Keystone's Market Action 8-26-11

The first hour of trading was a wild ride as expected. GDP hangs on to a '1' handle, 1.0%, this only serves as fodder for those looking for economic data manipulation. Psychologically, 1.0% is much better than 0.9% even though the difference is meaningless. Human psychology plays a large part in pricing. When you are at WMT today or any other store, do you now realize why a price is at the 99 cent level rather than the whole number letter?  For example, asking 7.99 for an item rather than 8.00 even? Of course it's human psychology. More sales occur at 7.99 since the 7 handle is more attractive than an 8 handle, resulting in higher overall revenue, making the lower one penny difference inconsequential. Conversely, a GDP number of 1.0 has the 'feeling' of a much higher number than 0.9% even though the 0.1% difference between the two is trivial.

The markets tumbled lower after the opening bell into the 10 AM pivot area. Once the SPX 1155.47 level was lost, a flush was expected, and occurred. Chairman Bernanke did not deliver a pony but, in fairness, he never promised a pony. Consumer Sentiment posted another low number basically in line reflecting the public's uneasiness. The markets dropped 10 spoo's at 10 AM reflecting market dissatisfaction with Bernanke's comments. Things were looking bleak but the indexes bottomed a few minutes later. The band-aid was pulled off quickly so the markets recovered in short order.

The Nasdaq went positive and its percentage gain is above the percentage gain of the SPX so more bullishness would be expected for the indexes in general, and has occurred thus far today.  The SPX regained 1155.47 at 10:44 AM so that served as an all clear signal for the bulls. Continue to watch 1155.47 for the remainder of the day. This serves as a bull-bear line as we move towards the weekend.

This week Keystone's critical UTIL 50 week MA 'trap door' signal took a back seat as the utes climbed healthily above. The 50 week MA is now at 414.55. Note that at 10:06 AM, the 50 week MA was pierced to the down side, but then quickly jumped back above the 50 week MA. Thus, without the UTIL 50 week MA trap door giving way today, the markets were fine and the bulls ran. Keep watching UTIL 414.55 for the remainder of the day.

The high drama today is subsiding, thoughts of a fun summer weekend now fill traders heads, volume is expected to trail off since now the priority is picking up charcoal and ligher fluid for the weekend barbeque. Watch SPX 1155.47 and UTIL 414.55 today, nothing else matters. If these levels of support hold today, the market bulls are fine. Remember, UTIL 414.55 represents a trap door for equities so if it does fail later today, the broad markets will go into free fall. At this juncture, this bearish outcome is not anticipated today.