB is under 270 and likely between 250 and 260. The CRB is over 300 so disinflation and deflation are not ocurring currently, so there is no reason to use the remaining bullets in his cap gun. Bernanke may announce the extension of the low rates from 2014 now into 2015 but a full-fledged quantitative easing program would be a huge surprise. Bernanke will also react independently of the politics, says Keystone, against the main stream pundits that say he needs to remain distant from the presidential race.  He has shown to have some guts in the past, despite his academia-type milk-toast image, so if the CRB falls under 270 next week, he will do QE3 next week, if it occurs in November, he will do QE3 in November, if the CRB stays elevated above 270 into 2013, then Bernanke will not announce QE3 until 2013. Easy as pie.  Speaking of pie, there is another piece of blueberry remaining, but not for long.

Note Added 8/30/12 at 3:18 PM: Status quo. JJC is under 43.70, bearish.  SOX is over 390, bullish. The SPX stumbles sideways thru 1399-1403. Watch SOX 390.