Keystone's Midday Market Action 1/6/12

SPX is drifting lower in early trading.  The SPX HOD so far is 1281.66 so the bulls never made a push to 1283, at least not so far today. Price dropped back under the 12-month MA so secular market bears dab the sweat from their foreheads and sigh some temporary relief. SOX remains elevated. Retail is slightly weaker but remaining in the bull camp.  Financials are weak on the downgrades but holding up fine for the bulls.  The slightly stronger dollar is keeping commodities and copper from experienceing any significant upside.  Thus, the markets are muddling along sideways. Reference this mornings 30-minute chart to note the importance of that upward sloping lower trend line that targets 1273-1276 as important support.  See if the SPX holds this level.  Here's a test now.  SPX 1273 handle.....

Note Added 1/6/12 at 10:13 AM:  The SPX bounced off that lower trend line at 1273. Another test should occur to see if holds again.  The SPX 10-month MA is 1270.63 and the 12-month MA is 1279.94. The Nasdaq is down -0.20% today while the SPX is down -0.39% so this is why the downside move does not have a lot of oomph. Watch to see if the Nasdaq builds up steam, or not. The euro is down, dollar up, commodities down, copper down, equities down, the asset relationship is as expected. See the previous discussion.

Note Added 1/6/12 at 10:23 AM:  The euro is testing the 127 level now, see if it fails.

Note Added 1/6/12 at 10:30 AM:  The euro pierces 127, see if it bounces or fails.

Note Added 1/6/12 at 1:47 PM:  The euro is treading water keeping its neck above the 127 level.  The SPX is staying under the 12-month MA, so far, and only by barely one point.  Natty gas is finally feeling some love.  This is interesting since the bad AA news should have hit natty but since natty is buoyant it may be a sign that natty has finally bottomed.  Watch retail very closely. RTH jumped up to a 113 handle poviding an even higher pedestal from which to fall.  The retail sector is a prime candidate for a negative divergence smack down and if retail tumbles it will take the broad markets down with it. Interestingly, the AAPL news that Apple products would be sold in some TGT stores is bouncing TGT today to help RTH enjoy that 113.  Keystone's algorithm is wanting to go short again but programming rules are keeping it on the long side for now.  The algo wants to see the SPX 1265 level to flip to the short side and the SPX remains 14 points above this level.

Note Added 1/6/12 at 2:00 PM:  The SPX just popped, big bounce, the fight at the SPX 12-month MA is on.  SPX 12-month MA is 1280.27.........last print is 1280.30.............

Note Added 1/6/12 at 2:18 PM:  The SPX danced above and below the 12-month MA for the last fifteen minutes, and failed.  See if it comes back up for another try. If the SPX cannot make it back above the 12-month MA by the close, that is a big feather in the market bears cap, and may signal an all-clear for further market downside. Interestingly, the ascending triangle pattern mentioned in the 30-minute chart post has formed.  If the SPX does break up thru 1283 it opens the door to a move over 1300. Thus, this fight today for the 12-month MA is uber important. Price is coming back up for another look..........

Note Added 1/6/12 at 2:25 PM:  The SPX 12-month MA is 1280.26.  Last print is 1280.13.......1280.29......1280.19......to and fro on each side of the 12-month MA, high drama to finish the week...........

Note Added 1/6/12 at 4:41 PM:  SPX price could not close above the 12-month MA at 1280.06. This is a big feather in the market bears cap.  The weakness in utilities this week is a major warning. Keystone has discussed this extensively over the last few months. For next week for UTIL, watch the 433 level, now at 451, comfortably higher, but big trouble occurs in markets should the 433 fail. Semiconductors and retail sectors supported the bulls today so see if they are up to the task on Monday. Financials weakened in the final minutes due to Meredith Whitney downgrade of GS. Volatility keeps drifting lower but is now set up for a positive divergence bounce on the daily chart. The dollar was up today but copper and commodities did not fall as much as would be expected.  Thus, the asset relationship of euro down=dollar up=commodities down=equities down must be monitored as discussed previously.  The asset realtionship is expected to hold and the behavior over last few days is probably due to seasonal effects, lackluster volume and flatish moves.