Keystone's Evening Nightcap 11-22-11

The IMF announcement at noon time, just when the SPX was testing critical support levels at 1183 and 1181, bounced the euro sharply, dollar retreated sharply, equites bounced strongly recovering from losses earlier in the session. Volatility cooperated with the market bulls this afternoon staying under the VIX 32 level to allow market buoyancy. Note that the NYAD bounced from that low -2500 level today, just as Keystone discussed this morning, helping to create the intraday market buoyancy.

A merry-go-round of economic data will hit tomorrow at regular intervals, one data point slapping you and then another before you can recover from the first. At 8:30 AM, watch Durable Goods, Claims and Personal Income and Outlays. Consumer Sentiment may cause a market pivot around 10 AM. Natty and Oil Inventories will follow and also Kansas City Mfg Index at 11 AM.  DE earnings will help set the tone for the commodities sector, the CRB index becoming more and more important each day forward.

Volatility, VIX, will dictate broad market direction at the opening bell Wednesday. If VIX stays below 32.05, now at 31.97, then the market bulls will enjoy some buoyancy in the indexes into Turkey Day. If VIX jumps above 32.05 and heads higher, the broad markets will sell off and move lower. SPX:VIX favors bulls right now, at 37, but if the ratio drops under 35 tomorrow, a huge down day for the indexes will occur.  If the ratio stays above 35, the day will be somewhat calm before the turkey holiday.

SPX tested 1183 and 1181 today, critical support levels. If they give way, the markets will head significantly lower. Thus, to keep it simple, watch VIX 32.05, SPX 1181 and SPX:VIX 35. These three compadre's will dictate broad market direction.