Keystone's Midday Market Action 8/28/12

The same four key parameters are in play today as yesterday; JJC 43.61, SOX 389, UTIL 464 and NYA 7808.  Copper is selling off this morning and appears to want to test the JJC 43.61 level. These sectors and indexes are identified by Keystone's algo and are subject to continuous recalculation so the JJC and SOX numbers may change slightly today. UTIL 464 is the number to watch all this week, it will not change. The NYA is simply the 40-week MA, one of Keystone's cyclical indicators, so you can monitor that easy enough.  If any one of the four lose the levels shown, think copper, the markets will be selling off, if two are lost, the markets will be selling off substantially and the SPX will be under 1400 and dropping and Keybot the Quant will likely flip to the short side. The market bulls need to keep all four parameters above the levels listed.

Watch for a market pivot point at 10 AM with the Consumer Confidence number; if markets are selling off they may favor a reversal back up at 10 AM, or visa versa.  For the SPX starting at 1410, the bears only need to drop under 1409 to acelerate the downside and that appears to be on tap. The sub 1409 level will need to hold for about ten minutes to lock it in. That leads to an immediate test of the sturdy 1406 and 1403 resistance levels. The bulls need to move above 1416 to accelerate an upside move.  A move thru 1410-1415 is sideways action today. Draghi cancelled his trip to Jackson Hole due to a busy schedule so the Saturday comments expected from the ECB head will not occur. Chairman Bernanke remains on tap for Friday. JJC 43.61, SOX 389, UTIL 464, NYA 7808 and SPX 1409 and 1416 tell you everything you need to know today for market direction. The first hour of trading should be entertaining. Tech is not leading the broad markets lower in the futures so the projected market down move does not appear to have much oomph.

Note Added 8/28/12 at 9:40 PM:  A quick start lower for markets but the bears do not have much oomph. Nasdaq is higher, tech will not cooperate to the downside so markets move sideways. VIX is slightly down, bullish. Copper, JJC, stays above 43.61. Utes are weaker. Keystone took profits on the MCP trade, benefitting from a strong pop. Also took profits in the UVXY overnight trade, will consider reentering both plays.  Also bot more HPQ increasing that long position. Con Con is on deck.

Note Added 8/28/12 at 10:17 AM:  The 10 AM pivot point resulted in a recovery move for markets. The ConCon was weak (lowest confidence number since November 2011) and markets intially knee-jerked lower.  The JJC level to watch is now 43.65 and at 43.83, the bulls remain in control.  If copper weakens and the JJC 43.65 level is violated, the markets will be selling off substantially, but, if JJC remains above 43.65, the markets will simply float along sideways to sideways higher all day long. Utilities are weak but UTIL remains eight points above the 464 danger level. It is shaping up to be a lazy hazy day of summer.

Note Added 8/28/12 at 10:56 AM:  Keystone wants to add to the RTH shorts but there are no shares available.  Instead, Keystone added to the RETS position which is a dangerous and thinly-traded leveraged ETF that moves opposite to the retail sector. The RTH negative divergence on the daily and weekly chart says a major smack down is on tap for retail, but, betting against the American consumer is always tricky.  Likewise, as would be expected, RETS, and SZK, both are inverse retail ETF's, exhibit very attractive positive divergence on the daily and weekly charts, the idea is to short the retail sector.

Note Added 8/28/12 at 3:21 PM:  Markets are flatter than the notes from Keystone's guitar playing.  Trading volume continues the vapor trend at a run rate of about 60% of a days expected volume.  UTIL may print a hanging man candle today. JJC is 43.86 remaining above the important 43.65 so markets meander sideways. Well look at that. The SPX 30-minute chart shows the 8 MA now stabbing down thru the 34 MA. Watch to see if the bears can takeover the reins thru the close, if the 8 remains under the 34, the broad indexes will be weaker for the hours and days ahead.

Note Added 8/28/12 at 3:42 PM:  With such a sleepy day today, it is stealth-like for the bears to gently push the 8 MA under the 34 MA on the SPX 30-minute chart while no one is looking. Keep an eye on it. RTH prints a multi-year high at 12:30 PM today at 44.20, now rolling off the pedestal at 44.08. The retail sector must be watched closely moving forward since it carried the markets this year along with tech.

Note Added 8/28/12 at 4:01 PM:  The SPX 1413 resistance held strong all day long. The 8 MA falling thru the 34 MA on the SPX 30-minute chart is a big deal, the bears plan on driving the bus forward.  This action sets up drama for the opening bell tomorrow morning since the bulls will have to spike markets higher to prevent the 8 MA from dropping significantly lower locking in the VST bear trend forward. For now, the bears are like ninja's today, sneaking in to cause the cross in the moving averages and no one is any wiser, except the readership here of course. The VIX is closing around 16.50 up on the day.  JJC is 43.89, settling out at the close, so bulls can hang their hat on JJC staying above 43.65 today. Keep watching copper. Reference the FXE chart from this morning, today's print is a hanging man candle with a matching high compared to three days ago, and the indicators are negatively diverged. The MACD line may want to see one more hurrah, so another stutter step is ahead for the euro, down, then up, then roll over down as all indicators should be negatively diverged at that point.