Keystone's Midday Market Action 11-9-11

Futures indicated a lower open and the down side did not disappoint thus far. SPX tumbled lower but held 1242 critical support. 1240 and 1239 support levels were explored for a few minutes, but the 1242 level held overall. XLF 13.00 level is key, and now price is moving up, printing a 13.22, so the market bulls are fighting back.

On a technical basis, very simply for today, watch VIX 30.50 and XLF 13.00.

Currently, VIX is above 30.50 at 31.16 (market bearish) and XLF is above 13 at 13.20 (market bullish). Thus, if the market bulls can move VIX back under 30.50 the markets will recover nicely today to the upside.  Conversely, if the market bears can push XLF under 13, the down side flood gates will open and the indexes will tumble another leg lower.

Note Added 11/9/11 at 12:40 PM:  VIX at 31.90, comfortably above 30.50 so keep the feather in the bear's cap.  XLF at 13.15, 15 pennies above 13.00 keeping the market bears at bay and a feather in the bull's cap. Thus, status quo. One of these two will flinch and that will tell the broad market direction.

Note Added 11/9/11 at 3:58 PM:  XLF flinched and failed the 13 level at 2:04 PM ushering in the next leg down for the broad markets this afternoon.  The semi's are the next sector to watch. If SOX loses 374.65 level, then another major leg of selling will occur.

Note Added 11/9/11 at 4:03 PM:  Keystone's SPX:VIX Ratio Indicator failed 35 at 2:07 PM. This verified today's down move and now ushers in more sustained bearishness, as long as the ratio stays sub 35.  The semi's ruptured the 374.65 level during the last 15 minutes of trading but price kept bouncing back up. For now, the market bulls saved a drop towards SPX 1200 by stopping the slide in semiconductors in the final minutes.  Semi's are very important for tomorrow's trading.