SPX S/R for Week of 6-27-11

SPX starts the week at 1268.45.  If the futures are red and the bears come to play, all they need to do is push one point lower, to get under 1267, and the selling will accelerate downward a few handles to test support at 1262 and 1258-1259 which is where the SPX started the year.

If the futures are green with happy Europe/Greece news, the market bulls would have to drive the SPX up to touch 1284, about 15 points higher, to develop any momo for the day, and that would be a formidable task.  Markets are typically bullish the last couple days before a three day holiday weekend, thus, Thursday and Friday sessions should be bull-friendly.  Use this seasonality as a guide once the week begins.

SPX daily chart is in a positive divergence profile, so a bounce off any of the support levels from 1249 and higher would be in order now. This would provide the indexes a path to move higher into the holiday weekend and take a small rest from all the June selling.  If 1249 is lost, that is a big deal, 1233 will then be in play.

SPX monthly prints are very important moving forward, the June print will be Thursday after the close.  The 10-month MA is a critical support level, as is the 12-month MA which serves as Keystone's Secular Signal for the SPX.  The 10-month MA is 1268; price held a few pennies above at the Friday close which gives the bulls a little feather in their cap.  The 12-month MA is 1236.  The NYA 40 week MA cross has already indicated that the markets have now fallen into a secular bear market.  The 12-month MA cross for the SPX, at 1236, would confirm the NYA signal and confirm a return to a secular bear market.  Above 1236, you have to continue to give the bulls the benefit of the doubt.

·         1389

·         1370

·         1365

·         1360

·         1357

·         1354

·         1350

·         1345

·         1337

·         1333

·         1331

·         1329

·         1326

·         1323

·         1321

·         1319

·         1316

·         1314

·         1311-1312

·         1306-1307

·         1300

·         1298

·         1295

·         1292-1293

·         1289

·         1286-1287

·         HOD Friday 1283.93

·         1282

·         1277-1278

·         1272-1273 (LT S/R)

·         1270

·         1267-1268

·         LOD Friday 1267.24

·         1262

·         1258-1259 (1257.64 is the starting number for 2011)

·         1257 (3/16/11)

·         1252 (9/14/08 pre-LEH bk)

·         1249 (LOD 3/16/11)

·         1247

·         1242

·         1235 (12/15/10; also HOD 12/7/10 large volume)

·         1233 (LOD 12/16/11)

·         1227 (HOD 11/9/11)

·         1226 (11/5/11)

·         1224 (12/7/10 large volume)

·         1220 (HOD 4/26/10)

·         1217 (4/23/10)

·         1209 (HOD 4/29/10)

·         1207 (4/29/10 Top)

·         1197

·         1192 (9/15/08 post-LEH bk)

·         1140

·         987

·         666 (3/6/09 bottom)

SML:XLP Small Caps Consumer Staples Ratio Weekly Chart 100 MA Cross

SML:XLP is a ratio chart comparing small caps to staples; risk to safety. Thus, as the wine is flowing and the equities party is in full swing, traders are in the growth and speculative stocks laughing and having a good time. Once the economy turns down, the defensive and safety stocks are preferred like staples and healthcare. Thus, this ratio chart will move up and get higher in the go-go bullish times, but fall and move lower in recessionary periods and weak economic times.

The 100 week MA is very useful to provide a line in the sand to gauge happy markets from sad markets. Note all the touches shown by the black circles adding to the 100 MA cross credibility. The go signal for risk occurred in late 2009 into early 2010, the train was leaving the station and the confetti was thrown. Note how the RSI remained long and strong at the April 2010 top but the other indicators were negatively diverged. Price was spanked down due to the divergence but the RSI wanted another higher high and got it a year later, this year, a couple months ago. Note how the 100 MA was failing last August when Chairman Bernanke then stepped in and saved equities with QE2.

The purple lines show how the higher price lined out with universal negative divergence to create the March 2011 top. The chart and indicators are now showing a preference for the broad markets to move sideways to sideways down ahead. Thus, we just bounced off the 100 MA, the market bulls are trying to keep their head above water, but, the 100 MA will probably fail as we move thru the summer. Watch the 100 MA cross as a broad market forecasting tool; a failure of the 100 week MA is a big deal. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

Keystone's 2-10 Spread Indicator

Keystone's line in the sand between happy bankers and sad bankers is a 255 spread for the 2-10.  Above 255 and the financials are in clover, making easy money, and the financials help buoy the equity markets overall.

Below 255 and the yield curve is no longer advantageous for the banksters and financials will languish moving forward, casting a pall over the broad markets.

As of this writing, the ten year is 2.89%; the two year is 0.34%.  289-34=255 on the dot.

