STOCK MARKET BULLISH -- LONG -- CAUTION

Keybot the Quant remains long to start the new trading week. Sunday's pre-scheduled number results in no change as the algo idles on the weekend. The market bulls staged a recovery rally last week. The market bears pushed hard last Friday morning and needed UTIL to lose the 414.5-ish level, which it did for only a few seconds, but once UTIL popped to show non-failure, the indexes catapulted higher as would be expected. If you are bearish, you want to see UTIL 414.59 fail during the new week. UTIL starts at 423.68, comfortably nine points higher, so this appears unlikely at this juncture, but, serious negative news out of Europe could be a catalyst.

With UTIL staying above 414.5-ish, the broad market bulls will continue along with the recovery rally. A further confirmation of the recovery rally will occur if the SPX:VIX ratio, now at 33.07, moves above 35. During the Friday session, the ratio moved a slight bit above 34, within a point of this confirmation, but gave up some ground into the close. Watch this ratio as a signal this week, below 35 and the market bears are still in the game. If the ratio moves above 35, the market bulls are going to run much higher and the recovery rally will be in full swing.

A key sector to watch this week is retail, RTH, now at 102.24. If RTH moves above 104, this also serves as further confirmation that the bulls will run the indexes higher. Thus, the bulls need to root for SPX:VIX 35 and RTH 104 while the bears root for UTIL 414.5.

For the SPX on Monday, starting at 1176.80, the market bulls need to get up and over 1181, if so, the indexes will rock higher in quick order. For the market bears, they have a formidable task ahead, probably only achievable on serious bad news out of Europe. Bears need to lose the 1136 handle, 40 points lower, to bring in strong selling and start a downward slide in the indexes again.  A move thru 1137-1180 is sideways action for the markets.

Thus, the bulls have the upper hand as the week begins. The bears best chance to drive markets lower will occur early in the week since markets tend to be bullish in front of a three day holiday weekend.  Thus, Thursday and Friday of this coming week would be expected to be buoyant based on seasonality. EOM occurs on Wednesday and Keybot clicks off three pre-scheduled numbers this week.

9/4/11; 7:00 PM EST =

9/2/11; 9:00 AM EST =

8/31/11; 7:00 PM EST EOM =

8/30/11; 10:00 AM EST =

8/28/11; 7:00 PM EST = -72; signal line -77

8/26/11; 10:00 AM EST = -72; signal -77

8/23/11; 11:51 AM EST = -72; signal line is -77; go long 1146; (Benchmark SPX for 2011=-8.9%)(Keybot this trade=+13.4%; Keybot for 2011=+21.2%)(Actual this trade via SDS=+25.6%; Actual for 2011=+28.4%)