Keystone's Midday Market Action 7/10/12

The NYA leaps above 7738 creating the market bounce. The SPX touched the 1355 handle so an upside acceleration occurred to 1361. XLF remains bullish above 14.40, likewise the VIX is under 18.75. However, semi's, copper and commodities, that the bulls need to win over to drive markets higher, are not in a happy mood today, all three are red. This will place a ceiling on the market bounce. The drama today will involve watching the NYA, now at 7768 thirty points above the danger level at 7738. The broad indexes will stay buoyant as long as the NYA does.

The SPX 20-week MA is 1359.68 and 100-day MA is 1360.39 so watch these levels closely.  The COMPQ is leading the SPX today, so this will help the bulls maintain buoyancy. The SPX 30-minute chart shows the 8 MA curling up to move towards crossing up and thru the 34 MA which would be a bullish development for markets. Oddly, the TRIN is 1.47 which actually favors sellers and not reflective of the market move higher thus far. Markets may want to trail out sideways again, watch NYA 7738.  Keystone shorted RTH opening up a new short position. The negative divergence on the RTH daily and weekly charts is very attractive.

Note Added 7/10/12 at 10:10 AM:  The NYA is leaking, now at 7742 only four points above the 7738 danger level.  The bulls came out swinging but it appears they slipped on a banana peel and fell on their sword. NYA 7738 and/or XLF 14.40 will accelerate the market downside, if they fail. Sounds like a repeat of yesterday.

Note Added 7/10/12 at 10:19 AM:  Whoopsies daisies, NYA fell under 7738 and this ushers in the broad market weakness.  See if price stays under 7738, or not. Perhaps markets will move sideways today into the economic data and FOMC Minutes tomorrow.  If XLF stays above 14.40 the markets should line out sideways today but if 14.40 fails, that will create a market leg lower.  Keystone bot NOK as it came down to within the targeted entry range.  NOK has momo to the downside so some basing would be in order in this 1.65-1.85 area. The charts are positively diverged and encouraging. If NOK continues under 1.65, the 1.20 would be the lower target, but at this juncture a bounce is appearing likely from the current level. Euro is at a fresh two-year low, now printing 1.2260. Equity markets move with the euro.

Note Added 7/10/12 at 12:28 PM:  NYA under 7738, bearish for markets. CRB under 295.50, bearish. JJC under 44.25, bearish. SOX under 380, bearish. VIX under 18.75, bullish. XLF above 14.40, bullish. UTIL is up today but after four down days in a row, a simple bounce is not unreasonable. Watch to see if utes reestablish weakness in the days ahead which would be an ominous signal for markets going forward.  For today, XLF 14.40 is providing the current real-time drama. Markets move sideways if XLF 14.40 holds, if it fails, now at 14.43, the markets will take another leg lower.

Note Added 7/10/12 at 1:25 PM:  Note that the 8 MA pushed up thru the 34 MA on the SPX 30-minute chart which is a bullish indication for the hours and day or two ahead, but, the moving averages are in a fight for control and the 8 can easily slip back under; keep an eye on it.  Whoopsies daisies. XLF is on a banana peel right now trying to stay at 14.40 or higher..... a noticeable market drop will occur if XLF loses 14.40.

Note Added 7/10/12 at 2:39 PM:  XLF gave up the ghost, so did the markets for another leg lower. VIX is above the critical 18.75 so the bears are cruising now; see if VIX stays above 18.75, if so, lots more market weakness is ahead.  Note how the 8 MA did fail back below the 34 MA on the 30-minute chart so the bears are glad to see that.  Remember from the weekend and the SPX S/R that 1337 is very important support and serves as a gateway to 1300.

Note Added 7/10/12 at 3:10 PM:  VIX is wrestling above and below 18.75; as it drops under 18.75 the markets become buoyant, as the VIX is pushed higher above 18.75, the market selling increases.

Note Added 7/10/12 at 3:24 PM:  Note the VIX above 18.75, more market weakness.  SPX with a 1337 handle, this is it, major test of major support, bears can really receive a large selloff if they push for it, bulls need to recover immediately, otherwise they will lose their grip. Keystone took profits on the short RTH day trade, will look to reenter, it remains an attractive short.

Note Added 7/10/12 at 3:31 PM:  Bears will growl with VIX above 19. Keystone's SPX:VIX Ratio Indicator is at 70.45, two and one-half points above the critical 68 level. If 68 fails, the bears will have full command of the markets and the broad indexes will drop much further from here. For now, the bulls are preventing the SPX:VIX failure and also have stopped SPX 1337 support from failing, at least for now.

Note Added 7/10/12 at 3:43 PM:  VIX keeps climbing so SPX:VIX ratio keeps dropping, now at 69.84 only one handle away from danger and a final nail in the bull coffin. Will the closing bell save the bulls? SPX 1337 support is holding........

Note Added 7/10/12 at 3:49 PM:  To no real surprise, lots of buyers came in to support the break at 1337.  Buyers dominating six of last eight minutes. VIX dips a couple pennies under 19. SPX now recovering. The LOD hit 1336.27, that is damaging, the bears drew blood, so another test will likely occur at 1337 over the coming days. The bulls are trying to run away but they are leaving behind drops of blood and they appear weak. If VIX closes above 18.75, the bulls are in big trouble. The bulls can at least make it to sick bay and have the medic sew them up if they can move the VIX back under 18.75.

Note Added 7/10/12 at 4:00 PM:  VIX dropped in the final couple minutes helping the bulls, they barely made it to sick bay. VIX closing near 18.75, allow some time for settlement, but this would be perceived as bearish but only by one single penny.  How does Keystone know these numbers to watch far in advance of when they occur?  The XLF lays mortally wounded on the battlefield, the bears are dragging it to their camp to spend the night.