Keystone's Midday Market Action 2/3/12

The Monthly Jobs Report was a blow-out with the unemployment rate dropping to the low 8% area, at levels not seen since March 2009. Futures sky rocket higher, the S&P futures are up 0.91% with the Nasdaq up 0.89%. Note that the projected move up for the open comes without tech leadership, thus the upside move in the markets should be limited.  APKT earnings disappointed and this is probably creating some tech hesitation today.  Thus, the markets are set for a large opening pop but perhaps many traders benefiting from the long bull run will be anxious to consider their great fortune and hit the sell button. The industrials and consumer discretionary sectors may pop proportionally higher at the open as compared to the broad markets due to the blow-out jobs number.

For broad market direction a bull-bear battle continues and UTIL and CRB will decide the outcome. Very simply, if UTIL moves above 452.66, this verifies more bullish fun ahead and extended market upside. If the bears can push the CRB under 309.50 that will verify broad market downside ahead. In addition, at the close today, watch to see if UTIL closes above or below 453.69.  This is the UTIL level of interest to watch for next week, already identified by Keystone's algorithm.  Thus, at 4 PM today, if UTIL closes above 453.69, the bulls should start next week in a happy mood.  If UTIL closes under 453.69 at todays close, this will cast a dark cloud over Monday's trading action.

For the SPX today, the bulls only needed to push above 1329 to accelerate the upside, and that appears handily beat by the projections from the futures.  Thus, the SPX should test 1331 and 1333 resistance in quick order. Interestingly, Keystone left the door open for this higher push, if you look back at the SPX daily chart, but study that chart closely after the close today to see if negative divergence is in place (it likely will). If so, that will signal a bearish bet at today's close to be an attractive idea. The market bears today need to push the SPX under 1322 to start any downside momo. This will only come into play if the profit-taking runs amuck and creates a sharp pullback. A move thru 1323-1328 is sideways action.

Lots of cross currents remain in these markets. Do not become complacent due to the encouraging job numbers. Company earnings are a disappointment with many companies guiding lower but the markets continue to brush this news off. Good news is good news and bad news is good news.  Traders do not appear concerned about the Greece resolution with bondholders since that goal line was moved so many times. Macro events in Europe and China can occur at anytime. Caution is warranted in these low volatility, low volume markets.

Note Added 2/3/12 at 9:32 AM:  UTIL makes a beeline for 452.66, now testing. How does Keystone always know these numbers ahead of time? This UTIL 452.66 level will tell you whether the bulls or bears win today.

Note Added 2/3/12 at 9:41 AM:  An overhead resistance cluster exists for the SPX at 1337-1339.  1337 is extremely strong resistance and would be very bullish if the close is above 1337.  Every minute that the SPX stays over 1337 adds to market bullishness.  UTIL received a smack down after testing 452.66 but the day has just begun; this provides the market bears some happiness.  SPX is up 0.91% and the Nasdaq is up 0.95% so the tech leadership has not faded today, this will provide at least steady sideways support today for markets. The Greece resolution appears to be pushed forward again with a deal not even likely for Monday, but markets are not phased. SPX:VIX ratio is at 78 far above 68 so the bulls have little to worry about and even a pull back now would not have any sustained bearish effects unless the ratio loses the 68 level. The market bulls are popping the wine corks, starting the weekend early, and already searching for lamp shades to wear as they dance on top of the trading desks.

Note Added 2/3/12 at 10:47 AM:  SPX punches thru resistance without losing a step, placing the 1337-1339 resistance cluster in the rear view mirror and then attacked 1341 R.  This crumbled as well with price hitting 1343, pulling back to back kiss the important 1341, now support, and then the successful back test leads higher.  SPX enjoys a bull day with a 1342 handle currently.  SPX 1344 is strong resistance, then 1347 and 1349 and 1354 next. The Nasdaq leads the SPX to the upside so this continued strength in tech is providing bull fuel.  Typically, the long players in technology playing Q4 strength start to cash out the second week of February but after profiting from the large upside move in tech over the last couple months, a smart trader would take the money and run now.  On the SPX daily chart with this price high occurring today, all the indicators remain firmly negatively diverged indicating that market selling will follow along close behind today's uber bullish behavior.  The SPX daily chart will require studying after the close.  NYAD spiked over +2000 so this will set up for a market pull back either later today or Monday. NYHL shows an extremely interesting print, at 295, very elevated but short of the prints two days prior--when the markets were lower.  In other words, the new highs are diverging and not confirming this broad market rally move higher, and in fact, is showing that a market pull back is preferred.  The TRIN is at 0.94, near the neutral 1.0, very surprising since if this bull move had legs, the TRIN would be expected to be in the 0.5-0.8 range.  UTIL has collapsed since the opening test of Keystone's all important 452.66 number.  This is a big feather in the bears cap. Strong sustained rallies occur as the utilities print weekly uptrends week after week. The utilities are signaling that this is over which is very bearish for markets moving forward despite today's huge market move. UTIL now printing 448.80, about four points under the critical number for this week and five points under the critical ute number for next week. UTIL is down -0.2% while the markets are up well over a percent today. Interesting markets indeed.

