Keystone's Midday Market Action 10/4/12; Romney Wins Debate; ECB Leaves Rate Unchanged

S&P futures are up about seven points this morning after the ECB announces no change to the benchmark interest rate at 0.75%.  Draghi's press conferrence is ongoing as this missive is typed. He says that Europe growth remains weak. A weaker euro will help growth but he did not cut. Therefore, he likely wanted to avoid drama ahead of the U.S. presidential election and chose to take a pass. The next ECB meeting is only two days after the election on 11/6/12 so a rate cut may occur then.  Just like last time, the euro pops higher on the news. Higher euro means higher commodities, gold and equities.

The presidential debate last evening results in a landslide victory for Romney. Keystone does not have a dog in this hunt but it is obvious that Romney got the better of the President, cleaning the President's clock. The elderly woman moderating the debate did not perform well. The President came unprepared; the couple day vacation at the resort must have been more filled with massages and manicures instead of debate prep.  The President was the student trying to cover up the fact that he did not do his homework. A pair of tap shoes would have helped. Romney maintained eye contact and exuded confidence. The President looked like he wanted to be anywhere except there, looking down and avoiding eye contact. Romney's command of business and finance is impressive, you can easily see why he made a lot of dough in his career, at times it looked like Romney was teaching the President with the pres taking notes, a clinic on business. The media is the largest winner since now they have a horse race that can sell newspapers, or, more correctly in these times, sell ad space on the Internet. The Intrade link is in the lower right margin with the President maintaining the better chance of being elected but Romney greatly improving his chances after last evenings performance. What effect does all this have on markets? The futures are up strongly but that is more attributable to the timing with the ECB rate decision today with a much higher euro bringing the markets and commodities higher.

Yesterday's KFT trading shenanigans were swept under the rug but are very important. The 'erroneous' trades occurred across eight different exchanges, a game-changer since one exchange cannot be singled out as the culprit. All exchanges are stuck in the HFT (high frequency trading) soup now. The chances for a flash crash took a tiny uptick yesterday. HPQ's terrible guidance roiled the tech sector but AAPL buoyancy saved the day.  CEO Whitman is likely resetting the clock to the lowest point possible so the progress in future quarters will be rosie.  Unfortunately, if long this sector, all associated tickers such as DELL, AMD, INTC and others dropped in sympathy. AMD will be interesting today to see if a bottom holds or if the HPQ doom and gloom takes it a bit lower. All four of these tickers show very attractive charts from a basing and positive divergence perspective which actually hints at a nice bounce coming across the board. Perhaps the HPQ news will serve as a downside flush to place the firm base in place for these tickers.

For the broad markets, watch UTIL 472 and VIX 17.25 which have remained bullish all week since Keystone's algo, Keybot the Quant, went long on Monday. As long as UTIL remains above 472 and the VIX below 17.25, the bulls are smokin' big cigars and ordering drinks.  For the SPX today, starting at 1451, the bulls need to punch up thru 1454 and an upside acceleration will occur. The futures are pointing this way. If 1454 holds for about ten minutes or more, the 1460 resistance will be tested in short order.  The bears need to push under 1442 to accelerate the downside so watch this as the day progresses.  A move thru 1443-1453 is sideways action.  The bulls are enjoying a positive start to the day courtesy of the ECB and strong euro. The 8 MA is above the 34 MA on the SPX 30-minute chart which is bullish for the hours and days ahead. Watch the 20-day MA at 1447.89, also the 10-day MA now at 1448.13 but will move upwards as the price moves up.

Stay alert in these markets. This week shows many cross currents with typical intramarket relationships skewing in different directions such as up volatility when markets are up, or Treasury rates dropping as stocks move up, and even the mixed closes in the broad indexes as well. The SPX daily chart this morning shows that the coming days will likely have a profound impact on price, sending the SPX up to 1485 or down to 1418.  Factory Orders hit this morning but should not affect markets greatly. The FOMC Minutes will create a market pivot point at 2 PM EST. After 10 AM, markets may travel flat all day long until the mid afternoon pivot. The euro is printing at recent highs at 129.90 continuing to bounce off the ECB news. The following asset relationships are ongoing; Up euro = down dollar = up commodities = up gold = up copper = up equities.  Down euro = up dollar = down commodities = down gold = down copper = down equities. AAPL is a touch negative pre-market. Watch the COMPQ versus SPX percentage this morning to determine the extent of the upside oomph.

Note Added 10/4/12 at 9:45 AM:  Draghi creates today's rally with a nod to Romney. KOL is up 1.4% feeling some Romney love since the President dislikes coal. UTIL has tagged 481. This is important since Keystone's algorithm will be tracking UTIL 481 next week. This hints that the market bulls are already setting things up to maintain market buoyancy thru next week. The SPX jumps over 1454 but the move is not entirely convincing as yet. Usually if the level holds from seven to ten minutes it is golden. SPX S/R in this area is 1465, 1461, 1460, 1457 and 1453. Price is now moving thru 1453-1457. A move thru 1457 will lead to the 1460's. Volatilty is flat not knowing which way to turn. AAPL is down a buck.  Note that the Nasdaq is flat with the SPX up +0.3% so tech is not leading the move higher so the bullish move to start the day does not have a lot of oomph. Gold is at 1790, watch to see if it can finally close in the 1780's today, which should lead to the 1820's, or not. Oil is at 89. The market bulls are driving the bus although they are driving along the side of the road rather than on the pavement.

