Keystone's Evening Nightcap 8-9-11

We got an initial look at a snap back rally today. The utilities should be one of the first sectors to recover if the rally is real and UTIL did gain 13 points today.  Watch the 50 week MA at 413.53; UTIL is now 404.59, nine points lower. If UTIL can regain the 50 week MA then that will show that the bulls have some strength for this upside market move, otherwise, they do not.

Charts for NYMO, NYHL, CPC are all agreeable to a snap back rally.  The SPX:VIX ratio closed at 33.44, remaining under 35.  A move over 35 with the ratio will signal a triple digit up day for the Dow Industrials and confirm that the bulls want to run. The bears are in control as long as the ratio stays under 35.  SPXA150R remains under 15 closing at 11.20, this needs to move above 15 to verify the rally.

The Fed announcement occurred this afternoon and the market showed volatile swings in both directions before deciding to run up into the close.  The Fed projects low rates two years into the future. Gold rocketed higher only to sell off fifty bucks in the final minutes.  The markets are far from settled, trading continues to be reactionary off news bites.

With the wild jump in gold the last couple days, caution is warranted since the raise in silver margin requirements that caused the 35% drop in silver in late April occurred directly after the Fed meeting on 4/27/11.  The raise in margin requirements was announced the next day, a Thursday, effective from Friday night on.  Thus, the big sell off in silver occurred the following week in late April early May.  Since the Fed had their meeting today, watch carefully for potential margin requirement announcements Wednesday or Thursday, at around 2 or 3 PM EST in the afternoon, targeting gold. Simply stay on your toes.

DIS earnings did not impress anyone since it is falling a percent after hours. A half buck move down for this one tomorrow would place 4 points in the red column for the Dow Industrials.

Keystone's Inflation Deflation Indicator shows that the economy is now in disinflation. Bernanke will probably not act with QE3 until we fall further into deflation as we did in August 2010.

For the SPX in Wednesday's session, the market bulls have the ball so all they need is to keep the futures green and they can accelerate the buying after the opening bell tomorrow. The volatilty will continue. The market bears need to push lower down to the 1101 low print and if they touch it, they can get an entire new leg of accelerated selling to occur sub 1100.

Ceridian-UCLA PCI data will provide insight into diesel fuel consumption at 9 AM, oil inventories are at 10:30 AM. 10-year note auction at 1 PM, this will receive lots of attention. CSCO and John Chambers outlook will be closely watched as well.