Keystone's Midday Market Action 6/4/12

The first full week of June is off and stumbling.  Markets popped slightly at the open and then fell on their sword drifting lower but, for now, we will call the action sideways indecisive.  The strong SPX 1277-1278 gauntlet of support gave way with price then accelerating lower as would be expected printing a 1270.83 LOD thus far. SPX S/R is 1277, 1275, 1272, 1270, 1268. If 1268 is lost, the starting year number of 1258 will be in the sights. The SPX remains below the 12-month MA at 1289.20, below the 200-day MA at 1284.94 and below the 50-week MA at 1283.34. Watch these levels when the SPX recovers.

The uber low NYAD numbers shown previously, the CPC 1.37 reading from Friday and the spike in the TRIN Friday hint that some market buoyancy is needed. The full moon is this evening so typically markets are buoyant in front of the full moon. The broad indexes are meandering sideways today, likely waiting on direction via European tape bombs (news coming across the wires). It may be a sit tight, wait and watch, type of day today. Markets should maintain a sideways posture unless the 1270 and 1268 support levels give way which will lead much lower. Also remember that the target for the S&P head and shoulders pattern on the daily chart is 1260 (head at 1420 and neck at 1340). This week is light on economic data but heavy on Fed talk so the markets are at the mercy of the hot air emanating from Europe and the Fed. Knowing this causes trader's to search for the Tylenol. Volatility, the VIX is at 27 so expect a pattern of large up days and large down days to continue for the broad indexes.

Note Added 6/4/12 at 10:43 AM:  SPX is coming back up for a back kiss of that critical 1277-1278 S/R level where price will decide to collapse again, or, to punch back up thru and provide a temporary recovery move.

Note Added 6/4/12 at 12:12 PM: SPX collapsed after the 1277 back test.  Now heading towards a test of the 1270 and 1268 support. LOD is 1269.09 thus far. SPX 1268 support should hold and lead to a bounce but if it fails price will move towards 1258. NYAD is -1500 so the divergence continues where the decliners are lessening each day as the NYA moves lower in price. This hints that a temporary bottom is taking place. The TRIN is 1.72, elevated for two sessions in a row which contines to prefer a snap back rally as well.

Note Added 6/4/12 at 12:21 PM:  SPX just printed a LOD at 1268.36 so consider that the intitial test of the sturdy 1268 support. The fight is on. Bounce or die at 1268; this action likely determining the fate of today's markets right now. Minute charts remain favorable to a market move back up. The 8 MA remains under the 34 MA on the SPX 3-minute chart which signals continued overall bearishness in the day or two or three ahead, but, the price action is positively diverging now hinting that some market buoyancy in the VST is needed. Simply watch to see if 1268 holds, or not.

Note Added 6/4/12 at 2:06 PM:  SPX pierced 1268 support at 12:30 PM but after five minutes price recovered.  Price then returned to the lows at 1:30 PM piercing the strong 1268 support once again but after about ten minutes price recovered once more.  She's holding at 1268 so far. Minute charts remain favorable to a move back up. Money is chasing into high yield stocks such as T and VZ pumping the divvy bubble larger.

Note Added 6/4/12 at 2:15 PM:  SPX wants to back test the 1272 support that failed at lunch time leading to the market lull the last two hours.  If price up punches thru, the inchworm trek to 1275 is next. Markets are sideways thru 1268-1272 for the last two hours.

Note Added 6/4/12 at 2:20 PM:  Booiiinnng. SPX is over 1274 in a heartbeat. Is this a last gasp of air from the beast, or, the first solid step of an afternoon recovery? If price moves thru 1275 R that sets up for a rematch of the critical 1277-1278 S/R gauntlet.

Note Added 6/4/12 at 3:22 PM:  SPX attacked the 1277-1278 gauntlet of resistance and received a smack down, now traveling across the 1275 support.

Note Added 6/4/12 at 3:45 PM:  The bulls are making a charge at the 1277-1278 gauntlet again. 1276.66.... 1276.70 ..... Price will either drive up thru the critical 1277-1278, or fail.

Note Added 6/4/12 at 3:50 PM:  The bugler plays "Charge!" The bull calvalry is attacking the 1277-1278 gauntlet, bounce or die.

Note Added 6/4/12 at 4:00 PM:  SPX closes at 1278 so the fight for the 1277-1278 S/R gauntlet continues tomorrow. Both camps will regroup.  The market bears will sharpen the bayonets overnight while the bull's are grateful that it was not Custer's Last Stand today. The markets had that sideways indecisive feel this morning; the SPX closing where it started today at 1278. Egan-Jones rating agency downgrades the U.K. Previously, the firm downgraded Spain, and Italy was downgraded after Friday's close.