Note Added 10/4/12 at 9:51 AM:  The SPX is testing the 1457 resistance so this will tell a lot. Factory Orders hit in a few minutes, followed by Natty Gas Inventories at 10:30 AM, markets should settle in until the mid afternoon pivot.

Note Added 10/4/12 at 10:11 AM:  The one-minute chart shows an ascending triangle pattern with the 1457 base line serving as resistance. Price just punched up thru 1457, that sets up the test of the strong R at 1460 and price has now punched up thru there as this sentence is typed. There should be a struggle here due to the strength of this 1460 S/R level.  The ascending triangle targets 1460 so that very short term trading pattern already played out and gave price the 1460 print. The SPX will next attempt a run at 1461 and 1465 R. Tech is not leading the upside so the strength of the move remains questionable.  AAPL is up a cople bucks which directly aids the market bulls. Note how price has poked up thru the upper trend line on the daily chart posted this morning. A back kiss to the 1553-ish would be prudent for price to prove that the break out above the sideways triangle is preferred. The SPX is now moving thru 1461-1465. HPQ is receiving a further 4% beating but this stock is actually an attractive buy in this area, say, 13.70-14.50. Keystone is not in HPQ since there is exposure to this area already with AMD. If AMD works out and provides profit, however, a rotation from AMD to HPQ may be attractive in the days or couple weeks ahead.

Note Added 10/4/12 at 1:29 PM:  Gold maintains its move today on central banker soothing words. The strong euro due to Draghi not cutting rates moves the dollar lower and gold higher. Gold will target the 1820's now. The euro moves above 130.  The SPX has honored the strong 1460 level today testing each side, above and below, ahead of the FOMC Minutes. Price is favoring the 1457, 1460, 1461 and 1465 S/R levels. UTIL remains elevated and firmly in the bull camp as traders that go long the markets, while holding their noses, are grabbing at the divvy or perceived safer stocks such as utes or staples, call them reluctant buyers.  The VIX remains above 15.  Tech continues to not lead the upside which causes the lack of oomph with the SPX. The Halloween season is coming and AAPL is 666. Interestingly, 666 marked the SPX low in March 2009. The SPX closing high this year is 1465.77. This afternoon should prove entertaining. FOMC Minutes is 2 PM, expect a market pivot point.

Note Added 10/4/12 at 2:03 PM:  The FOMC Minutes shows all members in favor of QE3 except Lacker.  The minutes contain all the wishy washy comments playing both sides of the street.  Please give me a one armed Fed member! That way he cannot say on one hand..., but on the other hand....  The minutes do not seem to shed a lot of light on the Fed's actions. The markets yawn. Traders look around at each other asking, 'now what?'  SPX continues its tease of the strong 1460 S/R. Check out the 5-minute chart. Remember the ascending triangle on the 1-minute chart this morning where price broke thru 1457 to then grab 1460?  The 5-minute chart has an ascending triangle now with baseline at 1462, the vertical side is seven handles tall. Thus, if price breaks up thru 1462, the SPX should run to 1469 and perhaps close with a new high for the year.  Watch the strong 1460 S/R and most importantly 1462 R as the session plays out. Bears need to prevent 1462 with all their might. Bulls want to move up over 1462 and the day will finish with a big upside orgy party. Note how price was at 1462 when the FOMC Minutes hit at 2 PM and the markets pivoted lower, dropping the SPX from 1462 to 1459 in only three minutes, receiving a rejection from the 1462 level and preventing the ascending triangle pattern from playing out, so far.  The euro is 1.3019, it drives the bus as per the bullish asset relationship described in the fifth paragraph above.

Note Added 10/4/12 at 3:43 PM:  The ascending triangle on the SPX 5-minute chart is in place but price is not yet able to break out up thru 1462 to put the pattern in play with a 1469 target. The fight for the 1462 breakout continues into the closing bell today, ahead of the most important economic data point of the entire trading year tomorrow, the Monthly Jobs Report.  VIX is 15.02. UTIL is 481.08, dropping under the critical 481.36 number that will play an important role next week. UTIL above 481 is bullish for markets. Below 481 late day tomorrow and all next week is very bearish for markets moving forward.

Note Added 10/4/12 at 4:00 PM:  The SPX could not punch up thru 1462.  The Jobs Report will decide the outcome.  The TRIN is an uber low 0.63 that will want to see a snap back market selling move. Two +900 TICK's occur at the close. UTIL is 481.48--above the critical 481.36. VIX is driven low in the final minute down to 14.79.  The table is set fo rthe jobs circus.