Keystone's Midday Market Action 10-13-11

Watch UTIL 439, XLF 12.60, VIX 28.75, SOX 361.50 and RTH 104.70. The semiconductors, SOX, and retail, RTH, are the main bullish market drivers and they remain bull-friendly above the values shown. Financials joined the bullish camp yesterday but today are back with the bears. XLF fell under 12.60 at the opening bell and stays under, thus, the financials are the main driver for lower markets today. Utes, UTIL, remain under 439 so this remains firmly bear-friendly and VIX remains above 29 also bear-friendly.

The SPX came down to test that 1196 pointed out in this morning's missive, but bounced on the first try.  At this writing, however, there she goes, SPX fell under 1196 so several more downside handles should occur. XLF now at 12.40.  JPM is getting hit 5% as a result of their earnings. Utilities, UTIL, now with a 430 handle, is almost ten points under the critical 439 number thus favoring market bears strongly. Since financials are weak today causing the broad market slide along with weaker utilities, watch the semiconductors and retail for further signs of weakness. If the SOX 361.50 and RTH 104.70 levels hold, then the market selling will not have legs. If either the SOX or RTH fail, then the market downside will accelerate.

Note Added 10/13/11 at 1:40 PM EST: Time for an update and then a trip outside to enjoy the scenic Autumn foilage. No change to the sectors discussed above. Note, however, that the financials, XLF, now at 12.41, are trying to mount a comeback today.  If the market bulls drive the XLF above 12.55-12.60 then the broad markets will be back in rally mode. SPX:VIX ratio is above 35 favoring market bulls, SPXA150R is over 25 favoring bulls, BPSPX favors bulls, and the Nasdaq is up 0.2% while the SPX is down 0.6% which favors the broad market bulls today since the Nasdaq always leads. Thus, the market bulls are maintaining their strength despite the weak markets today.  If the XLF moves above 12.55-12.60 then the booze will flow and the bull party will swing into high gear again.