Wednesday, September 21, 2011


Keybot the Quant remains long as the indexes flush in the final minutes. The algo shows that the semiconductors dropped back into the bearish camp today leaving the utilities and retail as the only bullish sectors, as perceived by the quant. The big trouble started this morning at 10:50 AM EST when the SPX:VIX ratio lost the 35 level indicating that the market bears have regained control of the markets and a large down day is on tap.  Then Chairman Bernanke rides out on a white horse and proceeds to lay an egg. He provides the Operation Twist as everyone anticipated but he follows it up with a negative outlook on the markets that told traders things were worse than they thought. The selling accelerated as traders ran for the exits.

Even though the markets tumbled and the SPX:VIX ratio dropped under 35, Keybot maintains a bullish posture.  Note that SPX is now under the 1180 level where Keybot entered the long side a week ago.  Watch SOX tomorrow, now at 365.37. If the algo sees 366.30 the bulls will be back in biz, but, if SOX remains under 366.30, then the market bears will continue to enjoy the downside.  If the bears keep the semi's below 366.30 tomorrow, the retail sector will determine broad market direction. If RTH, now at 105.03 and bullish, loses 104.10, then retail becomes bearish and this will help exacerbate the down side for the indexes. If retail stays above 104-ish, the market bulls are hanging in there overall and this will help the indexes recover.

For the SPX on Thursday, starting at 1166.76, the bears have the wind at their backs. Market bears only need to push the SPX a measley 55 cents lower and the downside will once again accelerate. Thus, if bearish, you want to see red futures overnight into the open to ensure the markets demise. If bullish, you need to provide green futures to stop the bears before things get out of hand.  SPX provides support at 1166 and 1155. SOX and RTH as described above will tell you the direction of the broad markets tomorrow. We will find out if Keybot the Quant wants to flilp to the short side, or stay on the long side, for tonight, the algo is in the bull camp still yet.

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 =
9/21/11; 3:50 PM EST = -40; signal line is -51
9/20/11; 9:00 AM EST = -24
9/18/11; 7:00 PM EST = -24
9/16/11; 10:00 AM EST = -24
9/14/11; 12:43 PM EST = -24
9/14/11; 12:39 PM EST = -40; signal line is -58; go long 1180; (Benchmark SPX for 2011=-6.2%)(Keybot this trade=+0.5%; Keybot for 2011=+26.4%)(Actual this trade via SH=+0.4%; Actual for 2011=+39.7%)

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