Keystone's Midday Market Action 10/26/12; Consumer Sentiment

The S&P futures are flat now, the euro is at 1.2917. If only checking the markets over the last few minutes, you would be unaware of all the early morning drama and theatrics.  The S&P's were off 12 only a couple of hours ago. The euro fell thru the psychological 1.29 level but has recovered.  The GDP number is 2.0%, amazing how a positive 2 handle can encourage traders.  Perhaps more data massage is occuring, paging Jack Welch, paging Jack Welch, which is especially easy with GDP numbers.  The final number that is locked in cement months down the road will probably place it closer to 1.5%.  The MRK earnings also helped to lift spirits.  Goodyear, GT, however, disappointed and this is concerning since rubber is another key bellwether.  Rubber makes the wheels go round for the global economy and are rolling strong in great economic times but, alas, not so much in troubled times. Consumer Sentiment at 9:55 AM will create a market pivot point so let the first half hour of trading play out before a feel for the day develops.

The bulls are buying pre-market erasing the earlier losses as mentioned above. It is somewhat unclear as to why since 12 spu's is a large deficit to remove this quickly and it cannot be due to GDP and MRK alone. Tongue-in-cheek, perhaps it was time for Spain to hint at a bailout again?  The SPX is looking for a bounce point anywhere between 1413 and 1391. A back test will be needed at some point forward for the 50-day MA at 1434.46. The 1403 is uber strong support where bad things will happen if it fails. The 20-week MA is 1403.65.  The SPX chart remains weak as highlighted this morning. In addition, the BPSPX fell thru the 70% level which now firmly signals bearish markets ahead.  For today, starting at 1413, the bulls need to touch the 1421 handle to launch an upside acceleration. The bears need to push under 1405 to launch a downside acceleration.  A move thru 1406-1420 is sideways action today.

Watch RTH 44.47 and GTX 4895. Both are contributing bearishly to markets. If the bulls begin a recovery rally, the strength of the move can be judged strong if one or both of these characters join the bull camp. The bears need to push the financials, XLF, under 15.60 to create another strong downside leg for the markets. Watch the 8 MA and 34 MA cross on the 60-minute chart which is currently bearish. Pay attention to the COMPQ versus SPX percentage relationship.  For the selloff in the overnight futures, tech was not leading the downside (Nasdaq versus S&P's), and the futures did indeed recover. Traders are shrugging off AMZN and AAPL disappointments last evening, but, let's see if they feel that way after trading begins. Watch the euro important levels as described in Keystone's XEU chart yesterday; 1.2925 (the bottom rail of the sideways triangle), 1.2900 (psychological level), 1.2880 (key support).  The euro is at 1.2915.

Note Added 10/26/12 at 9:40 AM:  Markets are flat to start the day. SPX is sitting on the strong 1413 S/R.  RTH is 44.25, bearish. GTX is 4873, bearish. VIX is 18 remaining elevated. Utilities sector is weak.  XLF is flat to negative. AAPL and AMZN are on the positive side. COMPQ is up 0.4% while SPX is up 0.2%; tech is leading the broad indexes higher, this encourages the bulls. The 8 MA is under the 34 MA on the SPX 30-minute chart remaining bearish as the day begins. Watch this 8 and 34 MA cross very closely since it will tell you if the recovery rally is real, or a fake-out.  The market pivot is upcoming at 9:55 AM.  The SPX is now at the 1416 S/R.

Note Added 10/26/12 at 10:22 AM:  The broad indexes dropped like a stone on the Consumer Sentiment pivot but is recovering.  The SPX is moving sideways thru 1410-1415 thus far today.  RTH is 44.22, bearish. GTX is 4861 remaining below the important 4895 that the bulls need to be happy. XLF leaks lower now at 15.79 but in the bull camp above 15.60. Apple is dipping a toe in the negative waters. AMZN is up 4%, go figure, perhaps if their earnings disappointment was twice as bad they would be up 8% (said cynically)? Markets are stumbling sideways. The euro has recovered strongly to 1.2941. Watch COMPQ versus SPX, the 8 and 34 MA cross, and AAPL's behavior today to gauge market direction. The Autumn leaves require attention since dogs, cats and small children are now disappearing under the suface when they go for a walk.

