Keystone's Midday Market Action 11/27/12; Egypt; Fiscal Cliff

The four key parameters remain status quo. Keystone's algo is tracking SOX 372.20, JJC 44.90, XLF 15.65 and VIX 15.90. SOX and JJC are causing market bearishness and XLF and VIX are causing bullishness. Any change to any of the four will result in a corresponding move for the broad indexes in that same respective direction.  The early lift in the SPX after the opening bell was due to the stronger semiconductors but they quickly petered out and fell on their sword.  The TICK marks the top today thus far at 9:50 AM with a +880 TICK and the bottom at 10:30 AM with the -840 TICK.  The SPX came up for a look at 1409 resistance but was unable to punch up thru.  The SPX is moving sideways thus far today, not yet testing the lower boundary for today at 1398. The VIX is flat to down which favors bulls. Tech is not leading the broad markets lower so the bears cannot develop any mojo and hte markets remain buoyant. The SPX and COMPQ are moving coincidentally, however, so watch to see which way the COMPQ prefers. The SPX is playing around at the critical 1403 S/R. The 200 EMA on the 60-minute chart is 1402.41. Bulls win above 1403, bears win below 1402.41. Note the pivot point at 10 AM where the markets took a turn south. The asset relationship of the euro down = dollar up = equities down is in play. AAPL is negative. The fiscal cliff negotiations and Egypt drama's will receive trader's attention.

Keystone sold USD, the ultra long semiconductor ETF, closing out the position at a minor loss. Keystone took profits on TLAB and RSH exiting those long trades. Also bot TWM opening up a new long position (which is a leveraged short of small caps). TLAB and RSH remain attractive moving forward but it appears prudent to start reducing long positions, building cash, and bringing on additional shorts. If the VIX and XLF highlighted above would move to the bear camp, Keystone's algo, Keybot the Quant, will likely flip short.

Note Added 11/27/12 at 11:07 AM:  The 8 MA and 34 MA on the 30-minute chart continue to converge.  The euro is 1.2932.  The 10-year yield is 1.65%.  The SPX is deciding which way to go right now from the 1402-1403 inflection point.  The SPX is down -0.19%. The COMPQ is -0.13%. Tech is not leading lower so the bears cannot develop any downside oomph. If the Nasdaq starts to lead the SPX lower, that may serve as a signal to nibble on more shorts. Egypt is calm.

Note Added 11/27/12 at 11:42 AM:  Keystone added more TWM on the +953 TICK a couple minutes ago. Also added more SPXS to that ongoing long position (which is short the markets).

Note Added 11/27/12 at 11:54 AM:  Semiconductors are running hgher which is causing the market bullishness. SOX is printing 372.76 well above the 372.20 level mentioned above. This will send the SPX up and thru 1409 if the SOX 372.20-372.50 support holds. If the SPX moves thru 1409, the 1412-1413 resistance is next. Tech is leading the broad markets higher despite AAPL down a couple bucks. The VIX is printing at the lows of the day at 15.03 which emboldens the market bulls. Look for the test of 1409 resistance and see what happens.

Note Added 11/27/12 at 12:04 PM:  Here's the test of 1409, very important, who will win?

Note Added 11/27/12 at 12:43 PM:  The semiconductors are dictating market action today as well as the lower volatility.  The SOX fell on its sword again so the SPX backed off from 1409.  The SOX is now at 372.34.  Keystone's algo has now settled on SOX 372.42 as the bull-bear line in the sand, which will remain applicable for a couple days forward give or take a few pennies. VIX is 15.06.  Tech is leading the broad indexes higher so this continues to aid the bulls.  The SPX 100-day MA is 1407.65.  The SPX is printing 1407.42. SOX 372.42 will provide the market answer today. AAPL is flat wanting to turn positive.

Note Added 11/27/12 at 1:46 PM:  The SOX jumps above 373.  It is surprising to see the SPX at 1406, the expectation would be the SPX moving up thru 1409 due to the strong semiconductors.

Note Added 11/27/12 at 2:27 PM:  SOX collapses under 372, it was a fake out move a short time ago to suck in bulls.  The SPX falls under the 100-day MA, thru the 1406 support, thru 1403 support, now thru the 200 EMA on the 60-minute chart at 1402.52. The 200 EMA signal says bulls will rule for the hours and days, perhaps a few weeks ahead.  The 8 and 34 MA's continue to converge on the 30-minute chart. SOX is 371.14. The euro is 1.2929. The 10-year yield is 1.64%. VIX now pushing strongly higher, at the highs at 15.40. XLF is in trouble, now at 15.67 and falling lower a few more pennies and this will cause another leg lower for the broad markets. The weak financials will create ugliness into the close. The SPX is at 1400.......

Note Added 11/27/12 at 2:38 PM:  Keystone took profits on the TWM trade using it as a day trade exiting the position. Will probably reenter before the close.

Note Added 11/27/12 at 2:43 PM:  Keystone is back in TWM opening a new long position. Harry Reid Senate Leader says he is disappointed in the Fiscal Cliff negotiations and he says "No more happy talk." Markets immediately sell off.  XLF is hanging on by a single fingernail. If XLF would drop a couplemore pennies, that would cause the SPX to drop thru 1398 and send it to test 1391. What say you XLF, now at 15.66?

Note Added 11/27/12 at 2:54 PM:  XLF is hanging on by a chinny chin chin. Now the bears are pushing the VIX higher as well, this could get serious to the downside if XLF and VIX tag-team into the bear camp; the SPX would easily drop through 1391 in short order.  Watch VIX 15.90, now bullish at 15.80.  Watch XLF 15.65 now bullish at 15.69. Either one failing will create immediate market weakness, both turning bearish and the SPX will be in the 1380's in a blink of an eye. The key for bears is to simply keep the SPX under the 200 EMA as described above which would be a huge and important victory today for the short side, otherwise, if the SPX moves back above the 200 EMA the bulls will not be worried.

Note Added 11/27/12 at 3:10 PM:  The 8 and 34 MA's are converging on the 30-minute chart and the closest to crossing since the bulls took over six days ago. The SPX is fighting across that 200 EMA level at 1402.53. The XLF is 15.69 only four pennies away from causing market mayhem. Ditto VIX at 15.76 now only fourteen cents away from causing market turmoil. Keystone needs a heart pill and has also wheeled the difibrillator closer to the computer. The closing may be dramatic.

Note Added 11/27/12 at 6:07 PM:  It was quite a show into the close, especially the last five minutes since XLF collapsed and VIX spiked, both jumping into the bear camp.  This action caused Keybot the Quant to flip to the short side at SPX 1399 at 3:56 PM EST.  XLF 15.65 and VIX 15.84 are the two most important things to watch tomorrow morning, they will dictate broad market direction. Both are bearish causing market negativity; the bulls must reverse one or both to stop a market downward slide. The SPX closed under the 200 EMA on the 60-minute chart which means bearish markets for the hours, days and week or three ahead.  The 8 MA is a tiny nose hair from crossing the 34 MA on the 30-minute chart; this should occur at the opening bell and would be another nail in the bull coffin. There is only one way for the bulls to save the day and that is by coming to play tomorrow and immediately driving the financials lower and/or volatility higher. A sharp upside move at the open will be needed to stop the market negativity that has now rolled into a big snowball and is already rolling down the hill.  Any events overnight are hugely important. The European markets will open at 3 AM EST. The first hour of trading tomorrow will tell you if the downside has begun in earnest again, or, if the bulls can stop the downside momo and recover.