Keystone's Midday Market Action 7/23/12

S&P futures remain weak with the opening bell less than one hour away. Remember the late day drama on Friday with NYA 7750?  That picks up again right where it left off.  If the NYA loses 7750, which is the 40-week MA, a key cyclical market indicator, and the SPX loses the 1362 level, Keystone's algorithm, Keybot the Quant, will likely flip to the short side.  The first ten minutes of trading are very important today. JJC 44.20 and XLF 14.46 remain important, both affecting markets negatively currently, and copper is being severely beaten now, and global banking is weak, so these two should remain in the bear camp today.  The SPX needs to drop only one point, thru 1362, to accelerate the downside and the futures show that all this will occur when the bell rings. SPX 1341 is an important support level. Reference the previous SPX S/R post for information on SPX support and resistance. The SPX 20-day MA is 1350.49, a critical level where bulls rule above, and bears rule below.

Pay close attention to the SPX 60-minute chart, the 200 EMA, which is currently at 1347.65 to start the day.  This is one of Keystone's Turn Signals, so a price failure thru 1347.65 has serious bearish ramifications moving forward. Mickey D's, MCD, laid an egg with earnings, missing the bottom line and slightly missing the top line. This creates further market disappointment and the S&P futures move down 17 towards the lows of the session. TXN earnings are very important today as well.  Watch CRB 294, now with a 299 handle, since failure of 294 will usher in further market weakness. The other important downside parameter is the VIX, volatility.  If the VIX crosses above 18.75, the market selling will increase and become sustainable moving forward.

Spain is banning short sales on stocks for three months and Italy is banning short sales on banks--the European tape bombs are hitting with frequency now. Do they not understand that banning short sales in the States had no positive affect on markets and in fact hurt equites markets over time? Desperate measures for a desperate country that has now jumped the rails and is falling apart right before out eyes. S&P futures now down over 18. Watch NYA 7750, CRB 294, VIX 18.75 and SPX 1350.49 and 1347.65 today. Keybot the Quant, displayed at the left margin on this site, will likely flip short after the opening bell. S&P's are now down 20, dropping like a stone.

Note Added 7/23/12 at 10:21 AM:  A wild start to the trading week.  Keybot the Quant, Keystone's algo, flipped short at the open.  The NYA lost the critical 40-week MA, a cyclical signal that now indicates bear markets ahead.  The VIX jumps above 20. Note that Keystone's SPX:VIX Ratio Indicator, a short term turn signal, drops under 68 indicating that a large down day is on tap, no surprise there.  Watch today to see if the ratio stays under 68, now printing 66.42.  The SPX failed the 20-day MA as well as the 200 EMA on the 60-minute chart, another key short term turn signal that says the bears now rule moving forward. Keystone took profits on SPXS and will look to reenter, perhaps when the TICK comes up to print a high number in the minutes ahead. Keystone also covered the RTH and XLU shorts taking profits and will look to reenter. Lots going on currently.

Note Added 7/23/12 at 10:42 AM:  Keystone reenters SPXS opening up this position again as the TICK hits +900. Keystone's SPX:VIX ratio pops back above 68, now at 69.70, which will place a damper on the bearish move today. Keep monitoring the ratio as the day moves along.  The VIX pulled back down now at 19.25 but it will continue to create market bearishness as long as it stays above 18.75.

Note Added 7/23/12 at 11:12 AM:  Bulls are fighting back.  SPX:VIX is above 70.  The RTH is above 41.90 returning to the bull camp and note the buoyancy in the markets.  RTH 41.90 and VIX 18.75 are key today.

Note Added 7/23/12 at 12:04 PM:  RTH remains above 41.90 which created the market bounce off the bottom today.  The VIX is printing 18.83. If the VIX drops under 18.75 and tumbles lower, this will correspond to a larger upside market move. The bears need to prevent the VIX 18.70's from failing while at the same time push the RTH back under 41.90.  Use RTH 41.90 and VIX 18.75 to gauge market direction.

Note Added 7/23/12 at 12:37 PM:  Markets head sideways as the RTH stays above 41.90 and VIX stays above 18.75; SPX moving thru 1338-1346. Either the RTH will drop under 41.90 which will send markets lower, or the VIX will drop under 18.75 which will send markets higher. SPX:VIX ratio is 71 remaining on the bull side above 68. The bears will continue to drive the bus going forward and will not experience an initial flat tire unless VIX moves lower. If TICK moves up to +900 in the minutes ahead, Keystone will likely increase the SPXS position.

Note Added 7/23/12 at 12:47 PM:  Keystone added more SPXS as the TICK printed +811. If VIX stays above 18.75 the short side trade will look great, if the VIX drops under 18.75, pressing any shorts will not appear wise.

Note Added 7/23/12 at 12:52 PM:  TICK at +800 again. VIX at 18.76, watch to see if it holds the 18.70's, or not.  RTH is over 42.  The SPX is at the top of the sideways channel today at 1346, markets will either bounce or die, this is an inflection point.

Note Added 7/23/12 at 1:08 PM:  Lots of drama at VIX 18.68-18.75 right now. Under 18.68 and market bulls will be happy the rest of today.  Above 18.75 and bears win.

Note Added 7/23/12 at 1:54 PM:  VIX is under 18.68 so the markets continue on a buoyant path today. NYA is at 7657 far below the 7750 area so this is a huge feather in the bear cap. The SPX moved back above the 200 EMA on the 60-minute chart at 1347.50 over the last hour. Watch the 1347.50 very closely. The utilities are weak which favors bears.  The NYSE run rate is at about 80% of a days typical volume, which is light, and similar to the days that were up, but interestingly, the volume was heavier early in the day today and as markets move up the volume becomes lighter. Focus on SPX 1347.50 and VIX 18.68 to determine market direction for the last two hours of the session. SPX is now printing 1347.95 (bullish) and the VIX is printing 18.61 (bullish). Remember, VIX moves inversely to the broad indexes.

Note Added 7/23/12 at 3:03 PM:  Here it is; SPX dropped under 1347.50 and the VIX sits exactly on top of 18.68-ish; it is time for markets to decide how to end the day. As VIX goes, so goes the markets.

Note Added 7/23/12 at 3:32 PM:  Look at that big collapse in the VIX, dropping from over 18.70 to under 18.35 in only five minutes. This causes the SPX to jump about four handles higher.  SPX 1361 is important for the remaining one-half hour of trading since Keybot the Quant, Keystone's short to intermediate term trading algo, will likely whipsaw back to the long side if the bulls can push the SPX up to 1361 before the close.  If not, bears should maintain control into the close and into tomorrow.

Note Added 7/23/12 at 4:05 PM:  The VIX closes sub 18.68 so the bulls have a feather in their cap but the NYA is under its 40-week MA which is a significant bearish technical signal. The bulls and bears simply continue to beat each other up day after day. Markets wanted to provide the benefit of the doubt to bulls before the TXN earnings that are imminent which will set the tone for tech and the markets into tomorrow. The CPC print will be interesting this evening. Look at that sneaky VIX, still settling out, currently printing 18.60. Trannies, RUT (small caps) and COMPQ (tech) all underperformed the broad market (SPX) today, which provides the bears a tiny smile.

Note Added 7/23/12 at 8:05 PM: Texan (TXN) laid an egg, beating on the bottom line, but missing slightly on the top line, and providing very weak guidance moving forward. In addition, CSCO announces mass layoffs to trim costs.  Also, Moody's lowers the outlook to negative for Germany, Netherlands and Luxemburg while maintaining Finland's rating.  Watch to see how Germany's yields behave in the morning, will Germany maintain a perception as a safe haven?