Keystone's Midday Market Action 9/20/12; China PMI Disappoints; Ditto Eurozone; Spain Delays Bailout

Japan exports continue falling.  China’s Flash PMI disappoints showing shrinking manufacturing for eleven months in a row, the largest contraction since data collection began.  Weaker Chinese domestic demand is worrisome since the transition from rural to urban life is obviously occurring far slower than hoped.  Japan-China tensions continue over the island dispute.  Eurozone PMI’s remain weak now showing an eight month contraction ongoing in Europe.  Spanish bailout doubts are weighing negatively on markets.  The ECB wants to help Spain but Spain continues to delay asking for the bailout since it does not want to give up sovereignty.  Instead, Spain says there is some ‘leftover’ bailout money available and will limp along using that. The euro falls under 1.30.  Mining and commodities are hit very hard on the weak China and Eurozone PMI’s.  Overnight futures markets are weak with the S&P’s down about five points and copper moving strongly lower. Daimler lowers guidance, the Mercedes-Benz unit is weak, perhaps another indication that even the high-end shoppers are decreasing spending.  The euro falls under 1.2950.

The market bulls need to see UTIL 478.48 to pull themselves out of the funk. The bears need to see SOX 395.50 to increase the market downside action. UTIL 462.20 represents the trap-door for the equities markets. For the SPX today, the bulls need to touch 1465 to ignite an upside acceleration; bears need to push under 1458 to accelerate the downside; 1459-1464 is sideways action.  Futures indicate that the 1458 should fail at the open. Therefore, watch the semiconductors since weak semi's will lead to more downside for the broad indexes. If the semiconductors hold up and do not want to go down, the bears got nothing. SPX S/R is 1468, 1466, 1465, 1464, 1460, 1457, 1455, 1453, 1448 and 1446.  Futures show that tech is not leading the downside so despite the weak opening on tap, the bears do not appear to have the oomph at the start. Watch the COMPQ and SPX relationship today. Keystone's SPXA150R indicator remains under 80, bearish.  Watch to see if the 8 MA falls back below the 34 MA on the SPX 30-minute chart, or not. A weak euro will continue to create weak equity markets, remember the asset relationship euro down = dollar up = commodities, copper, gold and equities down. The euro is at 1.2944. The S&P's are down six. The opening bell is only minutes away.

Note Added 9/20/12 at 10:07 AM:  Semiconductors fail at the open helping push markets lower; watch SOX 395.50 today. The SPX dropped thru 1258 so a downside acceleration to a LOD of 1449.98 occurs thus far. Price fell thru the support levels at 1457, 1455, 1453 and bounced from the psychological 1450.  The next support below is 1448 then a very strong support test exists at 1446 which would open the door to far lower prices.  Right now, the SPX is content with moving sideways thru 1448-1453. COMPQ is leading the SPX lower so all systems are go for bears with tech leading the markets lower today, and that tech weakness is showing up in the semi's thus far.  The 8 MA is near the 34 MA about to stab down thru on the 30-minute chart, keep an eye on it.

Note Added 9/20/12 at 12:29 PM:  The semi's are bleeding profusely, the wound ripped open fifteen minutes ago dumping SOX from 396 to the current 393 print, -0.8% in a few minutes time.  Market bulls need to move SOX back above 395.50. Market bears will continue the selling pressure with the SOX under 395.50.  The NYSE volume is on pace for a day's average volume, remember yesterday's up day was only about two-thirds of a day's average volume. Watch to see if the VIX can get above 15 today showing that fear is on the rise. SPX is moving thru 1455-1458 the last two hours; if 1455 fails, a retest of 1453 support is next then 1448. The 8 MA stabbed down thru the 34 MA on the SPX 30-minute chart which favors the bears for the hours and days ahead.

Note Added 9/20/12 at 3:36 PM:  SOX is under 395.50, UTIL is under 478.48, both bearish. Tech continues to lead the broad markets lower, bearish, but, the markets have returned to the flat line today.  NYSE volume petered out quickly today, interestingly, as the markets moved higher. Overall, today's volume will be 75% or more of a day's average volume remaining ahead of yesterdays pace. See if the VIX can close above 14, or not.  The bears have all systems go for the downside, but markets are flat, someone needs to tap the broad indexes on the shoulder and tell them to lay down. Trannies are down 3% today remaining steadfastly against the market rally as per Dow Theory. Weak railroads are causing the damage led by NSC's 9% tumble due to its lowered forecasts.

Note Added 9/20/12 at 4:03 PM: SOX finishes under 395.50 and UTIL finishes under 478.48, bears are content and remain in control.  The Oracle speaks. ORCL reports 53 cents exactly in line but top line revenue is light, ahhhh, the Oracle trips, catching his sandal on a banana peel, there he goes, falling down the steps, losing 2% in AH's. If this behavior holds, the tech sector will be negatively effected tomorrow. The euro is 1.2966.