Keystone's Midday Market Action 10/1/12; Q4 Begins

Watch the utilities. If UTIL stays above 472.06 and the SPX moves above 1447, Keystone's algo, Keybot the Quant, continually posted at the left margin, will likely flip long.  If UTIL is over 472.06 but the SPX cannot move above 1447, the markets move sideways and Keybot will likely remain short. If UTIL drops under 472.06, the broad market selling will accelerate.  Watch the euro, below 128.30 is bear friendly, above 128.75 is bull friendly.  The euro is now at 129.24 after printing near 128 overnight.  The futures point towards a test of 1447 after the opening bell.  As the markets pop, note if the COMPQ leads the SPX higher, or not, to determine if the bulls have oomph. Markets may idle for the first half-hour since the ISM hits at 10 AM and this will immediately push the markets one way or the other and set the tone for today.  Chairman Bernanke speaks at lunch time. If Moody's downgrades Spain, the euro and markets will drop. If the news on a Greece bailout is encouraging, or if Spain asks for a bailout, the euro and markets will pop.

Note Added 10/1/12 at 10:38 AM:  Lots of excitement this morning as was anticipated due to the buoyancy in the utilities sector as described in the final minutes of trading on Friday.  UTIL is well over 472, now printing 477 so it was all systems go for bulls.  The SPX took out 1447 but that was not convincing enough. Once 1450 gave way the bulls took over control. Keystone's algorithm flipped to the bull side at SPX 1453, but remain cautious moving forward.  The move is very shaky since the underlying markets portray a much greater negative picture.  It would not be surprising to see the algo flip back to the bear side this week. The euro is over 129 which beats the dollar lower and allows commodities and equities to move higher. The 8 MA remains above the 34 MA on the SPX 30-minute chart, and price also broke up and out of the sideways triangle as charted this weekend, so that continues to favor bulls for the hours and days ahead.  A test of SPX 1460-ish appears likely today or tomorrow. Note the serious lag of the COMPQ versus the SPX indicating that the bullish rally move today does not have a lot of gas, tech is not leading the upside. The bulls are driving the bus but the move today is not yet all that convincing. SPX resistance above is 1453, 1457, 1460, 1461, 1465, 1465.77 and 1468. SPX 1460 and 1468 are very strong R. Keystone bot UWM opening up a new long position.

Note Added 10/1/12 at 11:43 AM:  VIX is flat.  Tech is not leading the market upside today. PM's are coming back down after printing at or near highs for the year. Gold continues the fight at the critical 1780 which would light the way to 1820's. Oil is weakening. NYSE volume is a a run rate of about only 84% of a day's average volume expected. These metrics are not what would be expected with such a huge up day. Note the +1200 TICK that occurred at the 10 AM on the better than expected ISM. TRIN is 0.73 with a low at 0.58 so the buying is enthusiastic today, probably more due to the shorts covering than anything.  NYAD spiked to +2000 which is also an uber bullish move. The TICK, TRIN and NYAD would be agreeable to a pull back move for markets in the day or two ahead to relieve the uber bullish numbers today.  SPX is moving thru the 1453 and 1457 support/resistance zone. Chairman Bernanke is wiping the jelly donut stains from his necktie as he prepares to speak within the hour. Bernanke will likely either send the SPX to 1457 and 1460, or, down thru 1453 and 1450.

Note Added 10/1/12 at 11:58 AM:  VIX turns positive. Euro trying to hold 129.  SPX drops under 1453 support. Support below is 1451.28 (10-day MA), 1447, 1444.

Note Added 10/1/12 at 1:46 PM:  Look at the VIX go, now at 16.31, printing highs for the day.  The markets and the VIX only move in the same direction about 10% or less of the time, therefore, one of them is wrong today.  The VIX 17.25 level is a bull-bear line in the sand, if VIX moves above 17.25 the broad indexes will sell off substantially.  UTIL has a 475 handle remaining above the important 472 level for this week. RUT (Russell Small Caps), COMPQ (Nasdaq), AAPL and TRAN (Trannies) are all negative.

Note Added 10/1/12 at 3:33 PM:  Markets keep leaking lower, further support below is 1444, 1443.41 (20-day MA), 1441, 1440.24, 1440, 1438 and 1435.  VIX is printing 16.35 with the 17.25 level identifying significant market trouble.  The euro is 1.2883 nearing Keystone's danger range of 128.30-128.75 discussed this morning. Utilities have a 473 handle nearing the UTIL 472.06 that will trigger significant market trouble. If the bulls can keep UTIL above 472.06 and VIX below 17.25, they can float markets higher. The 8 MA is nearing a cross of the 34 MA on the SPX 30-minute chart to signal bearishness ahead but the cross may not occur until tomorrow morning, if it occurs.

Note Added 10/1/12 at 4:05 PM:  UTIL closes at 474 only two points from danger which will reinitiate the market downside, ditto VIX 17.25.  The SPX closes on top of the 1444 S/R level, below the strong 1447 level. Very odd market behavior today; it had that feel from the get-go. Lots of cross currents and instability. As VIX moves higher note the larger point swings intraday. Stay very alert this week. Watch your wallet.