Keystone's Midday Market Action 4/5/13

Markets sell off as the futures indicated.  SPX prints a LOD at 1539.50 so this number is important moving forward. The SPX crossed down through the 200 EMA on the 60-minute chart signaling bearish markets for the hours and days ahead. Watch to see if the cross remains through the closing bell, or not.  Volatility jumps higher; the VIX sliced up through the critical 14.47 bull-bear line like a hot knife through butter. VIX is drifting lower now sitting at 15 so watch this closely today. SOX collapsed to 412, now at 415, ten points below the bull-bear line at 425 showing serious damage to the semi's. XLF bounced off the 17.80 bull-bear line in sand now printing 17.83.  If XLF 17.80 fails today, the broad indexes will take another strong leg lower.

The 10-year yield is 1.69% collapsing through the 1.74% support shown on the charts this morning. Lower yields are in line with lower equity markets and in sync with deflationary conditions. In a nutshell today, watch VIX 14.47, XLF 17.80 and the SPX 200 EMA on the 60-minute chart at 1545.76. SPX 1546 is key. Market bulls do not have hope if the SPX stays sub 1546. Bulls will recover above 1546. Look for a recovery move into lunch time and then weakness may reenter in the afternoon. SPX is now printing 1544. Market volume is above average today with one-quarter of an average day's volume occurring in the first hour of trading. Keybot the Quant is short for 48 hours so a whipsaw did not occur and the algo remains bearish.

Note Added 10:58 AM:  Here's the back kiss of the 200 EMA at 1546. What say you bulls and bears? Bounce or die, one side or the other will win. VIX 14.76 stays bearish. XLF 17.87 stays bullish.

Note Added 2:40 PM:  The bulls are putting up a fight keeping the VIX under 14.47 today. VIX is now at 14.36 so the bulls are able to push the broad indexes higher as the day moves along. The break down in the semiconductors is important and Keybot the Quant will likely remain short if the SOX stays under 425, now at 417. The financials recovered with XLF now printing 17.94 above the 17.80 danger level. The SPX is at 1549.48 which is above the 200 EMA at 1545.81 so the bulls do not plan on rolling over.  The bulls need SOX 425. The bears need VIX 14.47. The broad indexes should float out sideways if the VIX stays under 14.47. If the VIX moves above 14.47, the markets will sell off in force into the closing bell.

Note Added 3:47 PM:  VIX drops from 14.43 to 14.16 in a heartbeat adding a few handles upside to the SPX.  SOX 418.

Note Added 4:00 PM: That was an interesting finish. VIX was moving higher towards the 14.47 and then it was slammed hard finishing under 14. Many traders preferring the long side are rushing in for fear of missing a dip-buying opportunity. SOX finishes near the highs at 419 but well under 425. The 10-year yield is 1.71%. The broad indexes recover today allowing time to think things over on the weekend. SPX finishes with a 1553 handle. It's all about volatility. The fight for VIX 14.47 will pick up again on Monday.

Note Added 4/6/13 at 4:58 AM: Consumer Credit grew as folks tripped over themselves to sign up for auto loans and student debt. The borrowing exceeded what was expected. This data verifies the new subprime auto loan situation. Just like the housing bubble, nowadays if you can fog a mirror, you can drive off the car lot in a brand new Caddy or a Winnebago. No need for a down payment. If you empty your pockets showing two sticks of gum, a couple marbles, a baseball card and a used handkerchief, the car dealership will accept that as a down payment.  CPC put/call is 1.00 showing a continuing lack of fear and complacency in markets. Traders simply believe in the Fed's money machine and are simply buying long without any fear or worry. When markets dropped at the opening bell yesterday, pundits, analysts and traders could not buy the dip fast enough and all day long the consensus was to buy this perceived minor pull back. The markets are not climbing a wall of worry. Markets are climbing a wall of Fed money.  The utilities are vertical; moving up one percent per week since November, truly remarkable action, nothing short of spectacular. Each trader thinks they are smarter than the other buying utes for the dividend and perceived safety. They are taking the Ron Popeil approach, 'set it and forget it', and will likely be crushed. No one is looking at the parabolic chart. UTIL is at 515. Semi's and volatility are dictating broad market direction currently.