Keystone's Midday Market Action 10-31-11

This week is expected to make epic trading history, with the earnings, economic data and four key events (FOMC, ECB, G20 and Jobs Report) occurring. So it was fitting that the BOJ would conduct currency intervention overnight to kick the week off to a wacky start. The dollar is buoyant, helped in part by the dollar/yen buoyancy caused by the intervention. The higher dollar beats down copper and commodities, gold, silver and so forth, the opposite of the trade we watched over the last month.

In play; euro down=dollar up=dollar/yen up=commodities down=equities down=gold down=treasury price up yield down. The visa versa has worked over the last month.

For the selling today, the Nasdaq is down a percent while the S&P is down more, off 1.3%. Since the Nasdaq is always the leader, this hints that the down move will be muted today. Major sectors such as utilities, semiconductor's, retail and financials remain elevated. Today is the month-end prints at 4 PM so the SPX 12-month MA is in full play.  The current print for the 12-month MA is 1276.61 and the current SPX print is 1270.11, so the secular market bears remain in favor for the weeks and months ahead, but, check this at 4 PM today.

The energy sector, XLE, is down 3% today, receiving a hard slap down. Many traders play the long energy/ISM trade at the end of the month into the ISM number on the first day of the month, but with the weakness this morning, many must be abandoning ship. Typically, you play this trade long at the end of the month and sell on the ISM news tomorrow.

For today, JJC (copper) will tell you a lot about broad market direction. Watch JJC 46.75, if above, the market bulls are ready to drive the broad markets higher again, if JJC remains below, now only below by pennies, then the market bears remain in control today.

SPX support and resistance to watch is 1293, 1291, 1289, 1287, 1286, 1285, 1282, 1280, 1278, 1277 (12 month MA is 1276.61), 1274 (200 day MA is 1274.11), 1272, 1270 (50 week MA is 1269.82), 1268, 1267, 1260, 1259, 1258 (starting year number 1257.64), 1257.

Note Added 10/31/11 at 11:30 AM:  JJC, a proxy for copper, moved above the 46.75 level that Keystone's algo is watching. If this is sustained for ten minutes or longer, the broad markets should elevate, and if so, watch SPX 1277 like a hawk.

Note Added 10/31/11 at 11:47 AM:  JJC now printing 46.92 so the market bulls are going to try to run the indexes higher.

Note Added 10/31/11 at 7:48 PM:  There were ebbs and flows but JJC closed in favor of the bulls at 46.90, ten cents above the now-critical number to watch, 46.80. VIX also remains favorable to bulls since it closed at 29.96, still four pennies under 30. If VIX moves over 30, the markets should sell off substantially, if VIX stays under 30 and JJC over 46.80, the bulls are fine.  The month-end prints occurred today and the SPX closed at 1253 well below the 12-month MA number of 1275. Thus, the market bears can kick back this evening and put their feet up, since they remain in control of the broad markets on a secular basis, for the weeks and months ahead. JJC 46.80 and VIX 30.00 will dictate broad market direction tomorrow.