Use the spread as a forecasting tool for the broad markets.  If the spread stays above 255, the bulls keep their heads above water and try to maintain buoyancy in the broad markets.  If 255 fails, the financials are sick and the broad markets will steepen their negative bias moving forward.

Note Added 1 PM EST:  Ten year at 2.87%; two year at 0.33%; 287-33=254.  Bingo.  Keep watching to see if it recovers, or fails further.

Keystone's Morning Wake Up 6-24-11

The broad markets bounced yesterday afternoon.  The technical’s showed copper not falling under 400, the utes, UTIL, not falling under 418, the positive divergence on the indexes over the one week time frame, the NYA is back above the 40 week MA and the TRIN not spiking higher during the session. Thus, the indexes moderated by the close, regaining much of the lost ground.

The SPX:VIX ratio is under 68, only by a point or so, forecasting continued weak markets moving forward; a short-the-rally mode is prudent.  If the ratio moves back above 68, then the indexes will reset again for the next big drop which would occur when the 68 level is lost the next time.

Markets continue to remain at the mercy of the European/Greece situation.  More twists and turns to come.  The countdown clock on Congress raising the debt ceiling heats up, only five weeks remaining, talks are breaking down, and Moody’s set a md-July date to consider the U.S. for review of a downgrade unless signs of progress are shown.

IEA (International Energy Association) to release oil from the SOR (Strategic Oil Reserve).  Or, SPR (Strategic Petroleum Reserve). This is one way of attempting a QE3, boosting the economy in front of a presidential election coming in future months.  Perhaps the reason for the odd timing is a matter of getting the most bang for the buck as well.  You want to push something when it is already moving along rather than starting it from a dead stop.  Oil price has been falling in recent days, therefore, the oil release news may have more of an impact. The talk is, however, that this move to release the oil is actually showing that the supply’s may not be as ample as thought, hence, a move back up with oil price may be coming in short order.

For today for the SPX, the market bulls need to push three points higher, and once the 1287 handle is touched, the bulls will be off and running the indexes much higher, with the 1300 in sight.  If the 1287 level is hit, Keystone’s proprietary algorithm will probably flip to the long side.

The market bears have a formidable task today; bears have to push the SPX down to 1263 if they expect to reignite the selling pressure, about 20 points lower. Thus, the bulls have the wind at their back to start the last session of the week, but, if the bulls cannot touch a 1287 handle, they got nothing overall, and the markets will languish along sideways with a downward bias into the summer weekend.

Retail and the NYA will be critical to forecast market movement today.  RTH, now at 107.51, favoring bears, only needs to climb four pennies to get above 107.55 to make the market bulls drive the broad markets higher.  NYA price got back above the 40 week MA so watch to see if that remains, or fails.  Also, SPX:VIX ratio, now at 66.54, favors bears moving forward.  If this moves above 68, the markets will float upwards the next few days.

Seasonality-wise, this week is down 18 of the last 20 times, and, with the last session today about to begin, the SPX is actually up one percent. Thus, the indexes would need to sell off about 12 points to finish the week lower; down to the 1271-ish level. Regardless how today’s session goes, yesterday the indexes were posting lower lows for the week in line with seasonality, but this reversed on the positive Europe/Greece news.

Durable Goods and GDP data is relatively in line of consensus.  Futures popped but are now giving it back.  Flattish open on tap.  Typically, Friday’s see buoyancy in the afternoon’s due to short covering ahead of the weekend and if it does not occur, that is to be considered bearish moving forward.

Futures have been jumpy the last 24 hours, very skittish.  If the market bulls cannot touch 1287, then the bears will push things lower today.

Keystone's SPX:VIX Ratio Indicator

All three drops, shown by the red circles, were large broad market selloffs, as expected when the ratio falls under 68. As long as it stays under 68, a short-the-rally mode is in place. If the ratio moves back above 68, the market bulls are running strong again taking the indexes higher. This move back above 68 would only set up for the next drop under 68 which will be a large selling event for the indexes again.

Any way you slice it, the markets are not healthy these days. Broad markets will continue along with a downward bias as long as the ratio stays under 68 and leaks lower. Once we see 40-ish and lower we can start thinking about a sustained rally but that is not in the cards in the near term. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

SPX Daily Chart Positive Divergence 200 Day MA

SPX daily chart showing that we are now at the lows from a few days ago. Also note the 200 day MA at 1263. The indicators are all lined up with positive divergence so they are hinting that a bounce is coming, all the major indexes have the same look. Have to let things play out today but a bounce from the blue circle would be suspected.This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

Keystone's Market Action 6-23-11

SPX:VIX under 68 indicates that the selling will remain for today with a large point drop. NYA dropped under the 40 week MA indicating a move of the broad markets into a secular bear.

