Keystone's Midday Market Action 8/3/12

The Monthly Jobs Report blows out even the high estimates at 163K jobs, a positive surprise, reversing the downward trend since the Good Friday debacle on 4/6/12.  The unemployment rate, however, moved up a tick to 8.3%.  The hours worked remains the same and earnings are not impressive either, so, despite the happy top line number, under the surface there is nothing to celebrate. Even 163K would only be in line with the number of jobs needed to simply keep pace with new workers entering the work force, let alone handle all the poor souls that cannot find jobs for weeks, months, even years on end.  Nevertheless, the bulls are running this morning and the S&P futures are up 15.  This sets up the SPX to attack yesterday's high at 1375.13. The futures were strong all morning before the Jobs Report, the S&P's were up about 12 before the jobs number, so the jobs number only added about three; the bulk of the projected equity gains today are on rumors that Spain will come forward to ask for a bailout and finally some action will occur in Europe. Spain will likely become a focus over the weekend.

The XLF is trading 14.65 pre-market well above the 14.51 the bulls needed so Keystone's algo, Keybot the Quant, will experience a whipsaw and flip back to the long side after the open today, taking its lumps from the move to the short side yesterday.  Watch XLF 14.51, NYA 7760 (see this morning's chart) and VIX 18.80 moving forward which will signal the broad market direction. The bulls are driving the bus as the final day of the trading week begins, the markets set to recover the losses from yesterday.

Note Added 8/3/12 at 11:09 AM:  The bulls are running. The upside began overnight on a happy Europe vibe. The positive suprise in the Jobs Report added a power boost.  The leader of the markets, Dr. Copper, interestingly remains weak. Keystone's algo, Keybot the Quant flipped back to the long side today. The market gyrations should continue. The markets are following a saw-tooth, jagged sideways pattern for six weeks now. SPX is now testing the strong 1391 resistance, and punching up thru perhaps.  SPX resistance above is 1391, 1394, 1399, 1403 and 1406. The strongest resistance is 1391, 1403 and 1406. The 8 MA just pierced up thru the 34 MA for the SPX 30-minute chart which signals bullishness for the hours and days ahead. The high prints in the SPX are occurring with negative divergence showing across the minute charts and daily chart. Watch to see if the negative divergence remains in place. Keystone took profits on CTRP exiting the trade, it remains attractive, will look to reenter.

Note Added 8/3/12 at 12:03 PM:  Here's the test of SPX 1394 R. It will be thru and onward to 1399, or, collapse back down to 1391.

Note Added 8/3/12 at 2:11 PM:  SPX is traveling thru 1391-1394. The bulls are cruising. Utes are down a percent this week.  Copper, even though up two percent today, remains down two percent this week and is lagging the rally--it should lead.  The volume for the rally is vapor and fumes. Traders must have given up on the markets and simply went to the beach. The NYSE volume run rate today is on pace for only about two-thirds of a days average expected volume. NYAD prints near +2300 so this uber bullishness will require a pull back move in the hours ahead to relieve the upside euphoria. Ditto the TRIN at a low 0.66, an intraday low at 0.45, which is uber bullish. The NYA is making new highs over the last month but the NYHL is diverging, not making new highs, so the participation in the rally is fading as the broad markets move higher. The bulls are buying steaks today to cook on the grill tonight.

Note Added 8/3/12 at 3:37 PM:  Whoops. SPX 1393 to 1392, then a drop from 1392 to 1388 in eleven minutes. Just a little late day give back to relieve some of that uber high NYAD. SPX support below is 1389, 1388, 1385, 1377, 1374, 1371, 1370 and the uber strong 1366. SPX is flat on the week. Ditto Dow and Nasdaq. RUT is down one percent on the week. All that energy spent on trading to end up in the same place or lower. VIX is ready to print a 15 handle; the CPC put/call number will be interesting today to see if a low 0.7's number prints, or not. The VIX and CPC are likely screaming complacency. There's VIX 15.93, there is no fear in the markets, traders expect the broad indexes to go up continuously without worry.

Note Added 8/3/12 at 3:57 PM:  The NYSE volume trailed off from vapor to mist that is vanishing all together.  The volume will end at below one-half of a days expected average volume; very weak participation.

Note Added 8/3/12 at 4:05 PM:  Note that the SPX closed at 1390.99, it may settle out further, directly on top of the 1391 that Keystone was harping about all day. The 1394 R held intraday; 1391 R is holding for the close. SPX 1391 is an important number for next week, it is the pathway to the 1403 R, as listed above. Time to search for some pie.