Note Added 2/3/12 at 11:09 AM:  SPX testing that strong 1341 area again. 1341 was resistance turned support after price punched up thru this morning. Now price is deciding whether 1341 will serve as R or S moving forward. Broad markets will probably trail lower after the European close. UTIL trying to fight back to even on the day. Tech strength continues to lead the markets favoring bulls.

Note Added 2/3/12 at 11:42 AM:  SPX 1341 support holds. Price now traveling sideways thru 1341 S and 1344 R.  UTIL remains under 450.

Note Added 2/3/12 at 12:46 AM:  SPX is now attacking 1344 R. See if it can poke up thru, or not.  TRIN is 0.77 more of what would be expected for a bullish day.  Tech is leading the upside and whipping the bears hard. Volatility, VIX, is at 17, see if it continues to hold the 16.78-16.80 level today, or not.

Note Added 2/3/12 at 1:27 PM:  SPX 1344 R is holding, so far. Small caps (RUT +2.2%) and tech are running strong today.  The bears are getting beat with a baseball bat but instead of 'Louisville Slugger', the printing reads 'Technology'. NDX (Nadaq 100) is up 1.4% and the COMPQ (Nasdaq Composite) is up 1.6%. VIX is above 17 and moving up. Copper strong, gold weak. XLF (financials), XLI (industrials) and XLY (consumer discretionary) are outperforming to the upside on the strong jobs number. The wine is flowing like water today for the bulls, the party rages on. Here comes the SPX for another look at 1344 R......

Note Added 2/3/12 at 1:55 PM:  SPX failed at 1344 R so price travels sideways thru the 1341-1344 range. For the Nasdaq Composite today, COMPQ, price is currently at 2903.33, at a level not seen since 2001, eleven years ago. Keystone provided the charts for XLK technology sector and the NDX Nasdaq 100 over the last few days showing how price is now matching highs from eleven years ago. The Nasdaq Composite is a broader based index so this would place a feather in the market bulls cap should the COMPQ close above these levels; 2887 (HOD 5/2/11) and 2873 (4/28/11 close). For the Dow Industrials, INDU, this price level is breaking to highs not seen since 2008 just before the waterfall crash. The Dow is now printing 12844.41. The bulls will receive a big feather in their hats if the Dow closes above 12928 (HOD 5/2/11) and 12811 (4/29/11 close). The Nasdaq is above both of the levels shown while the Dow is currently only above the prior closing high but not above the intraday high. Also of interest is that the infamous SPX 666, the satanistic low after the panic sell off in early 2009, has now doubled off the low, 666 x 2 = 1332.

Note Added 2/3/12 at 2:16 PM:  SPX price coming up to test 1344 R again. UTIL moving up now printing 450.80.

Note Added 2/3/12 at 3:12 PM:  Tech keeps pushing the markets higher; as long as tech leads, the wine is flowing like water. SPX keeps fighting 1344 R.  The market bears are trying with all their might to stop this upside orgy by preventing a breach of 1344.  UTIL is at 450.87 remaining under the 453 and 454 levels so this is actually market bearish for the days and weeks ahead.  COMPQ is printing 2905, about 20 to 30 points above the important 2873 and 2887 levels. INDU is printing 12856 which places it 45 points above the all-important 12811 level but below the 12928 level. Lots more drama ahead as the close is 45 minutes away.

Note Added 2/3/12 at 4:45 PM:  The market bulls show no mercy today, slapping the bears from start to finish.  The Nasdaq Composite, COMPQ, now closes at highs not seen since 2001. The Dow Industrials, INDU, closes at a 3 1/2 year high although it did not close above the intraday HOD that occurred on 5/2/11 at 12928. Nonetheless, the markets continue to exhibit impressive strong bullishness driven by technology.  Financials, a large consumer of technology, ran today as well. The SPX is up 1.5% today, closing above the sturdy 1344 resistance, that now becomes support.  All news is perceived as good news by traders and the jobs report delivered the cheer from early this morning.  China promising support for Europe this week, as well as the strong China PMI mid-week, helped the bullilsh momo.  Treasury yields jumped today showing that money moved out of bonds into stocks.  There is always two sides of the story. The utilities triggered an extremely negative indication this week that no one will report in the mainstream media.  UTIL closed at 451.36 below the 452.66 number that now indicates the utes to be a in a weekly downtrend after a multi-month move up.  When the utes roll over it portends bad things coming for the broad markets.  Next week the 453.69 level is the line in the sand for UTIL so price begins two points under.  If UTIL stays under 453.69 thru next Friday, the broad markets will weaken and sell off. The uber low TRIN at 0.59 and NYAD printing over +2000 today, as well as the NYAD and NYHL divergences, all indicate that a pull back for the broad indexes would be prudent.  The Greece situation is unresolved but no one cares. Europe is quiet, relatively, these days, so out of sight out of mind.  Earnings are meeting lowered estimates, at best, with weak guidance, but again, markets are wearing rose-colored glasses.  SPX daily chart shows negative divergence so buying long today does not appear the correct move. The RSI, however, sneaks out a higher high so after a sell off occurs, which should be any time, the SPX will want to come up to these highs again. The question will be when the buy-the-dips crowd reenters and thinking out loud at this juncture the 1320's are an attractive target.