Keystone's Midday Market Action 12/18/12; Fiscal Cliff

Three key parameters to watch are VIX 15.83, euro 1.3160 and the 10-year yield at 1.75%.  All represent bull-bear lines in the sand. Strike one, two and three, the bears are out, with all three indicators firmly jumping into the bull dugout with the VIX now at 15.61, euro over 1.32 at 1.3219, and the 10-year Treasury hitting 1.80%. Keep watching VIX 15.83, the bears will need to push volatility higher right away, otherwise the bulls will start running higher.  The SPX poked thru the strong 1433 resistance, then 1435, then the 1438, and then set its sights on the strong 1441 resistance. Whoa, price moves thru 1441 as this is typed, next is 1444 then very strong resistance at 1446.  The bulls are squeezing the bears out one by one. The 1446 is important since it would likely lead to 1460. Volume is on pace for an average days volume or better but the day is young. The Nasdaq is up one percent leading the SPX so this will help keep the indexes buoyant.

Note Added 12/18/12 at 11:28 AM:  The SPX daily chart shows the RSI and MACD line moving higher (see this morning's chart) so this would likely create a stutter step sideways for the SPX thru the 1440's for a day or two, and then the markets receive the thumbs up or thumbs down on Thursday and Friday this week. Copper is weak today. Financials are in an upside orgy today, XLF now at 16.51. The euro is 1.3122. The SPX is 1441. The VIX is 15.62. The euro violated its upper BB, ditto UDN with the upper BB and UUP with the lower BB. The SPX has also violated the upper BB as described in this morning's chart. Thus, this hints that the euro and SPX are at or near a top and the dollar is at or near a bottom. The TRIN is 0.51 remaining uber low and uber bullish. Everyone is on the bull side of the boat, even the last bear decided to at least walk across and stand on the middle point of the deck. The +903 TICK at 11:15 AM identifies the top in the markets thus far today.

Note Added 12/18/12 at 12:15 PM:  The VIX is up off the LOD at 15.49, now at 15.79, but still under the 15.85 bull-bear line in the sand (use 15.85 instead of 15.83). The bears can regain strength if they push the VIX back above 15.85.  The SPX sits on top of the 1441 S/R, taking it easy.

Note Added 12/18/12 at 12:48 PM:  Markets are melting up today like yesterday. SPX is attacking 1446-1447 which would open the door to 1460. VIX drops to 15.58. Volume is trailing off now targeting a run rate under a days average volume. The 10-year is at 1.81%. The euro is at 1.3225. The bulls are clearly in charge.

Note Added 12/18/12 at 1:51 PM:  The 10-year hit 1.82%. The VIX came up to test the 15.80's again but the bears ran out of steam, again, and the bulls pushed volatility lower.  SPX is playing around at the S/R at 1441, 1444 and 1446. The 10-year now 1.83%. TRIN is 0.49. The market tops at 12:40 PM and 1:40 PM are shown by the +900 TICK's.

Note Added 12/18/12 at 2:30 PM:  The VIX is back up again in the 15.80's now at 15.83.  Well, bears, can you grab two more pennies and higher to fight back today, or will you fold like a cheap suit as the VIX is rejected again? VIX 15.85 is key. Volume continues to leak lower today now at a run rate of only about 80% of a days average expected volume.

Note Added 12/18/12 at 3:16 PM:  The bears received a spank down with the VIX unable to move above 15.85 and hold it. A +900 TICK just printed at 3:05 PM so that may hold the 1445 high as a ceiling into the close. The 30-minute, one-hour and two-hour charts hint at a top either at the close today or tomorrow morning. For OpEx week, Wednesday typically sees a higher print as compared to Tuesday. Note the copper weakness.  Keystone's algo is now tracking JJC 45.50 as a bull-bear line in the sand and the current print is 45.97. The stage is being set for a ramping up of intensity each day forward into the weekend.

Note Added 12/18/12 at 4:04 PM:  The bulls receive another big rally today. The SPX one-hour and two-hour charts may need one more high tomorrow morning. The SPX jumps about 35 handles in two days time. The TICK hit +900 in the final few minutes to confirm the late day market orgy. VIX drops lower to 15.51 which paved the way for the bulls today. Euro is 1.3220. The 10-year yield is 1.83%. Everything went the bulls way today. There is no question that a happy fiscal cliff resolution is priced in. The SPX over 1447 opens the door to test 1460 resistance. Tech led the way higher today. Small caps (RUT) are strongly higher which is bullish. The TRIN is 0.48, two days in a row, strung tight as a rubber band, uber bullish, the bulls are all-in right now, even the shoe shine boy and cab driver ran into the exchange late day to buy shares. The hat check girl is providing hot stock tips as well and even Aunt Mary moved her entire life savings into risky assets today. The CPC put/call will be interesting this evening. ORCL earnings appear in line and the stock jumps 3% AH's which will provide the Nasdaq, and broad market, a further lift tomorrow.