Keystone's Midday Market Action 4/19/12

A wild ride occurs today from the Spain and France auctions at 5 AM EST up thru the open one-half hour ago.  Reference the previous notes to understand what occurred.  After the open, technically, the VIX dropped, bull-friendly, printing a 17 handle but on the less than stellar economic data releases, the VIX popped, now printing 18.64.  Bears cannot be happy unless the VIX 19 level is breached.  SOX is at 417 contributing negatively to the markets. XLF maintains its buoyancy due to the better than expected BAC and MS earnings. Thus, financials, XLF remains bullish, volatilty, VIX, remains bullish and semiconductors, SOX, remain bearish.  One of these three will tip their hand and show the broad market direction moving forward.  For now, markets stumble sideways.

AAPL is red and tech (COMPQ) is not leading the broad market (SPX) upwards, thus, the upside has no oomph.  SPX received a spank down from the critical 1388 resistance level minutes ago, and is printing 1380. As highlighted in last evening's missive, the bears needed to push down thru 1383, so a further downside move should occur.  SPX S/R is 1388, 1386, 1383 (today), 1382, 1379.01 (50-day MA), 1378, 1375, 1372, 1370.58, 1370, 1368 and 1366. Keystone exited the XCO trade taking profits, will look to reenter.

Note Added 4/19/12 at 10:33 AM:  The semiconductors are running higher, the SOX blew thru 422 and is now printing 423.28. This is market bullish and note the indexes moving up, the SPX now green. As long as SOX stays above 422.25, this will add to the broad market bullishness. VIX is at 18.38 well under the 19 level, bullish.  XLF is at 15.33 above the 15.10 level, bullish.  The bulls goosed the semi's.  The SPX is headed up for a possible test of the 1388 R again.  Remember, for the bulls today, they need to touch 1393, if so, an upside acceleration orgy will occur with the SPX headed to 1400.  This is quite a bull-bear fight today.  With semi's rocketing higher, tech is now leading the broad markets upwards which provides street cred for the up direction.  Watch price reaction at SPX 1388 and most importantly 1393, also SOX 422.25 that started the upside move. Overhead SPX resistance is 1388, 1389, 1391, 1393 (today), 1393.40 (20-day MA), 1394, 1399, 1401 and 1403.

Note Added 4/19/12 at 10:53 AM:  Look at the wild ride with semiconductors, SOX. Running higher printing a HOD at 424.75, then falling on its sword, now printing 422.47 only 27 cents above the danger level at 422.20 (Keystone's algorithm is constantly recalculating this level of interest that is why it continues to change slightly). Quite a soap opera today. The SPX is not making a run at 1393, yet, and the semi's may be running out of steam.  If SOX falls under 422.20, the market bears will begin selling the markets hard. Above 422.20 and the bulls have a chance to run the markets higher.

Note Added 4/19/12 at 11:00 AM: SOX printing 422.28........ 422.25 .......wait for it, is it a test of support, or failure?  The fate of today's markets is being decided right now by SOX, whichever way it goes the markets will follow.  ....422.23.....the number to watch is 422.20....

Note Added 4/19/12 at 11:05 AM:  SOX printing 422.21.....boom, 422.65 in a second. The bulls win, successful test of support occurs. SPX shoots over 1389 on its way to 1390. Keep watching SOX 422.20. It is looking better for the bulls right now but the upside acceleration will not occur unless SPX touches 1393. VIX is under 18 becoming more bullish. SOX drifting lower again.....

Note Added 4/19/12 at 11:10 AM:  Harriet, bring over Keystone's heart pills, he cannot take so much excitement.  SOX is collapsing, stabbing directly down thru 422.20, you should see the bears come back with a vengeance. SPX is now testing 1388 S/R.

Note Added 4/19/12 at 11:49 AM: The SOX ushered in the market upside today, and now ushered in the market weakness once it fell thru 422.20. Markets are now stumbling sideways just as the day started.  SOX 422.20, VIX 19 and/or XLF 15.10 will continue to dictate broad market direction today. Keystone started a new position shorting RTH.

Note Added 4/19/12 at 12:30 PM:  SOX making its way lower, see if it takes out the LOD of 417.03.  VIX stretching its legs heading upwards towards 19, now printing 18.62, no, check that, 18.67. Market bears need to see 33 more cents in the VIX so they can throw confetti.  Bulls need to prevent VIX 19 from occurring.  XLF is 15.27, seventeen cents above danger. Lots of drama with SOX and now VIX today. Keystone's algo, Keybot the Quant, remains long but if VIX and XLF turn bearish it is likely the quant would flip to the short side.

Note Added 4/19/12 at 1:29 PM: VIX is making a run to 19, now printing 18.75, the HOD is 18.87. If VIX stays over 19 for seven to ten minutes it should hold and that will cause markets to sell off for another leg lower.  Bulls have to stop the VIX before 19 otherwise they will lose control. The SPX 50-day MA is 1378.97, call it 1379. Price is at 1379.33 trying to use the moving average as support, if this fails more weakness will come into the markets. SOX is now firmly bearish with a 416 handle far under the critical 422.20. This is bearish for markets moving forward. VIX 19, SPX 1379 and XLF 15.10 will determine if the bears have any strength, or not.

Note Added 4/19/12 at 2:58 PM:  Good ole Keystone takes a rest from mowing the grass to see the VIX punched up thru 19 at 2:17 PM. This ushered in another leg down, the SPX tested the 50-day support level directly at 1:30 PM-ish and the bulls pushed it back up, but, at 1:54 PM the SPX collapsed thru the 50-day MA. Thus, the bears are leading the parade today by driving SOX lower and VIX higher.  Keystone's algo next identifies the XLF 15.10 level, now printing 15.22, twelve cents from danger that will create another leg down in the markets and this leg would perform signficant technical damage to the markets and likely create a sustainable downside move. The bulls are fighting to send VIX back under 19 while the bears are fighting to push XLF under 15.10. One of these sides will win and the broad market will move accordingly.

Note Added 4/19/12 at 3:19 PM:  AAPL continues to give up the ghost.  Note how as the day continued along, the Apple weakness, with semi's, beat the Nasdaq back down, and the COMPQ is down -0.95% with the SPX down -0.87%. Thus, tech is leading the downside providing street cred to the bearish move lower.  Apple is the markets.  The bulls keep pushing VIX under 19 right now and you notice the recovery in the markets. This move off of VIX 19 determines the broad index direction into the close.

Note Added 4/19/12 at 3:50 PM:  VIX 18.43 and the markets float along sideways with an upward bias into the close. Watch the SPX close in relation to the 50-day MA at 1378.93. Keystone opened a position in KGC long.