Keystone's Midday Market Action 2/21/12

The cross currents continue in the markets.  The SPX spiked above the 1363.61 closing high from 2011, the first penetration.  Watch to see if price closes above here today, or not.  This opens the door for several more handles higher and the 1370-1371 level, representing the 2011 intraday HOD is a likely target to test. SPX 1365 is sturdy resistance but price should have oomph to move thru since the breach of 1363.61 is so important.

The utilties spiked at the open as well, UTIL now printing 453.48 handily above Keystone's key number for this week at 451.92, thus, this ute buoyancy is helping the broad market bulls. Copper is popping as well, on the back of China's triple R easing, JJC at 49.09, well above the danger level at 47.60.  Likewise, commodities continue higher on the weaker dollar, CRB at 320 well above the danger level at 311.50.

The Dow Industrials are looking at the 13K psychological level but the HOD remains short at 12983. The SPX:VIX ratio is 73.71 well above the danger level at 68. Volatility is higher which is not what would be expected with buoyant markets. VIX is up 4% today which is more consistent with the broad markets lower by a half percent or more. Thus, things are out of sync and one side is incorrect. The Trannies, TRAN, drift lower which is a bearish indication, the Dow and the Transportation Indexes continue to diverge.

Tech has lost its leadership for the bulls for two days in a row now, but, the day is young, this is bearish.  The SPX is up 0.32% but the Nasdaq is up 0.29%. Watch this relationship since it is fluctuating currently. If tech does not lead, the broad markets have limited upside. AAPL is up on the day which makes market bulls happy.

Note Added 2/21/12 at 10:24 AM: The utes gave up the ghost, falling back under the critical 452.91 at 9:48 AM. The weakness in the utilities causing the weakness in the broad markets. Bulls cannot take markets higher without the utes moving above 452.91. The SPX fell back under the 1363.61 number but had spent the first fifteen minutes of the day above. Trading needs to play out for a couple hours to see if the SPX wants to come back up to test the highs today. If UTIL stays under 452.91, the market bulls will have difficulty.  Copper is buoyant but not moving up strongly so much of the China easing appears to have already been priced in to copper. Tech is not leading the upside so the upside should be limited. Continue watching UTIL 452.91, JJC 46.90 (slightly higher number now) and SPX 1363.61. Here comes the utes, bulls are on the move, UTIL now printing 452.70.....452.80......452.84.....bulls need seven more pennies.

Note Added 2/21/12 at 3:19 PM: The utilities moved above and below 452.91 but failed at 1:18 PM, ushering in general market weakness.  Copper and commodities are holding up on the weaker dollar, however, so the market bears are unable to gain steam to the downside. The SPX is back under the critical 1363.61.  The Dow Industrials touched the 13K pinnacle today, and then promptly fell on its sword now printing 12942.  Now that the utes are weaker, the market bears need to see the dollar strengthen so copper and commodities can move lower and take equities markets lower.  The market bulls want UTIL to regain 452.91 so they can get their upside mojo back.  Tech is leading the markets lower all day long, the second day in a row since tech also exhibited this weak behavior on Friday; this is bear favorable since the entire year was simply tech leading the broad markets higher day after day. Now there are chinks in the tech armour and February is also the expected month where many traders exit their tech positions.  Thus the current battle is the bulls trying to attain UTIL 452.91 while the bears are trying to push JJC under 46.90. One side will win and take the broad markets in the same direction. The battle may run thru the close and have to be decided tomorrow.

Note Added 2/21/12 at 4:05 PM: The utilities, UTIL, finished under 452.91, bearish. JJC finished above 47.90, bullish.  The SPX was not able to close above the 2011 closing high today at 1263.61 even though it poked up thru today. DELL just missed on the bottom line and met on the top line; it's giving up the ghost in the after hours thus far.  Tech led the downside today and this DELL news should foster further negativity. AAPL was up over 12 points today, 2.5%, to 515, thus, the market bulls best friend is Apple. With the matching high today, the indicators are negatively diverged for AAPL which is bearish. The market bears will enjoy a broad market slap down if the dollar is stronger while AAPL is weaker. Market bulls will maintain buoyant happiness with a continued weaker dollar and an ever-higher shiny Apple.