Keystone's Midday Market Action 11-1-11

Wild start to the month today.  The Nasdaq percentage down and S&P percentage down are lining out together now at -2.1%, thus the markets are stumbling along sideways.  If the Nasdaq strengthens in relation to the S&P, then the broad markets will move back up.  If the Nasdaq worsens in relation to the S&P, it should drag the overall broad markets lower.

Continue to watch the four key sectors and critical levels for each as identified by Keystone's algo; XLF 12.95; RTH 107.25; SOX 371.50; and UTIL 439.  The financials appear most vulnerable, now printing 13.04 as compared to the 12.95, only nine pennies from failure which would also drag the broad markets lower.

For the bulls to resume the rally fun, copper, JJC, needs to recover from the China PMI slap down overnight, and regain the 46.50 level. Now at 45.36, that requires over a point move and appears formidable considering the lower growth projections now apparent from the PMI number. Also, for bulls to resume the fun, they would need the VIX to drop under 30 and at 35 last print, this is a ways away. Thus, the market bears are flexing their muscles today. Use the above guidelines to forecast broad market direction.  Last check, the Nasdaq is down 2.14% and the S&P is down 2.18%, let's call that even-steven, so the broad markets continue to move along sideways. Last check, XLF is 13.02, watch this closely.

Note Added 11/1/11 at 11:33 AM:  Watch the XLF, it may be cracking here, 12.98.....12.97....if 12.94 fails, all Hades will break loose..............

Note Added 11/1/11 at 11:44 AM: Broad markets dropping but the four sectors above are still holding.  XLF now 12.97........it remains safe by three pennies.  If the XLF does not crack and fail the 12.94 level, then this market selling over the last few minutes will subside again and markets will recover. If XLF fails 12.94, the broad market downside will accelerate.  XLF now back up to 12.99.......keep watching, the first test down to 12.94 did not punch thru, wait to see if there is another go at it.

Note Added 11/1/11 at 11:48 AM:  There she goes.......XLF 12.94.....whoa, recovery back to 12.96.........12.97.....the bulls are trying to hold back a collapse with all their might.........

Note Added 11/1/11 at Noon:  The XLF is putting up a fight, hanging on to 12.94 currently.......note the Nasdaq pecentage is now down 2.9% versus 2.8% for the S&P, thus the move down is developing street cred.  XLF is failing, 12.94.......12.93.......the XLF is now determining the fate of the markets today..........

Note Added 11/1/11 at 12:04 PM: XLF failed.........12.90...........12.92......21.91........see if XLF holds under 12.93 for the next seven to ten minutes, if so, markets will continue to sell off substantially taking the next leg down.

Note Added 11.1.11 at 12:07 PM: Stick save. XLF now 12.97. Broad markets will recover again and there they go, spoo's up about 3 or 4 handles.  The XLF 12.93-12.94 level is holding the fate of the markets in its hands. At 12.97 now, so the bulls cheated the devil once again. Keep watching.

Note Added 11/1/11 at 12:57 PM:  Here we go again.  XLF now printing 12.94.......12.93 is key, see if the market bears can push it down thru this time and make it stay. Now 12.93..........

Note Added 11/1/11 at 1 PM:  Bingo. XLF 12.92. Now 12.91. If this holds, the broad market selling will accelerate.

Note Added 11/1/11 at 1:07 PM: Stick save again. XLF 12.93 is the level to watch. A move below will usher in large block selling.  The market bulls recovered again with XLF now printing 12.94. Can the bulls maintain XLF above 12.93? The broad markets are watching...........

Note Added 11/1/11 at 4:10 PM:  XLF failure at 3:46 PM that helped push markets lower into the close.  At the final print, XLF closes exactly on top of 12.93.  How does Keystone always know these numbers before they happen? For the Wednesday session, XLF will provide an immdiate clue on market direction. If XLF rebounds above 12.93 tomorrow, then the broad markets will be buoyant. If XLF drops lower under 12.93, the market selling will continue.

Note Added 11/1/11 at 5:02 PM:  The 'final-final' settlement of XLF now shows a 12.86 print. Same game plan for tomorrow. The market bulls need to see XLF back above 12.93, if not, the bulls got nothing and the bears will continue with the market weakness.