Keystone's Midday Market Action 12/16/11

Markets pop at the start as the futures projected. The SPX broke up thru the 1220 resistance, now making a run at the coveted 1226. The SPX is up 0.79% and Nasdaq up 0.81% so the market upside has some slight upside strength. RTH remains above 109.40 favoring bulls.  XLF at 12.60 has a long way to go to 12.82 so this may mute the market upside today.

There you go.  SPX 1226 plus.  Yesterday the SPX tried to attain 1226 a couple times and received a spank down causing the markets to languish and drift lower all day long.  Today, the SPX punched up thru 1226 at the open. See if it holds, if so, more upside is expected as buyers enter the markets.

Note Added 12/16/11 at 9:45 AM: When a level breaks, typically give it 7 to 10 minutes to see if it sticks. SPX popped above 1226, formed an island, then after six minutes, bloop, island reversal occurs, dropping back under 1226 nullifying the market joy. The XLF is keeping the markets in check. Nasdaq is leading the SPX percentage-wise by a fair margin so another run up and over SPX 1226 would be anticipated.

Note Added 12/16/11 at 10:12 AM: SPX came back up and over 1226 unleashing strong buying. The Nasdaq has strong upside leadership so it is pouring booze into the market punch bowl. The XLF is moving upwards, now printing 12.69 with a HOD of 12.71, still short of the 12.82 which would initiate a broad market bullish orgy. If XLF cannot get over 12.82, SPX probably moves sideways thru the 1225 (the top rail of that 1210-1225 channel that was broken to the upside at the open) and 1235 (the bottom rail of the nine-day sideways channel thru 1235-1268) range. SPX 1235 never received a back kiss so that serves as an upside target.

Note Added 12/16/11 at 10:56 AM: Nasdaq continues to lead the upside so the bulls have some game today.  XLF is 12.67 under the 12.82 level so this caps the upside for the markets, however. The SPX 8 MA punched up thru the 34 MA for the 30-minute chart posted this morning; market bullish.

Note Added 12/16/11 at 12:15 PM: SPX price collapses back thru 1226 and returns to the 1210-1225 sideways channel.  The XLF not attaining 12.82 places a ceiling on the broad markets with no financial participation.  For the broad market down move currently, looking at the RTH, now at 110.65, well above 109.40 placing a floor in the broad markets due to a happy retail sector. Thus, the SPX meanders sideways with bulls continuing to be favored for today. Keystone's Inflation Deflation Indicator is now at 2.90 on the dot, only one hair away from signaling Deflation. For now, the U.S. economy remains in Disinflation.

Note Added 12/16/11 at 3:20 PM: NYSE volume is now crossing the 10-day average volume today. The Fitch downgrades in Europe, and dire warning, although placing France on credit watch negative without yet downgrading, forced the sellers into the markets.  This sets up an interesting dilemma for after the close today since many traders are thinking that S&P may downgrade France. SPX is moving across the tight range channel of 1216-1220 as discussed this morning. The indexes should slightly favor the bulls but the S&P France downgrade cloud hangs over the markets for this final 40 minutes.  RTH is well elevated at 110.51, market bullish.  XLF could not muster up the juice to get over 12.82 today, best it could do was 12.72, so the financials did not have the energy to elevate the broad markets. The S&P downgrade drama is effecting trading.

Note Added 12/16/11 at 3:27 PM: SPX 20-day MA is 1220.74 and the 50-day MA is 1228.74.  Current print 1218.30.

Note Added 12/16/11 at 3:38 PM: TRIN is 0.98 sitting on 1.00 not favoring bulls or bears today. VIX 24 handle is favorable to bulls considering the time spent above 30 August thru November. Utilities are remaining elevated which are favorable to having the indexes float back upwards in the days ahead. Big 4% recovery in copper today. CRB remains around 295, bearish and disinflationary.

Note Added 12/16/11 at 3:58 PM: SPX top of the 1216-1220 tight sideways channel is 1220.  The 20-day MA is 1220.84, see where price closes in relation to these two.

Note Added 12/16/11 at 4:15 PM: SPX closed at 1219.66 remaining tucked inside the tight 1216-1220 channel and a buck short of the 20-day MA.