Keystone's Market Action 8-1-11

Wild day on Wall Street.  Large upside move, and then collapse. The 1304.16 level was grabbed for a couple minutes but price could not sustain that level so price trailed off.  On the bear side, SPX 1282 handle was needed to start the accelerated downside and since the bulls could not get it done above, the bears did get it done below, losing 1282 so several additional handles gave way in short order.

The MA's collapsed like domino's as well.  SPX is under the 20, 50, 150 and 200 day MA's. SPX is under the 20 week MA.  50 week MA is 1262.79.  The SPX 10 month MA gave way and the 12 month MA at 1275.11 is the only thing holding back the markets from falling into a secular bear market.  The MA is sloped steeply upward and with price falling big today, the two met in close order.  A few minutes ago, SPX dipped under 1275.11 but quickly bounced.

All things considered, the shorter term stuff, NYAD, NYHL, NYMO, CPC, VIX are all agreeable to a move up in the indexes.  The utilities are also only down 0.1 to 0.2%, a paltry amount compared to the worry seen in the broad markets today. The semiconductor and financial charts are setting up with positive divergence, this is bullish. Thus, as long as the SPX 12 month MA holds at 1275, this selling event is probably short-lived. The gap at 1280-1281 was now filled.

The ISM data slapped the markets silly.  In the morning commentary, it was pointed out that the energy trade was not placed in the last few days of the month into the ISM number, so something was up.  Perhaps traders had a little birdie visit their right shoulder in recent days since many knew to avoid the energy sector into this ISM number this time around. Further energy sector weakness would now be anticipated.

10-year yield has fallen a few basis points today.  Keystone has been forecasting this continual deflationary move.  The 2-10 spread now in the low 240's, well under 255 indicating further trouble for banks in the intermediate and long terms.

Watch Keystone's secular signal today that uses the SPX 12 month MA; this is a big deal.  If it fails the downside in the broad markets is real and sustainable, but considering the aruguments above, this first test of the 12 month MA today at 1275 looks like it wants to hold. 

Last print:
SPX = 1277.03
12 month MA = 1275.05