Keystone's Market Action 9-19-11

With about 40 minutes remaining in the trading day let's take a look. Keystone's SPX:VIX ratio dropped under 35 at the opening bell indicating that a large down day was on tap for the indexes today. So the market bears ran as the futures were indicating they would. Around 11:30 AM the ratio regained the 35 level indicating that the market bulls were regaining control but by 12:15 PM the ratio dropped under 35 again indicating further downside for the broad markets and a weak day ahead. But, at 2:13 PM, the ratio came back above 35 again indicating that the selling was moderating today. At 3:11 PM, only 13 minutes ago, the ratio was at 35.2-ish, now it is at 36.5-ish, a big jump.  Market bulls showing that, despite the weakness today, they are not ready to relinquish control of the markets.

The semi's remain somewhat buoyant as expected, above Keystone's algo's number of interest, but interestingly came down to within two points of possible failure. The SOX printed a LOD of 371 and if the 369 was taken out, the markets would have been in trouble, but, the SOX is now printing 379 with no worries.  Retail hung in there today as well.  The RTH in now pushing 108 handily above the critical 104.6-ish area that will signal trouble for the broad markets.  Utes, UTIL, are easily maintaining height above its danger level for this week at 424-ish, so none of these three sectors, that provided the strength for the up move last week, gave any ground today; they all remain bullish.

Thus, with the SPX:VIX ratio at 36.60 now, over a point and a half above 35, and the utes, socks, and retail hanging in there fine all day long, the selling event today appears short-lived, at least for now. The 2 o'clock hour was key. Once Keystone's ratio moved back above 35, with the three sectors remaining bullish, that was the tell that the markets would recover today. Once the upside started, the short covering helps spike it upwards. SPX is now printing between the S/R at 1204 and 1209-1210.