Keystone's Midday Market Action 1/23/12

Fascinating markets these days, floating up on low volume and hope.  Bad news is being ignored and good news rewarded.  Shorts have covered, again and again, as the rally from late November reaches a creshendo. The resiliency in the bulls is quite remarkable.  Also the change of Keystone's secular signals, such as the 12-month MA and 40-week MA crosses, from a secular bear for five months to a secular bull market now. Caution is warranted, however, since the bullishness has reached lofty heights.

The CPC put/call is printing numbers in the 0.7's consistent with where broad market tops occur.  Keystone's SPX:VIX ratio has now punched above 68 so this triggers an alert for a large sell off coming soon.  Continue to watch the SPX:VIX ratio, now printing 69.85, so the bulls are comfortably two points above danger.

Continue watching the CRB 311.50 level since this will determine broad market direction. The CRB provided the recovery in the futures a couple hours ago and are now providing a further boost. The bulls pushed the SPX up thru Friday's close and HOD at 1315.38, that is all it needed, so the indexes popped a few more points.  The SPX is fighting thru the 1314-1318 gauntlet and with the price now approaching 1319, is showing bullish strength.  The utiltities are up today as well which is a big feather in the bulls cap.

Use SPX:VIX 68 and CRB 311.50 as market directional signals today. The Nasdaq is up 0.39% while the SPX is up 0.38% so not much leadership in place by the Nasdaq. This may limit the upside move.  Watch the Nasdaq and SPX relationship for broad market direction as well.

Note Added 1/23/12 at 10:36 AM: Oil price up almost two bucks. Oil direction = stocks direction.  The CRB above 311.50 will provide continual broad market support.  Asset relationship = euro up = dollar down = commodities up = gold up = oil up = equities up = treasury price down yield up; nothing has changed, it remains the same asset relationship in place, and visa versa of course, should the market mood sour. SPX:VIX ratio is 70.36, two and one-half points above danger. The utilties, UTIL, are printing 450.53, well above the 439 level that is extremely critical this week.  The bulls are staying above CRB 311.50, and SPX:VIX 68, so the wine is flowing like water and the bull party continues along. Greece, schmeese, traders already forgot about the ongoing debt talks, instead drunk on the siren song of the bullish markets.

Note Added 1/23/12 at 11:17 AM: Markets drift lower but the CRB remains above 311.50 and the SPX:VIX remains above 68.  Interestingly, the Nasdaq is now leading the downside move, albeit slightly. SPX 1315.30 is important. The market bears need the dollar to strengthen to help smack the CRB down, otherwise, the bulls motor along without a worry.

Note Added 1/23/12 at 11:59 AM: The SPX 1314-1318 resistance cluster put up a fight after all, the SPX now under the starting day excitement at 1315.30 printing 1313.56.  Retail is weak all morning. Keystone is looking for this nut to crack for a couple weeks now.  UTIL is leaking lower but still positive, now at 449 ten points above the danger level.  Nasdaq is leading the SPX lower which is a feather in the bears cap.  SPX:VIX dropping towards 68 but remaining above at 68.74.  Bears need another 74 cents.  CRB 311.50 is key.

Note Added 1/23/12 at 12:06 PM: The SPX:VIX ratio is drifting lower towards the critical 68 level............68.08.......bears are making a push......

Note Added 1/23/12 at 12:09 PM: Bingo.  SPX:VIX ratio failure at 68.  Broad markets should experience a large sell off today--as long as the ratio stays under 68. See if it holds.

Note Added 1/23/12 at 12:12 PM: To start today, SPX 1309 is the key level the market bears must punch down thru, if so, it will usher in accelerated downside with large block sellers pushing the broad indexes lower quickly.

Note Added 1/23/12 at 12:27 PM: High drama occurring, the SPX:VIX ratio regains 68, now back kissing that 68 level, printing 68.17, so see if this is a back test and failure, or if the bulls recover today.  The direction of the markets are being determined as this is typed.  SPX:VIX above 68 and bulls win, below 68 and bears win.

Note Added 1/23/12 at 9:00 PM: The drama at lunch time fizzled out.  If watching the SPX:VIX, you saw the ratio move up, and up, and up, the fix was in, the bulls were in clover.  The SPX:VIX ratio closed at 70.49 well above the critical 68 level.  If the ratio stays above 68 the bulls are fine.  When the ratio loses 68, the markets will experience a large sell off.  Once the CRB turned bullish today that made the bear's road hard to hoe.  The dollar weakness, euro strength, provides the bull fuel.  For Tuesday, CRB 310.40 is important, and bulls will be partying without a care if commmodities stay above this level.