Keystone's Evening Nightcap 4/11/12

Recapping the market behavior over the last few days, the utilities, semiconductors, copper and commodities caused the initial market weakness from last week into early this week. The collapse in copper, JJC, and commodities, CRB, is serious but media pundits are blind to the moves. Dr. Copper is always mentioned as the leader on the way up but when it leads the markets down the typically bullish analysts ignore the signal. It is always best to view the markets impartially, it is of no consequence which way the broad market goes, all that matters is to be on the correct side of the trade. This week volatility, financials and retail joined the bear camp to slap the markets further south and create the large selloff on Tuesday.

The banks, XLF, ran higher today, as well as the retail sector, RTH, with volatility dropping, VIX, in the first minute of trading. This allowed the broad markets to recover satisfying the low -2100 number printed by the NYAD on Tuesday.  The NYAD shot upwards today to print +2300 and announce the preference for markets to sell off on Thursday to burn off this excessive positive energy.  The NYSI fell thru the 200-day MA today which is bearish.

Volatility, VIX, moved higher as the session moved along and placed a ceiling on the recovery bounce. At 2 PM, when the Beige Book was released, AAPL drifted lower. This caused the Nasdaq to relinquish its leadership position today and placed a further lid on the bull rally. Remember, Apple is the markets.  For Thursday, watch VIX 19.45 (now bearish at 20.02) when the opening bell rings.  If the VIX stays above 19.45, the bears will rule the day, if the VIX falls under, the bulls will gain traction.  Also watch XLF 15.10 and RTH 40.65, both currently bullish contributing positively to the market action. If either of these give up the ghost, the bears will resume the downside action.

For the SPX, starting at 1368.71, the bulls need to touch the 1375 handle, if so, the broad markets will accelerate higher.  If the bears push under the 1359 handle, the broad markets will accelerate lower. A move thru 1360-1374 is sideways action. The 50-day MA at 1373.29 serves as a resistance ceiling.

The International Trade and PPI data is released at 8:30 AM which will affect the futures. Natty Inventories 10:30 AM. 30-Year Bond Auction 1 PM. GOOG earnings are important to the tech trade since tech has led the rally all year long; great numbers would encourage the depressed bulls, bad numbers will embolden the bears and grease the skids for further market downside. The bears remain in control of the markets; the recovery move today was of no importance. VIX, XLF and RTH will dictate broad market direction when the bell rings in the morning. Also watch Keystone's SPX:VIX Ratio Indicator to see if it moves under 68 to signal a large down day on tap, or not.  After the market closes, check Keystone's SPXA150R Indicator to see if it is above or below 80.