Keystone's Market Action 4-26-11

The SPX 1340 gap fill is here; Keystone has been waiting two months for this. 1343 was the closing high and 1344 was the HOD in February so watch these levels.  More than likely, markets will idle into the Three Ring Circus tomorrow where the fate of the dollar, and thus, the commdoites and equities markets, will be determined.

 

The gap fill of that 1340 is important since it closes out any open business above.  Some technicians are embracing an inverted H&S now in the charts with this SPX 1340 level serving as a neckline but Keystone does not.  Keystone does not place much worth in any inverted H&S, or C&H for that matter, that occurs after a stock has rallied and trended up.  An H&S forecasting a turn down, yes, but an inverted H&S, no.  Keystone only uses the inverted H&S pattern, and cup and handle pattern, after a stock or index has been beaten down and is trying to bottom.  But, does this mean that the inverted H&S projection by other technicians will not come to be?  Of course not.  Time will tell but Keystone is on the other side of those analysts.

 

Gold and silver pulling back a little after the spike highs yesterday but again, markets should go into a holding pattern ahead of Chairman Bernanke.  Over 30 billion is currently shorting the dollar, that is quite a trade all going in one direction, even a hawkish cough from Bernanke, that pops the dollar even only a few pennies, may unravel this trade in a short covering explosion, but, have to wait until tomorrow to find out.

 

All major sectors are bullish except for copper and financials.  Watch copper during the POMO pumping now since copper buoyancy will give the market bulls further reason to buy.  Watch retail, RTH, for hints of overall broad market direction as well.

 

VIX remains low, CPC at 0.7, there is no fear in the markets at all, traders are complacent and expect the indexes to simply continue up day after day moving forward, usually a contrarian indicator.

 

Thus, we'll see how the SPX reacts around this 1340 gap, the 1343 close and the 1344 HOD from February, as well as support at 1338-1339, then 1336, and then stronger support at 1332-1333.  Probably sideways into Bernanke's Q&A tomorrow afternoon. SPX now at 1343.39, broke thru the February high close, not yet the HOD at 1344.  This will serve as drama for today but the high percentage thought points to a close at the 1340 gap, perfectly setting up tomorrow for Chairman Bernanke's moment in the sun.