Keystone's Evening Nightcap 1/24/12

The SPX lost the 1310 level at the opening bell today and dropped immediately down to 1306 but the rest of the day climbed steadily higher.  The drama today, and again tomorrow, centers around the SPX:VIX ratio 68 level.  The ratio closed at 69.52 today so the market bulls are favored.  Market bears need the ratio to drop under 68 again to signal a large down day on tap. AAPL earnings hit a homerun tonight so that should buoy markets tomorrow. Technology remained strong today so the markets could not develop any downside momo.  The commodities, CRB, closed at 314.69, well above Keystone's algorithm's number of interest at 310.40. The bulls seem to have everything going there way.

The 8 MA remains under the 34 MA for the SPX 30-minute chart which is a bearish signal. The utilities remained weak today and UTIL closed with a 446 handle, inching ever closer to the danger level at 439. For the SPX for Wednesday, simply watch 1316 and 1306.  If the bulls touch 1316, they win, the upside will accelerate strongly, the SPX moving back towards 1322 and 1326.  If 1306 is lost, the bears win, and the downside will accelerate strongly, 1300 should test and fail. A move thru SPX 1307-1313 is sideways action.

Congress returned to Washington, D.C., this week as the State of the Union speech occurs. The political machinations will cast a bearish pall over markets.  It was interesting to note the weaknes in the markets on Monday morning moving opposite of the OpEx Friday action, as seasonality dictated. The new moon on Monday also ushered in some market weakness. Although sometimes quirky, tracing seasonality factors are what professional traders do, it simply provides another advantage over the lesser experienced traders.

The FOMC meeting began today.  Tomorrow Chairman Bernanke releases a couple of new rate charts that graphically depict the rate hike information at 12:30 PM.  A press conference follows in the 2 PM hour--Keystone calls it the 'desk' conference.  Thus, look for these times as market pivot points.  The Davos, Switzerland, World Economic Forum meeting continues with lots of winter fun on tap. Europe debt crisis, who cares, why there's fresh powder out there man, er, dude! Housing data hits at 10 AM, Oil Inventories at 10:30 AM and the 5-Year Note Auction at 11:30 AM. All are potential market pivot points so tomorrow may be a wild ride.

The earnings parade continues with noteables such as ABT, ATI, BA, COP, DAL, ETFC, EXC, GD, HES, HCBK, MUR, NFLX, OXY, PX, QTM, SNDK, SO, STJ, SWK, SWFT, SYMC, VAR, WLP and XRX reporting.  Thus, lots of tech.  A little for everyone, defense, banks, oil companies, trucking, healthcare, quite a smorgasbord.  EXC and SO require attention due their impact on the utilities sector as discussed above.

The recent broad market rally is truly remarkable. It is the Energizer Bunny, chugging upwards day after day undaunted. There are some chinks in the armour appearing but even today, when Keystone's SPX:VIX ratio failed at 68, the bulls wrestled back control, moving the ratio back above 68 to save the broad markets from falling. Keep it simple for Wednesday by watching SPX:VIX 68, UTIL 439, CRB 310.40 and SPX 1316/1306 to determine broad market direction.