Keystone's Midday Market Action 12/6/12; ECB Lowers Growth Forecast

The opening bell begins another day under the Big Top, strike up the caliope and bring on the dog and pony shows.  The ECB did not lower rates, as was expected, but the big news was in the growth forecasts. Draghi says downside risks remain and the growth forecast was lowered to 0.3%, bingo. This reduction automatically hints that an ECB rate cut is coming at one of the following three meetings, January thru early March.  A rate cut would weaken the euro and the equity markets. Traders sniff this out and push the futures lower albeit only a couple points lower on the S&P's. AAPL is weak pre-market. The euro is down this morning at 1.3035. The 10-year yield continues to track lower to 1.57% showing that traders prefer the safety of notes and bonds to guard against the fiscal cliff shenanigans. As the previous charts show, watch the SPX 30-minute to see if the 8 MA stays above the 34 MA to maintain bullishness, or, the 8 fails down thru the 34.  Likewise, see if the SPX stays above the 200 EMA at 1405.26 on the 60-minute chart. This signals bearish markets ahead should it occur. SPX 1403 and 1399 are important downside support.

SPX support and resistance is 1419, 1417.53 (50-day MA), 1417.34 (20-week MA), 1416, 1413, 1411.86 (100-day MA), 1409, 1406, 1405.30 (200 EMA on the 60-minute), 1404, 1403, 1401, 1399, 1397, 1394, 1391.88 (20-day MA), 1391, 1389, 1385.79 (200-day MA and 150-day MA) and 1385. SOX 372.80 and XLF 15.68 are key again today.

Note Added 12/6/12 at 9:42 AM:  Big move up for semi's, SOX. XLF remains elevated. SPX is testing the 100-day resistance. The LOD is 1406.15 so the strong 1406 support and the 200 EMA held on the first push lower by the bears. AAPL is negative. Tech is not leading the broad markets lower; the COMPQ and SPX are moving coincidentally. The bulls are starting the day off by flexing their muscles, trying to punch up thru the top rail of the sideways triangles shown on the previous charts at 1408-1411. Well, bulls, do you have the juice today? The euro is 1.3014 so here or higher is bull-friendly today, if the euro moves lower and loses 1.30, the bears will initiate strong downside selling pressure. So far today, the bulls have the edge.

Note Added 12/6/12 at 10:08 AM:  The SPX moves sideways into the apex of the sideways triangles that were charted. For now, it is a waiting game. Price should make a decision today. TRIN is 1.10 favoring the sell side action today by a hair. VIX is at 16.75. AAPL came down to print 518, and bounced with the positive divergence on the daily chart, now printing 539, it likely needs to explore those lower numbers at 515-530 a bit more, perhaps closing down there so the positive divergence on the daily chart can be firmly locked in to create a mini-rally.

Note Added 12/6/12 at 10:18 AM: Euro is 1.2983. SPX is coming down for another test of 1406 and the 200 EMA. Check out the descending triangle pattern on the SPX one-minute chart, it has to bounce, or die now.

Note Added 12/6/12 at 11:33 AM:  The SPX bounces from the 1406 support and moves to the strong 1413 resistance, using the 100-day MA as a tightrope, to continue the circus theme, that is today's range thus far, 1406-1413, so watch to see which way price exits. VIX dropped from its highs, now at 16.39 forming a confluence with the 20-day MA and 50-day MA, all at 16.40. If the VIX moves above 16.40, bears win today. If the VIX drops under 16.40 heading lower, the bulls will rule today.

Note Added 12/6/12 at 1:16 PM:  The sideways journey thru 1406-1413 continues. The VIX punched up thru the 16.40 confluence so that creates market negativity. The 8 and 34 MA's on the 30-minute chart are converging.  SOX is near 377 firmly bullish. XLF is 15.65, bullish. It is surprising the euro is not creating more market weakness today. The technology and financial sectors are keeping the markets elevated. Tech is leading the broad markets higher which also helps maintain market buoyancy. The bulls remain favored as price motors along sideways. The 10-year is 1.565%. The TNX chart from 11/3012 projected this area at 1.55%-ish. Type 'TNX' in the search box above to bring that chart up for further study if you are interested in Treasuries.

Note Added 12/6/12 at 3:11 PM:  SOX ran strongly higher today.  The strong 1413 resistance held all day long thus far. Neither side wants to run with the ball. The bulls are keeping the 8 MA above the 34 MA on the 30-minute chart but that may not last. The 100-day MA at 1411.86 has been in play all day long; watch to see which side that price closes in relation to the 100-day MA. The VIX is 16.59 remaining above the 16.40 confluence continuing to create market negativity.

Note Added 12/6/12 at 4:06 PM:  The SPX jumps higher in the final minutes closing at the highs, at 1413.95.  The bulls are happy with the SOX and XLF firmly in their camp.  Bears are happy with the VIX at 16.59.   The 8 MA remains above the 34 MA on the 30-minute chart adn the SPX stays above the 200 EMA on the 60-minute chart both indicating bullish markets for the hours and days ahead.  Since the close was near the high, Keybot the Quant will likely flip long if the SPX moves above 1414 and higher tomorrow. Thus, watch the overnight futures, the bears must keep things negative. Any tinge of positive futures will lead to an upside market acceleration tomorrow as well as Keybot flipping to the long side. The main event tomorrow, before the open, is the Monthly Jobs Report at 8:30 AM which will obviously impact markets as well. TRIN is 0.83 after a low 0.54 yesterday, two bullish days, which will require some market selling to relieve this extreme bullish sentiment. Interestingly, the TRIN has not printed any print, intraday or otherwise, above 1.40-ish for eight trading days.  1.40 represents moderate and orderly selling. So there has been no strong panic-style selling (1.50 and higher) in the markets for over a week, but uber bullish euphoric buying has occurred the last two days. The CPC put/call will be interesting this evening to gauge market sentiment. Protection to the downside is cheap these days and many short plays show desireable entry points but trader's are not concerned at all about the markets dropping.  Oil and commodities dropped today but stocks were up.  The VIX was up and stocks were up, this happens only about 10% of the time, one side or the other is wrong. The euro was down and dollar was up which should correspond to lower equity markets. The mixed signals continue. The euro is 1.2968 so use that as a point of reference overnight and for tomorrow. The Big Top closes the tent flap for this evening but fear not, the carnival will open again tomorrow.