Keystone's Midday Market Action 11/15/12; Europe in Recession

The daily drama continues.  Politicans are digging in with the fiscal cliff negotiations. The SPX has lost 6% of its value since the president was re-elected, in only six days time. Riots in Europe are growing in intensity. Citizens in Spain are protesting austerity and in Barcelona police are now shooting rubber bullets into the crowds. This is where the easy money policies lead. The France, Germany and Italy GDP's are a smidge better than forecasted but Spain, Austria and the Netherlands is worse. Austria and Netherlands is worrisome since they are expected to help pull the European wagon out of the mud.  The Netherlands took a big tumble in economic activity.  The Euro area shows lower GDP overall in Q3 verifying that Europe is in recession. No one is surprised. Israel, Iran, Syria and Egypt tensions are growing with the Israeli airstrike yesterday. Oil prices moved higher, Brent is more affected.

Keystones' SPX 12-Month MA and NYA 40-Week MA signals triggered yesterday indicating a Cyclical Bear Market moving forward.  Significant technical damage has occurred in the markets. As the previous charts highlighted, the NYAD and index charts hint that a VST bounce is needed, perhaps only for a few hours, but then lower lows should be ahead for the broad indexes. Read Keybot the Quant's notes from last evening to note the importance of the current levels.  The broad indexes are at a point where a market bounce should occur at any time from now thru Monday. Thus, pay close attention moving forward.  The loss of the 1358 strong support should lead to 1345. The VIX is well-behaved.  If traders start to panic, you will see it in the VIX spiking which would further reinforce that a market bottom is close by. A strong spike higher in the VIX will cause a larger and sharper drop in the markets.

The Philly Fed Survey is at 10 AM so markets may take a stutter step.  Natty Gas Inventories are 10:30 AM and the Oil Inventories are 11 AM, delayed one-day due to the holiday.  The weak WMT earnings are dampening the market mood but TGT was better. Overall, the earnings releases this morning are disappointing causing the futures to retrace back to the flat line. The Jobless Claims jumped strongly higher this week but that would be expected now that the electioni shenanigans are no longer in play.

Note Added 11/15/12 at 10:07 AM:  The broad indexes printed a lower low than yesterday so the weak Wednesday did lead to a lower print on Thursday.  Markets bounced at the open, then fell on their sword. The SPX is at the strong 1358 S/R.  Tech is leading the SPX downward today.  AAPL is down four bucks to 533 now inside the attractive 520-535 area for a potential bounce. The VIX is at 17.79, a hair above the 200-day MA at 17.72, bears must hold this level and move higher. Bulls will try to push the VIX lower. Markets are taking a breather so far today after all of yesterday's excitement.  The Philly Fed data is weak but Hurricane Sandy is cited and the SPX actually moves higher from 10 AM on.

Note Added 11/15/12 at 10:41 AM:  The computers are slow here today and the airlines are experiencing glitches as well; cyber gremlins are at play. Markets are flat and uninspired. VIX sits at 17.73; whichever way the VIX moves from here the markets will move opposite.  Keystone took profits on the ZNGA long trade exiting the position. Will look to reenter but probably not today. ZNGA remains attractive as a long trade moving forward.

Note Added 11/15/12 at 11:12 AM:  Here is the test of 1352.50, yesterdays late-day low, todays low at 10 AM, and now.  Price will either bounce or die from 1352.50.  Tech is leading the downside. VIX just moved above 18. Keystone's SPX:VIX Ratio Indicator is at 75; a move under 68 wiill trigger a large market selloff but this may not occur until a few days in the future, unless volatility spikes wildly higher.

Note Added 11/15/12 at 11:23 AM:  The 1352.50 failed so the 1345 support should be in play which would be an attractive bounce point, even if only a bounce for a day or two before the downside would then finish up. See if price stays under 1352.50 for the next ten minutes, if so, the SPX will be down in the 1340's in short order. The bulls can mount a comeback if they regain 1352.50 and drive higher but it must be immediately.

Note Added 11/15/12 at 11:35 AM:  VIX is 18.12 attacking the 50-week MA at 18.14, a move higher in volatility from here will push the broad indexes strongly lower. The SPX is 1352.15 deciding its fate, time to choose.

Note Added 11/15/12 at 11:51 AM:  VIX is 18.38.  SPX is in the 1340's. The strong 1345 support is nearby. Keystone added more USD, the 2x long semiconductor ETF ongoing trade.

Note Added 11/15/12 at 1:46 PM:  SPX bounces on Chairman Bernanke promising more QE to help support a continuing weak housing sector.  The crack cocaine catapults the SPX from 1348 to 1356, the current print, eight handles on the news.  Yellen's comments on Tuesday afternoon about low rates running thru 2016 had no effect on markets; at least Bernanke received a little bang for his buck.  These central banker theatrics, however, are getting old and traders have grown tired of the money-pumping games. The Fed is a cheerleader for markets. The 1358 resistance ceiling will be interesting to watch. If markets leak lower again, that will expose the Fed as the emperor not wearing any clothes.  Perhaps markets will carry along with this positivity to finish the day and then the true bottom can occur tomorrow or Monday. The other outcome would be a loss of confidence today and strong drop into the close which would serve as a potential makret bottom. The VIX is at 18.02. The SPX is now fighting the 1358 S/R.

Note Added 11/15/12 at 2:02 PM:  President Obama is talking on television from the Hurricane Sandy damage at Staten Island, New York. SPX has dropped two handles in the last few minutes from 1358 to 1356 ....... now 1355..... hurry up bulls, grab the microphone away from the president, each time he speaks the markets start to drop.

Note Added 11/15/12 at 3:07 PM:  The Internet waves are slow today perhaps serving as an omen for coming cyber events. Tech continues to lead lower.  AAPL is printing the lows of the day at 524. Apple is at the targeted 520-525 area but who wants to buy it?  An AAPL long here is only for nimble traders since the weekly chart will want to push it lower into 475-485 for starters.  The SPX is printing 1348.81 dropping continuously from when the president appeared on tv an hour ago, ten handles higher. Bulls better hide those microphones and tell him to stay in the Oval Office!  Wall Street traders are now Pavlov's dog, the minute they see the president, they hit the sell button.

Note Added 11/15/12 at 3:15 PM:  The drop in the SPX also exposes the Fed for shooting blanks.  When Bernanke would verbally pump the markets weeks or months ago, the SPX would jump 25 handles and not give up the gains.  Today the SPX jumped ten handles on Bernanke's promises for future easing, only to give it all back up an hour later. Bernanke pulls a handkerchief from his vest pocket and dabs the beads of sweat on his forehead. The LOD is 1348.05. The VIX is 18.33 above the 50-week MA favoring bears.

Note Added 11/15/12 at 3:42 PM:  The SPX pops off a test of the 1348 level; the fourth test of 1348 since noon time.  The SPX moves sideways thru 1348-1358 all day long. The TRIN is low all day long favoring bulls. VIX is 18.12 fighting for that 50-week MA.

Note Added 11/15/12 at 3:59 PM:  The SPX is hanging around right where it started today, at 1355.  VIX is sitting on the 50-week MA, watch this closely tomorrow. Keystone bot more IWM adding to this ongoing long position.