UTIL remains under 453 favoring market bears. Keystone's SPX:VIX ratio jumped back above 68 so that nullifies any big market move down today, unless the ratio drops under 68 as the session plays out today. SPX:VIX now printing 69.28. CRB is moving across 316 well above the 310 danger. The dollar is red so commodities, copper, gold, etc..., all rock higher.
The SPX is up 0.55% while the Nasdaq is up 0.53%, thus, the upside should be limited. Tech is not leading today, perhaps the first day this year. SPX took out the 1316 level so the acceleration upwards occurred in quick order with the SPX now printing over 1321. Watch for a potential market pivot at 10 AM with the Consumer Confidence number.
Note Added 1/31/12 at 9:56 AM: SPX:VIX at 68.56 drifting lower, keep watching. SPX came down to test that 1316.16 area highlighted by Keystone. Watch the behavior at this level. If bulls hold, then the day will go their way. Failure will open the door for market bears. Consumer Confidence is minutes away.........
Note Added 1/31/12 at 10:26 AM: The market pivot occurs at 10 AM as the Consumer Confidence data was far weaker than expected as well as a downward revision to last month's number. The fact that tech, the Nasdaq, was not leading the upside helped bring the broad markets lower after the opening pop. However, the SPX is now up 0.11% with the Nasdaq up 0.16%. A flip-flop again. This smidge of bullishness now showing in tech is helping the indexes move back to the green side. Keep monitoring the tech strength, or lack of strength, today. The SPX:VIX ratio dropped under 68, now printing 67.66, so this soap opera fight at 68 continues along. A large market down day is expected today, with the Dow Industrials down triple digits, as long as the ratio stays under 68. Heck of a prognostication since all the indexes are green now.
Note Added 1/31/12 at 10:35 AM: The Golden Cross occurs for the SPX; the 50-day MA is 1257.82, the 200-day MA 1257.20. What's it mean? As Keystone discussed in the comments on the previous posts last evening, do not use this indicator for trading. The only technicians that do are those that do not understand technical analysis. If anything, the cross may actually identify a short-term market top. Volatility, VIX, is higher which is bear-friendly not bull-friendly.
Note Added 1/31/12 at 10:40 AM: The CRB has an 314 handle now, inching down only four points from the critical 310 level now. Dollar is recovering and moving up. SPX:VIX ratio is under 68, now printing 67.25, so bears are smiling.
Note Added 1/31/12 at 10:48 AM: SPX:VIX just lost the 67 level. Nasdaq and SPX moving lower in sync. If tech accelerates lower, the selling will accelerate.
Note Added 1/31/12 at 11:36 AM: SPX:VIX hanging on to the 66 level by a fingernail. CRB has a 313 handle inching towards 310. The dollar is positive. Same old asset relationship, moving in favor of the bears after the opening pop; dollar up=euro down=commodities down=copper down=oil down=gold down=equties down.
Note Added 1/31/12 at 12:00 PM: SPX:VIX is under 66 now. CRB touched a 312 handle continuing to inch towards 310 where big market trouble occurs. Nasdaq is not leading the down side, it is in sync with the SPX, lagging by a hair, thus, the broad markets are languishing at these levels.
Note Added 1/31/12 at 1:44 PM: SPX:VIX is printing 67 remaining in bear territory. CRB touched an 311 handle about one-half hour ago. Market bears need about two points lower for the CRB to seal the deal on substantial broad market downside. Remember, this afternoon, about an hour or so from now, Farm Prices are announced which will effect the ag trade. Perhaps the famous movie Trading Places will provide guidance today with "Sell Mortimer Sell!"? ADM is down 4.4% today on weak earnings showing losses in all their divisions helping to cast a pall on the CRB along with the higher dollar. The Nasdaq turned green for a few minutes but is now red again. Nonetheless, the SPX continues to lead the downside rather than tech so the bears are having trouble pushing the indexes south. UTIL remains under 453 all this week thus far creating market bearishness.
Note Added 1/31/12 at 1:57 PM: SPX:VIX ratio is printing 66.62 so continued market weakness is expected today.
Note Added 1/31/12 at 2:00 PM: Utilities, UTIL just turned red on the day. CRB coming down to look at that 311 handle again. If CRB loses 310, now less than two points away, Keystone's algorithm, Keybot the Quant, will probably flip short after this six week bullish run from 12/20/11. An exciting finish should be on tap today.
Note Added 1/31/12 at 2:31 PM: Nasdaq is positive on the day again, bears cannot move the markets lower if tech is unwilling to lead lower.
Note Added 1/31/12 at 5:53 PM: SPX:VIX ratio came up to back kiss the 68 level minutes before the close and fell lower to close at 67.51 favoring bears. Since the large down day did not occur today, markets actually dropped but recovered when banks and tech led the indexes higher today, then the large broad index down day should occur tomorrow, as long as the ratio stays under 68. Perhaps AMZN weak earnings will finally dent the unstoppable tech machine this year. Bulls know if they can regain UTIL 453 they can stop this bearish move in the markets over the last four days. At the same time, the bears know if they can push the CRB under 309.50, the bulls will lose control of the markets. This is the battle ground for Wednesday; SPX:VIX 68, UTIL 453 and CRB 309.50.
Thanks again Kesystone for the great analysis...
ReplyDeleteWhat's your thoughts on bank ETFs such as FAS/FAZ and the best strategy to be successful trading these ETFs?
Chris
Hello Chris. The FAS/FAZ plays are the crack ho ETF's. Many traders get chewed up in these plays. The thing to remember is that these are very short term plays only, they do not function like a regular stock play. Once they go against you they can whack you very hard. Tight stops are required.
ReplyDeleteLike any sector, watch the specific sector ticker to guide any long or short plays. For financials, this is XLF, so use that as a guide to enter any financial ETF's.
To reduce risk, the one for one plays, such as XLF, IYF, IYG, on the long side. The 2x ETF's are UYG (long) and SKF (short). If traders want additonal risk and exposure the 2x's may be attractive. Then the 3x crack ho's FAS (long) and FAZ (short).
Always check the volume action on ETF's before entering since if they are thinly traded realize that it may be harder to get out (you will have to take more of a loss) if the ticker goes the wrong way for you. Using more liquid ETF's is prudent.
So use XLF as the main ticker to watch to generally gauge financials, and then the ETF you select is based on your risk tolerance and other factors. XLF just came off the top due to the negative divergence. The weekly chart is long and strong, so after a potential pull back in the daily time frame, nimbleness is required since the weekly charts would like to see another higher high in the weeks ahead. The 50-week MA iss erving as a ceiling at 14.11 for XLF. Watch the action in realtin to this number.
Thank you for your response and your help has been greatly appreciated
ReplyDeleteChris