Keystone's Market Action 9-9-11

President Obama stepped up to the plate last night to try and rally the team, but the futures were down large before the open and the markets languish after the opening bell, thus, 'mighty Casey has struck out'.  The markets are rattled by the resignation of the ECB's Juergen Stark, a German anti-inflation hawk.  Stark cites 'personal reasons', that is a typical excuse as well as 'to spend time with the family'. The European markets are hit hard, banks falling and U.S. indexes selling off on the news. The markets remain at the mercy of Euro news with the President's speech looking like a footnote already.

Let's stick to the technicals and avoid this daily media circus. The retail and commodities sectors were the key to the market bulls regaining control but that was never in the cards, at least so far today.  The RTH has a 102 handle favoring the bears, bulls need the RTH to move back above 103.22 to mount a recovery. The euro is crumbling upon the collapse of the descending triangle (see previous chart posted), thus, the dollar moves opposite the euro, and the dollar index is now shooting towards 77. The commodites and markets move with the euro, so there is no surprise to see the weakness. Be aware of the asset relationship; euro down=dollar up=commodties down=equities down, and visa versa, the opposite will occur if the bulls decide to run. The bulls needed the CRB to move up and over 340.44 today but with a 335 handle, and weaker dollar, this outcome is not likely.

Keystone's SPX:VIX ratio sits at 32.32 now, below 35 so the bears are in charge of the markets. Bulls will not run large until the rato moves back above 35, but keep watching this as the day proceeds. The SPX tumbled after the 1183 level gave way, as projected in last nights nightcap missive.  The low today is 1165.34 so watch that closely to see if it holds today, or not.   As long as 1155 holds, the bulls have no major worries, the market are simply churning lately with large ups and down (due to high volatility) but neither bull or bear is gaining any significant ground. To use a football metaphor since the season is underway, think of it as punting the ball back and forth.  Watch 1155 for the bears and 1200 for the bulls. SPX printing 1173 currently which is the 50-yard line.

Major SPX support and resistance to watch includes 1204, 1197, 1193, 1181, 1178, 1173 (testing now), and 1155.  On Friday's, market buoyancy typically appears after sandwich time since shorts pare back positions in front of the weekend. This is due to risk assessment dictating that typically positive news would occur on the weekend, and thus, the unlimited downside exposure must be reduced. If markets are weak on Monday, traders simply step in again to rebuild the shorts. This is tricky with the G-7 meeting this weekend, however.

Thus, despite the negative feel today, the indexes may trail along sideways from here for the most part. Use the major support levels as a guide; Keystone can post the more detailed support and reisistance after this commentary. The fight appears to be for the 1173 S/R currently.