Keystone's Market Action 9-2-11

Even though the markets are bright red, the bark was worse than the bite, at least so far today. The SPX came down to test the support levels expected; 1181, 1179, and 1177--where the bounce occurred about an hour after the open.  A move down to 1173 was not even attempted so that gives the market bulls something to hang their hat on. Price should continue testing the support/resistance levels of 1188, 1184, 1183, 1181 and 1179 as the day moves along.

Further, the utes, UTIL, never even came close to the 50 week MA below and, in fact, bottomed at 10 AM, leading the broad markets back off their bottom. UTIL has moved up ever since today and is now back to a 429 handle, far from the 415 danger area that represents a trap door for equities. Thus, markets are churning digesting today's negativity.

The commodities, CRB, fell to 336 but rebounded nicely back to the 339-340 area. The dollar is higher, euro lower, perhaps the descending triangle on the $XEU will play out, 142 and 141 levels extremely important as they represent the base support of the triangle. Latest print is 142.05, if the 142 handle is lost it forecasts further euro weakness, and the U.S. equities will move with the euro direction (down), opposite of the dollar direction (up).

Today gold takes a large leap up, 50 bucks, as the dollar gains strength.  Since the CME has been quiet on gold margin hikes again, the euro fears can affect the gold market more directly, hence the rise.  The first gold margin raise was 8/10/11, a Wednesday, followed by the second raise on 8/24/11, another Wednesday. Keep an eye out for a potential gold margin raise, even this afternoon, and more importantly thru next Wednesday.  The CME is not following the same game plan as they did when they orchestarted the silver slap down in April so it is difficult to gauge direction. Next Wednesday will be two weeks from the 8/24/11 hike, thus, if the CME does not act again by the middle of next week, their game plan has changed and gold may rocket upwards substantially.  At this writing, however, further gold margin raises are expected which will result in weakness in gold price rather than strength.  Gold price depends solely on the Euro situation and the CME gold margin hikes currently so the news will drive price.

Perhaps some of the seasonal buoyancy is trickling into equites as the day plays out.  By no means is now the time to jump in long to be a hero since some weakness may languish into Tuesday's trading, but, the selling side was much less spectacular than expected today.  Traders will start to sneak out the back door now, so volume should trail off as preparations are made for the weekend barbeque.

$XEU, the euro, just lost the 142 handle. Note how equities and the euro move in the same direction.