Keystone's Midday Market Action 1/26/12

The markets launch out of the gate today; this is becoming a standard routine now.  The Dow, INDU, prints a HOD thus far at 12842, over the closing high from April, but not yet thru the intraday high of last year in early May. The SPX overtook 1328.30 immediately so this led the way to bullish fun and a thrust up and over 1333.   Referencing the SPX support and resistance, the 1329, 1331 and 1333 levels are extremely strong resistance levels. Price has used these levels as magnets in the past so the progress of the SPX, and thus the broad markets, can be measured as the SPX interplays among these levels.

Keystone's SPX:VIX ratio popped to 74 and is now printing 73.29.  The bulls remain in control of the equities markets as long as the ratio stays above 68. Bears do not have a chance unless they see sub 68. The bulls are holding all the cards with a weak dollar that causes the euro, copper, gold, commodities and equities to all move higher. SPX now continues to leak lower, rejected by the 1329, 1331 and 1331 resistance levels.

The SPX is up only 0.12% while the Nasdaq is up 0.27% so the tech strength continues to underpin the markets and provide that buoyant bull support. Looks like the bears may only be able to reverse this bullish market momo if bad news from Greece, Hungary, Portugal, or Japan, hits the wires. Housing data was weak but who cares when the wine is flowing like water.

Note Added 1/26/12 at 10:51 AM:  The Nasdaq is down -0.22% while the SPX is down -0.18%.  That is a change from the open.  The Nadaq is now leading the downside, albeit slightly. This accounts for the weakness in the indexes.  If the Nasdaq continues to lead lower the markets will continue to trail lower. The SPX:VIX is now printing 70.93, still a couple handles above the critical 68 level, but the market bears are making a push. Note the volatility is rising as well favoring the bear move down.

Note Added 1/26/12 at 12:14 PM:  The Nasdaq is down -0.22% while the SPX is down -0.28% so the tech leadership to the downside melted away. Thus, markets stumble sideways waiting for the next catalyst. For the SPX, strong support exists at 1319 (strong support), 1316 (very strong support), 1314 (very strong support), and then the number the bears really need to fail today, 1308. Watch to see if downside Nasdaq leadership reexerts itself, or not.

Note Added 1/26/12 at 2:44 PM:  The Nasdaq is down -0.57% while the SPX is down -0.66% so although the markets drift lower tech is not leading the down side, so the move south will be muted, unless the Nasdaq accelerates lower.  The SPX cracked thru 1319 support at 2:17 PM. Watch 1316 support next. SPX:VIX is now 69.57 and actually moved down towards 69.30 a short time ago.  Thus, the bears are fighting back today.  If the market bears can push the SPX:VIX ratio another point and change lower, a large negative snowball will start growing and rolling down hill.

Note Added 1/26/12 at 2:54 PM:  Since SPX 1319 was strong support, price is coming back up and performing another back kiss to make sure that 1319 can now be renamed as resistance. Price will either fail now and head down to test the strong support at 1316, or punch back up thru and decide that it does not want to give up 1319 support just yet. Here we go......currently printing 1319.16.......

Note Added 1/26/12 at 2:59 PM:  The back test results in collapse and failure, SPX now printing 1317.54.......1317.18.  Two handle drop in five minutes.  SPX:VIX is 69.36, however, so the bulls remain in control above 68. 

Note Added 1/26/12 at 3:03 PM:  The SPX did not waste any time testing the 1316 support, two minutes ago stabbing down thru, printing a LOD at 1315.76 and bouncing.  SPX 1316 is strong support so price will likely try once or twice more before it possibly breaks down thru.

Note Added 1/26/12 at 3:08 PM:  She's coming down now for another look at 1316......there you go, failure, 1315.97.  Can the bears keep it under 1316? If so, it would say a lot about the strength of the bear push lower since 1316 is very strong support.

Note Added 1/26/12 at 3:25 PM:  SPX now under 1316, the bears are flexing their muscles, so now a back kiss is in order to verify that 1316 will serve as resistance moving forward, just like the move down and back kiss that took place at 1319 one-half hour ago. The next strong support is at 1314.

Note Added 1/26/12 at 3:29 PM:  SPX back kissed the 1316 resulting in price failure.  Price now collapsing thru 1315 probably on its way to test 1314 support. SPX:VIX ratio is now down to 68.67.  The market bears got game.  If the bears can move the ratio down another 67 cents they can start some mayhem, and there is ample time available with one-half hour remaining before the close.

Note Added 1/26/12 at 3:32 PM:  SPX drops to test 1314 and bounces, look for further tests of 1314 support. This action the last couple hours is text book support and resistance action.

Note Added 1/26/12 at 3:35 PM:  The SPX is down -0.80% while the Nasdaq is down -0.73%. This makes the market move down questionable since tech is simply not providing the strong leadership and oomph needed to drive bearishness. 

Note Added 1/26/12 at 3:49 PM:  The bears ran out of gas.  Since the Nasdaq would not provide bearish leadership, the downside move faded, price climbs back up thru to overtake 1316 again.  The SPX:VIX ratio is moving towards 70 again.  The bears are folding like a cheap suit into the close.  SPX now up to test the 1319 S/R again.  Watch the closing price in relation to the critical S/R levels at 1319, 1316 and 1314.

Note Added 1/26/12 at 4:10 PM:  During the last two hours of trading, the SPX failed the 1319 support level then attempted four times to regain 1319, including in the last minute, only to fail each time.  SPX 1319 sealed its importance as critical S/R moving forward so watch it closely here on out.  Think of this in terms that if markets stay under 1319 a bearish pall exists over markets but if price moves above 1319 the skies will clear and this will be bull favorable. Remember a couple days ago Keystone called the 1314-1319 zone the 'resistance gauntlet' and price overtook this zone favoring bulls.  Today's action brings price back down for a test of this area, what we will now call the 'support gantlet' zone. Thus, price is going to either bounce from this 1314-1319 zone and the bulls will ride another leg higher well into the 1320's and 1330's, or, price failure will occur from this zone.  For tomorrow, Friday, watch the 1314 support, it is extremely important, if lost, it will signal that perhaps this long December-January rally may finally roll over.