Keystone's Midday Market Action 10-4-11

The utilities, UTIL, failed the 50 week MA at 418 so the markets are in big trouble now, and will remain that way unless they can regain 418. The Nasdaq is down 0.75% and the S&P is down 1.5% currently, which is actually not agreeable to a big slide. If the Nasdaq was down more that would indicate a bigger slide on tap.

SPX dropped into a bear market now down over 20% off the late April top.  The dollar moves up to 80.  Commodities continue their weakness. Keystone's Inflation Deflation Indicator now at 2.84 indicating that we are in Deflation now.

Indexes are recovering at this writing; the Nasdaq is not leading lower which makes the early weak action suspect.  If UTIL remains under 418, however, that will overrule all and cause the broad markets to continue lower. Keep watching UTIL 418 and the percentage relationship of the Nasdaq versus the S&P.

Note how the SPX 1076-1079 support cluster held as steady support--so far.

Chairman Bernanke is beginning his speech now broadcasted on the business channels.

Note Added 10/4/11 at 11:10 AM EST:  Now that some of the smoke has cleared, and Bernanke continues his testimony, the broad markets have bounced off the lows today, but the utilities, UTIL, remains under the 50 week MA which is 417.74. The Nasdaq stronger than the S&P at the open was a hint that the down side was going to be limited. Once the utes failed minutes after the open signaling ugliness coming for the indexes, the SPX fell from 1089 to a 1075, 14 handles. Even though the markets are showing some buoyancy, pay attention to UTIL 417.74. Last print for UTIL is 413.96, thus, the market bulls are not out of the woods yet. Markets remain open to a major whoosh downwards unless UTIL regains 417.74.

Note Added 10/4/11 at 3:48 PM EST:  UTIL regained the 50 week MA at 3:43 PM, it will be interesting to see if it holds at the close. If UTIL can close above 417.83, the market bulls at least pull the marets back from the brink.  If UTIL remains between 424 and 418, however, weakness will continue for the indexes moving forward. If UTIL moves above 424, then the bulls can sigh relief. Last print for UTIL is 420.62.

Note Added 10/4/11 at 4:05 PM EST:  UTIL closes at 422.  This is between 424 and 418 so the bulls cannot pop the champagne corks and celebrate the late day market rally until they see UTIL regain 424. This will be tomorrow's drama.