For the selling thus far, the TRIN has not jumped any significant amount, spending its time between 0.9 and 1.2.  This indicates that the selling is not all that strong despite the dramatics of it all.  TRIN now at 1.26 so this has to be watched.  If TRIN moves up thru 1.5 and 2.0, then this day will become very ugly, but, at this junctue, does not look to be the case.

The indexes have now either matched or moved under the lows from a few days ago, while the indicators for the most part are all showing positive divergence, thus, this reinforces the thought of a bounce in here.

The most important thing to watch now is Keystone's Ute Indicator.  For this week, the UTIL 418 level is critical.  UTIL is now 420.67, only two and one-half points above danger.  If the 418 level is lost anytime today or tomorrow, the broad market selling will be quick, and substantial, and take on a panic tone.  But, as long as the market bulls can keep UTIL above 418 today and tomorrow, the bulls will be able to stabilize the indexes and moderate them sideways.

TRIN now 1.21.  Use 1.3 as a guide today, if TRIN sneaks above 1.3 then the market bears are not finished with the selling today, but, if TRIN stays in these lower numbers and moves back towards one, you will see broad market buoyancy.

Keystone's Morning Wake Up 6-23-11

This morning's downbeat futures now makes sense of why Keystone's proprietary algorithm did not flip long over the last couple days.  Equities are headed for a lower open.

This week is down 18 of last 20 times seasonality-wise so it looks to be extending that trend.  Big down days on Wednesday's typically lead to weak Thursday mornings, which appears to be the case, but Keystone will not be surprised to see buyers come in mid to late morning.

Watch the SPX:VIX ratio to see if it falls thru 68, which it should the way things are setting up now.  That means the indexes will sell off large today, as long as the ratio stays under 68, the Dow Industrials typically down from 100 to 300 points.

Watch the NYA 40 week MA cross.  Price remains above to keep the secular bull market alive, but watch to see if the NYA loses the 40 week MA which means long term trouble ahead for the broad markets.

For the SPX for today, the market bulls have to reach up to touch 1298-1299 today,which is not going to happen in the early going at least.  The market bears are in the drivers seat and will test several support levels below such as 1282, 1279, 1277, 1273, 1270, 1268, 1262 and 1258--the start of year number. Look for a bounce off one of these levels.  If the utes maintain buoyancy, or at least flatish, watch the UTIL, then the selling event may be short-lived and the indexes will meander upwards again. Let's see what the SPX:VIX ratio shows and the NYA 40 week MA.  If the NYA 40 week MA does not fail, and/or the utes do not weaken, those will be signs that the bulls will want to come back in to buy again.

Keystone's Morning Wake Up 6-22-11

The push in retail is what moved the indexes higher. For today, watch the retail sector, RTH, now at 107.82, only 20 pennies above the 107.62, which Keystone's proprietary algoirthm identifies as the line between bulls and bears.  A drop under 107.62 will weaken the broad markets today, thus, the bulls will only be able to move higher if the RTH stays above 107.62.

The Europe/Greece vote last night was anti-climactic.  Vote went as everyone expected.  Markets already moved up for four days so it appears to be baked into the cake, considering the red futures.

Chairman Bernanke will hold the second 'Desk" Conference today.  If the Chairman walks on stage and then sits behind a desk again, well, that is just too much.  Laughter all around.

FDX earnigns beat, and the guidance looks to be about a dime better for the year, so this popped the futures, but some of the excitement has worn off.

FOMC decision is 12:30 PM, no change expected, the press conference is 2:15 PM.  Watch oil inventories at 10:30 AM as a possible market pivot point. MLHR furniture indicator will be interesting.

NYA moved back above the 40 week MA.  The market bulls are trying to prevent the indexes from falling into a secular bear market with all their might. NYA, now at 8156; the 40 week MA now at 8049.  Watch this NYA 40 week MA cross, and the RTH level above, today, and this will tell you the direction of the broad markets.

For the SPX for today, if the market bulls can touch a 1298 handle, the indexes are going to pop a lot higher, SPX will probably move up to grab 1307.  The bears need to push down to a 1278 handle to make any real noise.  The futures are not that red.  If the bears cannot get to 1278, and the bulls cannot get to 1298, the day will be some sideways slop. Use the SPX:VIX ratio today as well, the 68 level, above and bulls are happy, below and bears are happy.

Keystone's SPX:VIX Ratio Indicator Above 68

Yesterday the SPX:VIX ratio moved back above 68, verifying the bullish fun.  Now at 68.69, thus, if the ratio stays above 68, the market bulls will maintain buoyancy in the broad markets.  If the ratio drops under 68 today, then the indexes will sell off large, the Dow Industrials should drop from 100 to 300 points. Watch it closely for the outcome.