Keystone's Midday Market Action 12/10/12

Lots of action already this week on the global landscape. China factory orders and retail sales are up which boosts commodities, especially copper.   The meeting at the Whitehouse with President Obama and Speaker Boehner set a positive tone overnight. As the morning started on the East Coast, however, China exports fall unexpectedly.  Italy's Monti resigns and Berlesconi plots a return to power. This sends the Italy 10-year yield up over 25 basis points to 4.8% and the Italy stock market fell over 2% in a heartbeat, down as much at 3.8%. Italy banks sell off strongly. An increase in yields may force Italy to seek the OMT and this is a problem since the wheels are falling off for Spain and they need the OMT aid as well.

The euro dropped under 1.29 but moves sideways since the anticipated Fed easing coming this week should weaken the dollar and maintain euro buoyancy.  The futures fell this morning as news leaked that the Obama/Boehner resulted in the same old stalemate and Italy's GDP disappointed. Japan is in recession as well, the fifth such downturn in the last 15 years. Now do you understand why Helicopter Ben Bernanke wants to print money like gangbusters?  Japan's deflationary spiral funk is ongoing for two decades and the Fed is desperately throwing the QE kitchen sink at the economy to stop the Japan scenario from occurring in the States. The futures were down 5 S&P's but MCD announces far better sales than expected so the Dow and S&P recover to the flat line. Perhaps Hurricane Sandy boosted sales since folks had no where else to eat?

VIX 15.82 is key today. The VIX begins at 15.90, helping the bears, if the VIX stays above 15.82 the market bears should hang on just fine. If the VIX drops under 15.82, the bulls will rule today and the SPX will start to move up thru the 1420's.  Keybot the Quant, Keystone's trading algorithm, remains on the bear side, but the current markets are in a sideways indecisive mode and likely to commit one way or the other this week, or at any time.  If the VIX drops under 15.82 and the SPX moves up into the 1420's, Keybot will likely flip to the long side.  Watch the 50-day MA at 1417.16 and 20-week MA at 1417.76, the two moving averages drawing a line in the sand today where bulls are happy above 1418 and bears are happy under 1417. AAPL is down 7 pre-market which keeps the Nasdaq, technology, weak as compared ot the broad markets. There is no economic data or earnings of interest today so the markets are at the mercy of the Fiscal Cliff negotiations, which must make progress this week due to time constraints coming, and the European debt crisis. The euro has recovered to 1.2936. The opening bell is only one-half hour away.

Note Added 12/10/12 at 10:44 AM:  The VIX leaped higher at the opening bell to the HOD thus far at 16.47. The VIX is now printing 16.27, bear-friendly, well above the 15.82 bull-bear line.The goosing of semiconductors continues, SOX running higher today which allows the Nasdaq to recover despite AAPL negativity.  The Apple death cross occurs today with the 50-day MA slicing down thru the 200-day MA. Banks are weaker led by Italy turmoil today but the XLF at 15.96, bull-friendly, remains well above the bull-bear line at 15.69. The SPX is 1418.46 above the 50-day and 20-week MA's highlighted above.  The markets pick up where they left off on Friday, status quo action, the sideways market funk continues.

Note Added 12/10/12 at 2:15 PM:  The VIX is at 16.15 running flat the last couple hours or more, staying above the critical 15.82 level. The VIX 20-day MA is 16.16 so watch to see if this important support holds, or not, also watch the 50-day MA at 16.44. The SPX is flat as a pancake today, now printing 1419.00.  The 20-week MA is 1419.41 and the 50-day MA is 1416.88 so price continues to fight to maintain this support. AAPL remains negative but semiconductors remain elevated. No great shakes today thus far. Perhaps President Obama will shake things up with fiscal cliff comments. The euro is 1.2934 moving flat.  The 10-year yield is 1.62%, flat as well, showing no great interest to shed bonds in favor of riskier stocks.

Note Added 12/10/12 at 7:16 PM:  The SPX stumbled sideways today. The volume was very low only running about two-thirds of a days average expected volume. This allows the bulls to squeeze the bears forcing them out one by one. The bulls pushed the SPX higher today but could not make any headway since the VIX would not move under 15.79. The bulls got nothing if they cannot move the VIX under 15.79, if they do, the bulls rule and the SPX will accelerate higher. The bears could not hold the VIX 20-day MA at 16.15 support. The SPX closed above the 50-day MA at 1416.86 but not above the 20-week MA at 1419.39. The bulls need to touch 1422 to accelerate the upside tomorrow. The bears need to drop under 1416 to accelerate the downside. If the VIX drops under 15.79, and/or the SPX moves above 1425.90, Keybot the Quant will likely flip long. The BPSPX is 64.20, the drama continues, the bulls need to print 64.40 and higher to trigger a market buy signal. The TRIN recovered today to print above 1.00 but closed at the neutral line at 1.07. CPC is 0.90, there is no fear in the markets, the bulls expect a happy outcome for both the fiscal cliff and the potential FOMC QE4 announcement on Wednesday.