Keystone's Midday Market Action 3/1/12

Will March come in like a lion or a lamb? Considering the opening minutes, a lion.  The market bears only needed to push less than two points lower to 1364 to ignite downside accelerated selling, but the bears did not have the strength, at least at the start today.  Bulls are running after the open, the SPX now printing 1371; watch the 1370.58 intraday high from 2011.  The bulls got nothing today unless they touch 1378 so the early move up does not tell a lot.

The dollar is slightly buoyant which may cap the upside move.  Volatilty, VIX, is back under 18, now printing 17.74, a weak showing for market bears and strong for market bulls. The ISM Manufacturing Index hits at 10 AM which will serve as a market pivot point and the energy sector is expected to react strongly depending on the news. Chairman Bernanke will dictate market direction as well, if he does not mention QE3, or downplays the use of QE3, markets will tumble lower.  If Bernanke is influenced by yesterday's market behavior and says the Fed stands ready to use QE3 and it is very much on the table, these early market gains will likely stay in place.  This current broad market action is noise for another fifteen minutes. The markets will tip their hand at 10 AM on the data releases and then, other than that, the fate of the indexes today is in the Chairman's hands and depends on what he says, or does not say.

Note Added 3/1/12 at 10:35 AM:  The broad markets pivoted lower on a worse-than-expected ISM number, but overall, the broad markets remain buoyant today.  VIX is staying under 18 showing the bulls regaining market control but the bulls need to touch SPX 1378 today to prove they are worthy of moving higher.  For now, the markets are stumbling sideways after the opening pop in the broad indexes.  Chairman Bernanke is in the Q&A (question and answer) period of his testimony on Capital Hill, so listen for what he does or does not say. The SPX provides support at 1363-1364 and resistance at 1377-1378; a break thru one of these ranges will indicate a winner. The SPX is now fluctuating across the 1370.58 level and this can be used as a mini-gauge of bullishness or bearishness depending on which side the SPX favors.

Note Added 3/1/12 at 2:07 PM:  The SPX is now printing the highs of the day, 1376 has offered up resistance, and the 1378 the bulls need to create an acceleration move higher remains two points higher, thus, the SPX moves across the sideways range today.  The Nasdaq is leading the SPX so tech is leading the broad markets higher.  AAPL reversed some earlier minor weakness and is now on the plus side again by a couple bucks at 544. As AAPL goes, so goes the markets.  The VIX is dropping all day long continuing to reinforce the complacency in the markets; the CPC print will be interesting tonight.  The market bulls are giving Chairman Bernanke the benefit of the doubt and even though there was no change to Bernanke's stance in reference to QE3 today, the markets are accepting the fact that the Fed should be there to backstop markets for the weeks and months ahead. Technically, the markets are ready to roll over, but the Energizer Bunny moves higher. Keybot the Quant algorithm (at the left margin) remains long the broad market but Keystone continues to like the short side, looking for a turn in this shorter time frame.  The retail sector is the largest surprise continuing to creep higher against high gasoline prices, low relative sentiment, low employment and the data showing the low-end customer is hurting. Consumer Staples, a highly defensive sector, is negative today among the bullishness, showing how traders are giddy with upside joy and not worried about any market pullback despite what they may say. Watch what traders do instead of what they say via the VIX, CPC, sector analysis and other indicators highlighted here by Keystone.  As long as AAPL remains positive and the VIX remains under 18 the market bulls will remain happy.  The bulls need to touch the 1378 handle to seal the deal, if so, the end of the day will be an upside orgy.  The market bears need to prevent the SPX from going near 1377-1378 today while at the same time spank AAPL to the negative side and push the VIX back above 18. Bulls are cruising.