Keystone's Midday Market Action 6/25/12

Storm Debby in the Gulf is moving up towards the panhandle instead of towards the Louisiana and Texas coasts so the premium that started to move back into the oil price fizzles. The hurricane names are interesting but why did they use Debby with a 'y' when obviously Debbie with an 'i' (eye), would have been much more appropriate? Since oil and the equity markets move together, keep an eye on black gold today.

Watch to see if Keystone's SPX:VIX Ratio Indicator drops under 68, if so, this will verify a large down day, typically a triple digit down day for the Dow Industrials, as long as the ratio stays under 68. This will also signal weaker equites markets moving forward. For the SPX today starting at 1335, the bulls only need to touch the 1338 handle and they will launch an upside acceleration, but, the U.S. futures are weak all morning long and this outcome does not appear on tap.  The bears need to push under the critical 1326 support highlighted in the SPX S/R message a couple of posts back to accelerate the downside. The S&P futures are down 11 points which hints that the 1326 may rupture. Price appears to want to migrate to 1326 at the opening bell to provide a test.  A move thru 1327-1336 is sideways action today.

Besides watching the SPX 1326 level closely, watch the financials, XLF, now at 14.34. Keystone's algo identifies 14.35 as a key level where market positivity is created above and market negativity below. With the SPX dropping at the start, watch the retail sector, RTH, now at 41.41. If the RTH loses 41.27 this will tell you that the downside has legs to it. If the RTH stays above 41.27 the market downside will be limited and likely recover as the day moves along. Volatility is key as well today. The VIX is at 18.11. If the VIX pops above 18.90, the markets will sell off and maintain bearishness moving forward. Watch the utilities today since if they continue to lead lower it is very ominous for markets.

The housing sector is very important this week with housing data at 10 AM, other data this week and LEN and KBH earnings as well. Keystone has moved in and out of SRS (inverse real estate ETF) and continues to like it moving forward (since the housing sector has not bottomed yet, probably not for another year or two) although does not currently hold a position. Window dressing is expected this week. Thus, a selloff may provide an attractive opportunity so ride some buoyancy as funds add the winning stocks into their portfolio's to make it look like they actually knew what they were doing in Q2. Window dressing tends to create market buoyancy in the last days of the quarter and this Friday is month, quarter and first-half end, EOM, EOQ2 and EOH1, respectively.

In a nutshell, to keep it simple for Keystone's mind, SPX:VIX 68, SPX 1326, XLF 14.35, RTH 41.27 and VIX 18.90 will dictate market action today. If all of these indicators are in the bear camp, markets are in a heap of trouble. In addition, watch Keystone's other tools mentioned on Friday such as the 30-minute and 60-minute chart turn signals. S&P's are down 11 and the opening bell is about one-half hour away.

Note Added 6/25/12 at 9:45 AM:  SPX:VIX drops under 68 which says a large down day will remain in place with continued bearishness ahead--as long as the ratio stays under 68. SPX sliced thru 1326 support like it was not even there. Price should want to back kiss the 1326 as time moves along. The break of the 20-day MA at 1320.49 is serious trouble, price will surely want to back test this critical support. LOD is 1315 so the strong 1314-1315 support held on the first leg down. If it fails, 1307-1308 is next.  XLF is well under 14.35 contributing bearishness as well as the RTH now under 41, and VIX above 18.90, now printing above 20 on the way to 21. All of the indicators mentioned before the open are now in the bear camp. The bulls are in a heap of trouble. Tech is not leading the downside so this will provide the bulls a sliver of hope for stopping the slide lower. The Supreme Court decision on the Affordable Care Act (known as Obamacare) may be imminent.

Note Added 6/25/12 at 10:30 AM:  SPX 1314-1315 support continues to hold. The Supreme Court Obamacare ruling will not occur today. Keystone took profits on TZA exiting the trade and will look to reload. Also bot APKT opening up a new long position.  Also bot UCO (long oil) opening up a new long position.

Note Added 6/25/12 at 10 :46 AM:  Keystone bot SPY looking for a countertrend rally. TICK likes the negative side today, as would be expected. TICK is now -363, would have liked to see a -1000 to buy the SPY.  Boom, there is a TICK jump now +371.

Note Added 6/25/12 at 10:52 AM:  SPX keeps testing the 1314-1315 strong support but it will not completely fail as yet. 1312 and 1310 are support with 1307-1308 very strong support if the 1314-1315 gives up the ghost. Perhaps a countertrend rally will take shape so price can back kiss the 20-day MA at 1320.36.

Note Added 6/25/12 at 11:01 AM:  Keystone took profits on the APKT day trade, will reload once it pulses back. Also adding increments of CUR an ongoing long position. Also bot RIMM opening up a new long position.

Note Added 6/25/12 at 11:21 AM:  Keystone reopened the APKT long position, a pop above 19.70 resistance may set this one on fire, if it occurs.

Note Added 6/25/12 at 11:30 AM:  European markets close with Spain down a huge 3.6%; that will leave a mark. Spanish and French banks are down 5 to 6%. Keystone added more RIMM.

Note Added 6/25/12 at 11:41 AM:  SPX falls thru 1312 support, now testing 1310. The strong 1307-1308 support test occurs if 1310 is lost. Minute charts appear more agreeable to seeing a countertrend rally move. Tech is leading the downside move now so this enables the bears to keep the negative pressure in place.

Note Added 6/25/12 at 1:06 PM:  SPX poked down thru 1310 for only four minutes so the 1310 support is holding, for now. SPX traveling sideways thru the tight 1310-1312 S/R range since 11:30 AM, almost two hours. Keystone's ANR long coal trade continues to drop continuing to cause pain but for a knife catch the charts remain attractive. Keystone bot more APKT, it is printing the lows of the day currently. Using Keystone's 80/20 rule price may want to come down to 18.80 before bouncing but the positive divergence in the charts may bounce it at anytimes, or, as with all knife catches, they cut you a little more.

Note Added 6/25/12 at 1:27 PM:  Oil is running. Oil buoyancy should help the equities recover and SPX has now poked above the 1312 trying to move out of the sideways 1310-1312 range. The 20-day MA at 1320 was a key level to fail so price should want to take a second look, a back test, to make sure down is the correct direction, or not. In a perfect world, the SPX would come up to 1320 to ditch any longs that are profitable, then reload with a couple of shorts for the ride lower (for a successful back test that spanks price back down from 1320). Keystone took profits on the UCO day trade, will look to reenter. RIMM starting to feel some love.

Note Added 6/25/12 at 1:41 PM:  Utes are red but marginally, red nonetheless. NYAD -1850 now with LOD at -2048 which is extreme negativity that will need an up move to relieve the bearish pressure. Ditoo TRIN popping to 2.61 today which is uber bearishness as evident by the market behavior today. Keystone took profits on RIMM day trade, will look to reenter.

Note Added 6/25/12 at 2:34 PM:  Keystone bot TZA opening up a new long trade.

Note Added 6/25/12 at 3:00 PM:  Keystone exited the half-hour TZA trade taking profits. Also bot RIMM opening a new long position.

Note Added 6/25/12 at 3:24 PM: Let's see if the SPX wants to run to the 20-day MA at 1320 before the close, or not. Keystone exited the SPY for the tiniest of tiny profits. He wanted to use a 2x or 3x ETF for this intraday long but was sleeping on the job this morning when he opened up the SPY trade. Also bot TZA opening up a new long position.