Thursday, September 8, 2011

STOCK MARKET BEARISH -- SHORT -- CAUTION

As the smoke clears on a crazy day, Keybot the Quant sits on the short side, the way it started today, after whipsawing long during the middle of the session logging some minor losses. The algo started to kick off numbers before the opening bell today, indicating a wild day on tap, and 13 numbers printed by the time the closing bell rang. This action shows how erratic the markets were today, first rising on positivity from the retail and commodites sectors, then to only collapse once Chairman Bernanke started speaking after 1:30 PM.

Looking back, the algo went short a week ago, on 9/1/11, at SPX 1207. The index traveled down to test 1140 on 9/6/11, rebounding with a rocket ride skyward yesterday.  Today, Keybot flipped long at SPX 1200 at 10:33 AM taking a gain of 7 points. As always, you have to watch for a whipsaw and today that occurred in spades--the first whipsaw since June, three months ago. The algo is programmed to trigger a reverse (whipsaw) if a one percent opposite move occurs in the SPX within a 24-hour period from the turn. That occurred after Chairman Bernanke's words took the markets south in the 1:30 PM to 2:30 PM time frame.  Thus, Keybot took a loss of 14 points in a four hour trade.  Additionally, when a whipsaw occurs, the algo stops trading the leveraged double or triple ETF's and replaces that strategy with single ETF's to reduce near-term risk.

For the Friday session, obviously dependent on President Obama's speech tonight, the market bulls will need to move the retail sector back above RTH 103.42, closing tonight at 103.28. The bulls also need to move the commodities sector back above CRB 340.44, now at 340-ish.  The market bears obviously want RTH and CRB to continue lower. For the SPX for Friday, if the market bears can move under 1183.34, closing tonight at 1185.90, thus only two and one-half points lower, the broad market selling will accelerate substantially with much lower numbers expected.  The market bulls need to get up above 1204 to wrestle back control of the markets so the President will have to bring the A game this evening. A move thru 1184-1204 is sideways indecision.

Volatility remains elevated and markets remain unstable.  What a day.

10/7/11; 10:00 AM EST =
10/2/11; 7:00 PM EST EOM =
9/30/11; 10:00 AM EST =
9/27/11; 10:00 AM EST =
9/25/11; 7:00 PM EST =
9/20/11; 9:00 AM EST =
9/18/11; 7:00 PM EST =
9/16/11; 10:00 AM EST =
9/11/11; 7:00 PM EST =
9/8/11; 3:51 PM EST = -72; signal line is -55
9/8/11; 3:39 PM EST = -56; signal line is -53
9/8/11; 3:00 PM EST = -72; signal line is -52
9/8/11; 2:32 PM EST = -56; signal line is -51
9/8/11; 2:28 PM EST = -72; signal line is -50; go short 1186; (Benchmark SPX for 2011=-5.7%)(Keybot this trade=-1.2%; Keybot for 2011=+25.9%)(Actual this trade via SSO=-2.0%; Actual for 2011=+39.3%)
9/8/11; 2:18 PM EST = -72; signal line is -49 but algorithm says stay long
9/8/11; 1:30 PM EST = -56; signal line is -47 but algorithm says stay long
9/8/11; 12:21 PM EST = -42; signal line is -47
9/8/11; 11:56 AM EST = -56; signal line is -47 but algorithm says stay long
9/8/11; 10:33 AM EST = -42; signal line is -48; go long 1200; (Benchmark SPX for 2011=-4.6%)(Keybot this trade=+0.6%; Keybot for 2011=+27.1%)(Actual this trade via SDS=+0.8%; Actual for 2011=+41.3%)
9/8/11; 9:04 AM EST = -42; signal line is -48 but algorithm says stay short
9/8/11; 8:36 AM EST = -56; signal line is -49
9/8/11; 8:25 AM EST = -42; signal line is -49 but algorithm says stay short
9/7/11; 2:02 PM EST = -56; signal line is -52
9/4/11; 7:00 PM EST = -72
9/2/11; 9:00 AM EST = -72
9/1/11; 2:02 PM EST = -72; signal line is -51; go short 1207; (Benchmark SPX for 2011=-4.1%)(Keybot this trade=+5.3%; Keybot for 2011=+26.5%)(Actual this trade via SSO=+12.1%; Actual for 2011=+40.5%)

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