Keystone's Nightcap 3-16-11

The utilities sector will tell the story tomorrow.  When the UTIL lost 399.03 today, the broad markets were in big trouble.   By the UTIL not falling under the 50 week MA at 393.25, the broad markets stopped a crash.

Thus, for tomorrow, if the UTIL, now at 397.22, falls below 393.25, the broad markets will go into free fall.  If the UTIL stays between 393.25 and 399.03, the broad markets will trend sideways.  If the UTIL moves above 399.03, some sanity will return to the broad markets.

In addition, concerning the SPX, watch 1249.05, if that level is lost tomorrow, the broad markets will accelerate selling again, and, if this occurs in concert with the UTIL falling under 393.25, the markets will more than likely have a crash event.

All that said, the expectation is for the UTIL to hold steady or rise, and the SPX to hold that 1249 level, so the broad market major selling event should be avoided.  This does not mean we will not have more selling in the days and weeks ahead, we will, but the thinking is that we head back up in here to take a rest from the negativity.

SPX is now negative on the year with a 1256 handle.  Nearby S/R includes 1267, 1263, 1258, 1255, 1252, 1250, and the critical 1249 level.  The pre-Lehman bankruptcy in Fall 2008 occurred at 1252.

The CPC spiked up today over 1.6 intraday, but dropped back down to close just under 1.2.  The level of 1.2 and higher is where broad market selling typically subsides and it is prudent to think about long positions.

TRIN closed the day over 3 indicating that the sellers had a party.  Considering the huge intraday spike yesterday was even higher, this behavior is indicative of a selling event that has reached a crescendo.

SPX:VIX now in the low 40's.  Thus, only 5 or 10 points away from where it indicates that the bulls will be favored, so another indicator showing that the majority of the selling has probably occurred.

The NYMO printed a -88 which is also more consistent with a selling event that is more towards the end rather than the beginning, and agreeable to a bounce.

The NYUD at -1194 is another indicator that is extremely negative adn at a level consistent wherre market bounces occur.

The NYAD printed a -1631 which was actually higher than the -1750 from yesterday, and this occurred as the NYA printed a lower price from day to day.  Thus, it also indicates that the markets would be agreeable to a bounce here.

The broad markets have now sustained structural damage so expect the indexes to continue an overall bearish trend for the days and weeks ahead.

For tomorrow, 3/17/11, the behavior in the utes will dictate the broad market behavior as explained above.