Keystone's Midday Market Action 12/13/11

Markets popped at the open despite weaker than expected retail sales and Best Buy earnings.  Financials are creating the market buoyancy with the XLF above 12.82, but, XLF launched at the open and keeps trickling backwards towards a test of the 12.82. Nevertheless, even with financials in the bull camp, semiconductors and copper remain weak.  RTH is now in the mid 111's. Volatility continues to drop, VIX now with a 23 handle favoring the bulls.

Next market pivot point today is the 10-year action at 1 PM. Whoopsies daisies, XLF now at 12.82.....it's testing.......if XLF drops any lower, returning to the bear camp, the broad markets will noticeably sell off.

Note Added 12/13/11 at 10:57 AM: XLF failed at 10:47 AM but recovered five minutes later at 10:52 AM and is now printing 12.84, two pennies above danger for itself and for the broad markets. Thus, the market dip was temporary.  If XLF fails the 12.82 level again, the indexes will sell off.

Note Added 12/13/11 at 11:03 AM: XLF sitting on top of 12.82.  How does Keystone know these levels to watch? She's not tipping her hand, watch which way XLF moves off this 12.82, it will take the broad indexes with it.

Note Added 12/13/11 at 11:12 AM: XLF failed at 12.82 at 11:05 AM. The major indexes have now lost the days gains and are hovering at the flat line. RTH printed an 110 handle; retail sector is weakening. XLF now printing 12.80, if/when it heads lower the major indexes should turn red.

Note Added 12/13/11 at 11:41 AM: XLF recovered at 11:24 AM so the broad markets experience buoyancy again. XLF now printing 12.85 favoring the bull side again.

Note Added 12/13/11 at 12:47 PM: XLF is now testing 12.82 again. Thus, the soap opera continues as the markets head into the 10-year note auction results at 1 PM.

Note Added 12/13/11 at 1:30 PM: XLF continues to tease the 12.82 level.  Markets are idling until the Fed announcement within the hour. Traders are waiting to see to what extent, if any, that quantitative easing is mentioned in the wording of the text at 2:15 PM. Any mention of QE and markets will rally. If there is no mention of QE, markets will sell off. Thus, we wait.

Note Added 12/13/11 at 1:41 PM: XLF sitting on 12.82. Whichever way it goes, so goes the broads.

Note Added 12/13/11 at 2:16 PM: Fed announcement is a cookie-cutter release from last meeting with no surprises. No mention of QE--markets are drifting lower. XLF now under 12.82, see if this holds, if so, markets will weaken.

Note Added 12/13/11 at 2:19 PM: Hello. XLF 12.79...12.78. Financials have failed. Hang on.

Note Added 12/13/11 at 2:23 PM: XLF 12.75.  Dollar is above 80. Nasdaq is negative.  SPX is now flat on the day.

Note Added 12/13/11 at 2:35 PM: XLF 12.71.  SPX turns negative on the day. Retail weakness continues. RTH now printing 110.41, the lows of the day.

Note Added 12/13/11 at 2:50 PM: XLF 12.60, a complete collapse.  Watch RTH 109.40 level, now at 110.19.  The major indexes are all red now. Nasdaq is leading the downside which helps the bear case. Copper and PM's are down. Gold down 31.

Note Added 12/13/11 at 3:24 PM: XLF 12.60. SPX is now printing a 1228 handle.  The 1227.25 comes into play as mentioned in this mornings missive.  If 1227.25 is lost, the broad indexes are going to puke big into the close.  Gold down 33.

Note Added 12/13/11 at 3:26 PM: SPX punched down thru to 1227.08.  Now a bounce, rejected on the first try.  Watch 1227.25, it is for all the marbles today. If it is lost, it will be a blood bath. Gold down 36.

Note Added 12/13/11 at 3:29 PM: Hello.  SPX now printing a 1325 handle.  See if the SPX stays under 1227 for seven to ten minutes............RTH 109.81. Markets are deteriorating.

Note Added 12/13/11 at 3:34 PM: Keystone's algo is watching RTH 109.40. RTH now printing 109.55. If 15 more cents are lost, the broad markets will take another big leg down. Hang on.

Note Added 12/13/11 at 3:37 PM: SPX holding at the lows so the market weakness should continue into the close. RTH 109.57. Seventeen more cents and another leg down occurs.

Note Added 12/13/11 at 4:01 PM: XLF settling around 12.61, printing as low as 12.45. RTH held on without violating the 109.40 level, but a major cause of the broad market damage today was the drop in the retail sector, RTH was down 2.1% today. Rumor of pending S&P downgrade news helped accelerate the selling. The Nasdaq led the downside which provided street cred for the move lower.  Time to allow the smoke to clear.