Keystone's Evening Nightcap 2/16/12

One day is stranger than the next.  Keystone was looking for a sharp down, then sharp up, then sharp down again type move, but did not think it would occur over a three day period.  This is said somewhat in jest but choppy markets should be expected moving forward.  Bulls and bears alike may become bloody over the next several days. The utilities were the big story today, when UTIL moved thru 451.17 the bull hearts soared and the bear hearts sank.  The SPX:VIX ratio stayed below 68 showing the market bears maintaining control but at 1 PM, the bears folded like a cheap suit as the ratio jumped above 68 and never looked back.

Keystone's SPXA150R indicator is at 87.40, nose-bleed territory but there is no reason it cannot go higher, although the chart is negatively diverged and a spank down, which would correspond to a spank down in the broad indexes, appears to be on tap.  The CPC put/call is at 0.88 showing the unquivering bullishness in the markets. The bearish talk you hear from pundits and analysts is bluster since the CPC shows that there is no fear and has not been for quite a while.  The low 0.7 CPC numbers that Keystone has highlighted over the last three weeks should come home to roost now. Traders need to be shocked from their complacency. Volatility, VIX, made a run to overtake the 50-day MA but received a smack down and that helped accelerate the bull move today, as the VIX stumbled lower from 21.50 to close at 19.22. Traders are complacent, no fears or worries, every day is a happy day.  Perhaps a sharp drop in the broad indexes will bring fear front and center again.

The key tomorrow is UTIL 451.17 as it has been all this week.  Watch to see if the market bears can push back under to ignite market weakness.  Watch the 452.91 level at the 4 PM close since this is the number to watch next week for UTIL, and will represent a bull-bear line in the sand. Bulls will be happy next Tuesday (U.S. markets are closed Monday) if UTIL closes above 452.91, bears will be happy next week if UTIL closes below 452.91 today and remains under all next week.

Watch JJC 47.90 and CRB 311.40.  The market bulls have been successful in maintaining prices above these levels.  The market bears need to see a stronger dollar to bring the commodities lower. For the SPX tomorrow, starting at 1358, the market bulls only need one point, to push over 1359, and the upside will ignite higher.  Watch the resistance levels above especially the 1360 gap fill and 1364 closing high last year as shown in the previous support and resistance message.  Thus, if the futures are green, the bulls are going to have a big party into the weekend tomorrow. The market bears need to prevent the 1359 print and try to move UTIL back under 451.17. A move thru SPX 1243-1258 is sideways action.

Markets are typically buoyant in front of a holiday weekend and that was the case today. If the futures are green to start the day the bulls may be able to slide the indexes sideways into the weekend.  The broad indexes are not to be trusted. Do not be surprised to see a large down move in the broad markets at any time.

Lots of pundits talking about Dow 13K. Ignore that for now, the Dow Industrials have yet to close above the 2011 intraday high at 12928 and in fact, yesterday was the first close of the new year above 12900.  Thus, watch to see if Dow closes above 12928 first. Similarly, the SPX 1364 and 1370 levels are key representing the 2011 closing high and intraday HOD, respectively, and are extremely important resistance levels.

Note Added 2/17/12 at 8:38 AM EST: The S&P futures are up +0.21% and the Nasdaq futures are down -0.03%. Tech is not leading this joyous start to the day for the broad indexes, thus, the upside move should be muted.  Pay close attention to see if the 1360 gap fill is performed, all it takes is for price to print with a 1360 handle for a couple seconds and that will be good enough.  If the SPX moves up thru 1359, the markets should accelerate higher but at this point with tech not leading, this creates conflict and a head wind for bulls.