Keystone's Midday Market Action 11-10-11

Markets jumped today as the Italy 10-year bond yield moved back below 7%. Typically, market weakness would be expected for a Thursday morning folowing such a dramatic sell off on Wednesday, but the CPC, NYAD and TRIN values discussed in last night's missive were very powerful to help bounce indexes.

The two key sectors currently are financials, XLF, and semi's, SOX. Since the bulls came to play today from the get-go, futures were strongly positive since the early morning hours, there was no need to watch the semi's as closely since more than likely the 374.65 level would not fail, and it has not. SOX is now printing 378.26 three or four points above the danger level for the semi's which would ripple thru to the broad markets.  Thus, financials are the main focus and the XLF regained the 13.00 level as soon as the opening bell rang, verifying the bull move today and showing that the market bears gave up ground that they had gained yesterday. But hold on, sonny. As this is typed, XLF fell back down to 13.00 printing now. And now a print of 12.99, the bulls are slipping again. Watch this 13 level since it will tell you broad market direction today.

SPX:VIX ratio popped back above 35 so that signals that the market bulls will have a great day. If the markets weaken as the day progresses, watch the ratio closely. Above 35 and the bulls rule, below 35 and the market bears will be selling the indexes.  NYAD popped today to recover from the -2500 print yesterday, already printing over +2100 today. This market rally should be viewed as a simple relief rally for now. The S&P is up 0.7% while the Nasdaq is up only 0.2% (due to lower demand on AAPL products) thus, the upside has limited potential. XLF, the financials, will tell the story today and at this print, a 12.97, is showing that they are not in as good a mood as the broad indexes. Weak financials will weaken the broad markets.

Note Added 11/10/11 at 10:10 AM: High drama in the financials today as XLF walks the tightrope across the 13 level.  The 13.00 level is identified by Keystone's algorithm; above and the markets bulls will run the indexes higher, and below, the market bears will run the markets lower. At the bell, XLF popped above 13 favoring bulls. At 9:51 AM, XLF drops under 13 favoring market bears.  Use the 12.99-13.00 level as a guide today; it will tell you the broad market direction. SPX:VIX is now 36.35 only a point above the 35 level that will establish firm market selling again. XLF 13 and SPX:VIX 35 will tell market direction today. XLF now printing 12.93..........bears are pushing......

Note Added 11/10/11 at 10:35 AM:  See how XLF could not regain 13 and in fact is puking now dropping lower and lower. Note the affect on the broad markets as banks stumble today. Whoa....SPX:VIX at 35 now.......if bulls cannot hold this level stronger selling will occur.  Holy smokes.  The semiconductors choked after all. SOX collapsing, down thru 374.65, this is driving broad markets lower as well. Bears are pushing now. Of interest today is how the SPX did come down to make a lower low, by pennies, as compared to yesterday, verifying the projection of lower market numbers this morning, based on the Wednesday selloff, afterall.  Current prints....XLF 12.93 bearish.....SOX 374.12 bearish......SPX:VIX 35.17 a smidge bullish.....watch to see if SPX:VIX fails 35, or not.

Note Added 11/10/11 at 10:43 AM: SOX trying to recover.  Gold taking the pipe.  All that matters today is SOX 374.65, XLF 13.00 and SPX:VIX 35.00.

Note Added 11/10/11 at 11:00 AM:  SOX and XLF are market bearish as SPX:VIX fights over 35.  If the SPX:VIX ratio loses 35, then watch SPX 1227 level.  If SPX starts to print 1226 handles, the broad markets will drop further in short order. If SPX:VIX holds 35 support, then the bulls can struggle out a sideways market move.

Note Added 11/10/11 at 11:15 AM: High drama continues. The semi's recovered, SOX moved back above 374.65, so the bulls were all a flutter again.  SPX:VIX at 35.91 is now a point above 35 providing bulls some relief from danger. Continue watching SOX, XLF and SPX:VIX today and if the bears push hard enough, see if SPX 1227 fails which would usher in strong selling. If SOX and SPX:VIX remain buoyant above their values shown, then the markets will squib along sideways today.

Note Added 11/10/11 at 5:55 PM: SOX and SPX:VIX remained buoyant so markets simply rambled along sideways the remainder of the session. Financials made an attempt to pull the broad markets higher around 1 PM but then petered out. SOX, XLF and SPX:VIX are key for tomorrow.