Keystone's Evening Nightcap 4/10/12

The 'Rodney Dangerfield Selloff', that Keystone described in a missive last week, where last week's market selling was not receiving any respect from uber bullish eurphoric traders, received lots of respect today, and the bears enjoyed the last laugh. There are lots of twists and turns ahead but today's market action caused significant technical damage to the markets. No need to recap much of the day's events since the Midday Market Action missive serves as a reference.  The key failures today occurred with volatility, financials and the retail sector. For Wednesday, VIX 19.50, XLF 15.05 and RTH 40.63 will determine the broad market direction. All three are bearish which caused the leg down in the markets today. The extent at which any, or perhaps all three, revert back to the bull side will directly correlate to the strength of a recovery bounce.

For the SPX, starting at 1358.59, the bears only need one measley red spoo point overnight and this will open the door to more market selling at the open.  A move thru SPX 1358-1382 is sideways action. The bulls have to focus on the VIX, XLF and RTH, as described above, to stop the bleeding.

Keystone's SPXA150R Indicator has now collapsed thru the 80 level down to 77 so the bears are in full market control unless the bulls regain 80.  Keystone's SPX:VIX Ratio Indicator dropped under 68 to close at 66.63 which ushered in and verified the strong downward move today. The bears remain in full control unless the ratio moves back above 68. The NYAD punched out two days in a row of -2100 prints so the markets need a bounce back move to burn off all this negative energy.

Amazingly, the CPC Put/Call Ratio is at 0.99 still unwilling to move above the 1.10 level for the whole entire year thus far, about four months in all! This continues to verify the complacency in the markets and forecasts that much more market down side is ahead over the coming days and weeks, until the CPC prints at least 1.2 and higher. The VIX is over 20 now but remains somewhat tame, expect much larger numbers as the market moves towards a bottom in the coming days and weeks. NYHL printed -43 and will identify a market bottom somewhere in the -43 to -100 area.

The BPSPX printed 77.20 which is well over a six point drop from its high signaling a continued bearish move for markets.  A further bear signal will be obtained when the BPSPX loses the 70% level. The Dow Industrials lost the 13K level, Nasdaq lost the 3000 level, the SPX tumbled down thru the 50-day MA and lost the confluence of support at 1370-1372 which ushered in the afternoon selling. What a day for the bears.

Wednesday is a Bradley Turn date and considering the obvious fall from grace over the last week, the turn may likely be up in the form of a market recovery bounce. Italy and Germany bond sales occur first thing in the morning and perhaps Keystone can update the European Bond Summary to assess the results.  Mortgage Purchase Applications are always released on Wednesday morning at 7:30 AM.  Import and Export Prices are at 8:30 AM.  Oil Inventories 10:30 AM.  10-Year Note Auction 1 PM. Beige Book 2 PM. Thus, plenty of drama is on tap all day long. VIX 19.50, XLF 15.05 and RTH 40.63 are the most important items to watch tomorrow since these three characters will dictate broad market direction.