Keystone's Midday Market Action 10/10/13; Markets Rally Strongly on Potential Debt Ceiling Limit Extension

Big upside market orgy today; shorts are scrambling to cover providing a rocket-fueled launch in all major indexes. Retail, financials, commodities and utilities are all providing oomph. Keybot the Quant flips long at SPX 1681 in these purely news-driven markets. The higher readings lately in volatility will lead to larger and larger point swings day-to-day and intraday moving forward. Watch UTIL 483.63 and 485.90. UTIL is at 484.92 so additional market upside occurs at 485.90 but markets will weaken if 483.63 is lost.  Watch XLF 20.02. Same dealio. Bulls receive upside juice above 20.02, now at 20.12, while bears will receive strength if XLF loses 20.02. JPM and WFC bank earnings are tomorrow morning.

The SPX is above the 200 EMA on the 60-minute chart at 1681.78 and the 8 MA is above the 34 MA on the 30-minute both signaling bullish markets for the hours ahead. Pay close attention to 1681.78 moving into today's close. The SPX is using the 50-day MA at 1678.29 as the support floor and the 20-day MA at 1692.05 as the resistance ceiling. Remember this bracket from a couple days ago? It is back in play. The SPX needed to back kiss the 50-day MA so that is accomplished with today's move. Bulls win big and travel to 1700+ if the 1692 gives way. Bears are back in biz if they can close under 1678. VIX drops to 16.75 but it continues to cause negativity and remains above the 200-day MA. The CPC put/call highlighted this morning helped create the bounce. TRIN is at 0.61 helping bulls today. So use SPX 1678, 1682, 1692 and UTIL 483.63 and 483.50, and XLF 20.02 as market directional guides as the Washington clowns dance and play. The bulls are driving the bus.

Note Added 1:41 PM:  UTIL smack-dab on top of 485.90 so this will provide more upside market juice if it stays above, or not, if it drops back below.

Note Added 3:20 PM:  UTIL 485.90 adds more bull fuel. The SPX came up to tap on the 1692 resistance. The first try is rejected. Price will likely try again. HOD 1692.48. The 20-day MA is 1692.45.

Note Added 4:03 PM:  SPX finishes on top of the 20-day MA at 1692.53 at 1692.56 so this serves as a pivot point for tomorrow. The president and republican leaders are meeting at 4:30 PM. The markets rallied today, the second best day of the entire year, solely based on an imminent political deal. There should be statements at 5:30 PM, about one and one-half hour from now. Markets fully believe the deal is done; they expect a pony and need to receive the pony this evening. WFC and JPM earnings are in the morning before the bell and they will dictate whether the rally continues, or not.

Note Added 8:11 PM:  The Washington, D.C. political theatrics continue. The Whitehouse meeting was about one and one-half hours long and Speaker Boehner sneaks out the back door. Since Boehner did not come to the microphones at the front of the Whitehouse to brag about a deal, this signals potential trouble. S&P futures fell to -8. Then clarification occurs that all parties will continue talking this evening. S&P's recovered to -3. Then the legislative arm appears to not be working this evening so there may be limited progress rather than a full blown deal? S&P's bump around from -3 to -5.  Equities have their second strongest up day this year. The volume was not impressive; less than yesterday's volume. Traders ran to the long side today buying every ticker available. Shorts covered swearing never to short the market ever again. Traders expect another happy day tomorrow on the deal announcement. The caterer has been paid, the booze is all ordered, extra valet parking is available and the band will play three full sets. The politicians promised that a pony will be delivered to Wall Street tomorrow morning and by golly there better be a bright new shiny pony there when the opening bell rings.