Keystone's Evening Nightcap 10-26-11

The VIX fell and dropped under the 30 level during the last one-half hour of trading today providing bull fuel. For Thursday, watch VIX 29.90 as the opening bell rings. If the VIX stays under, as it is now albeit by only four pennies at 29.86, then the broad markets will remain buoyant and open to more upside. If the VIX moves above 29.90 then the market bears will sell the markets.

Continue to watch the four sectors that are providing the support for the bull rally; UTIL 432, SOX 367.75, RTH 106.75 and XLF 12.75. All prices remain above these levels so the market bulls enjoy buoyancy each day. The market bears got nothing unless they can move at least one of these sectors under the values shown.  Even if the indexes sell off large, if one of the four do not cooperate with bears, then the bears have nothing, and markets will recover.

For the SPX, starting at 1242, market bulls need to get up and over 1246, if so, the SPX will be on its way to 1252 in short order. The bears need to push the SPX over 20 points lower to touch the 1220 handle, if so, the bears will be selling the markets much lower.  Should this happen, watch the four sectors above to see if any fail, if so, the bears have legs, if not, the bears got nothing.  A move thru the SPX 1222-1244 range is sideways action.

GDP and Jobless Claims get the action started at 8:30 AM. Pending Home Sales at 10 AM. Natty Inventories 10:30 AM. Kansas City Fed Mfg Index 11 AM. 7-Year Note Auction 1 PM. Steady excitement all day long with continued Euro news, plus more earnings releases with notables such as MO, CELG, ERTS and PG. The VIX at the open, in relation to 29.90, will immediately tell you the broad market direction.