Note Added 10/26/12 at 12:38 PM: COMPQ is down 0.8% with the SPX down 0.6% thus, the tech leadership to the upside evaporated and the bears can drive the broad indexes lower now with tech leading the broad markets lower.  The 8 MA remains under the 34 MA.  AAPL is under 600 giving up the ghost today, that enables tech to become weaker. AAPL is printing the lows of the day now at 592.  RTH broke under 44. GTX remains weak.  VIX is printing at the highs today at 18.56.  Keystone's SPX:VIX Ratio Indicator is 75.76, watch for the 68 level that signals all steam ahead for the bears and hope is lost for the bulls. TRIN is 1.40 reflective of steady-eddy selling that can go on for a while. Financials are becoming dicey, the XLF now at the lows at 15.74 only 14 pennies from danger at 15.60. If XLF fails the 15.60 level, the SPX will be slicing down thru the critical 1403 support like a hot knife thru butter and long plays are likely not worth contemplating until 1394-1395 or 1391 as described in this morning's SPX chart. Watch the euro now at 1.2927. Bulls need to keep it here or higher, as a last ditch effort keep it above the psychological 1.29. If the euro loses 1.29 the markets will weaken further, a loss of 1.2880 will signal serious trouble for markets, a loss of 1.2830 and the markets will be noticeable selling off by then with the SPX easily in the 1390's and likely headed towards the 1380's. Pay attention to 1.29 for now to see if the bulls can hang on, or not.

Note Added 10/26/12 at 1:28 PM:  AAPL is at 596.80 printing a LOD at 591.00.  The 200-day MA support is 586.09.  The 586 is also a gap fill.  The 570-586 area is very strong support for Apple.

Note Added 10/26/12 at 3:49 PM:  Status quo.  The 8 MA keeps teasing the 34 MA but remains under.  Markets are flat, leaking a little into the close.

Note Added 10/26/12 at 3:56 PM:  Keystone bot HPQ opening up a new long trade; the positive divergence setting up is attractive.

Note Added 10/26/12 at 4:10 PM:  Reviewing the metrics, the RTH is 44.30, recovering today, but under 44.47, bearish.  GTX is 4859 under the 4895, bearish. The XLF is 15.77, bullish, staying above the 15.60 level where it will drown and drag the broad indexes under as well. The euro is 1.2932.  The utilities, UTIL, were weak today finishing at 475.  The number of importance for UTIL next week is 489.34 so the utes are fifteen points under, bearish. The VIX closed exactly at the 200-day MA support at 17.81; more upside in volatility is expected moving forward. AAPL ended the day down six but above the 600 level at 603.  As Apple recovered today, the COMPQ moved a hair above the SPX so markets moved flat and could remain buoyant. Next week watch the COMPQ's fight at the 200-day MA support. It is the leader so if it fails, the RUT will fail next, then the SPX and Dow Industrials. If the COMPQ holds the 200-day MA, the market bulls may be able to mount a come-back.  The 8 MA remains under the 34 MA (by a single hair) on the SPX 30-minute chart which continues to forecast bearishness for the hours and days ahead. Of greatest interest is the SPX coming down to test the uber strong 1403 horizontal support level, and 20-week MA at 1403.60, with a LOD at 1403.28. A bounce occurred from here up to 1417, so if you were as nimble as Fred Astaire you would have enjoyed 14 points in three hours time, but, alas, Keystone did not catch that bus.  Fear not, there is always another bus that comes along.

Note Added 10/26/12 at 6:21 PM:  The slope of the 150-day MA turns negative today signaling a Cyclical Bear Market ahead. Reference the Cyclical Signal page on this site.