Sunday, October 9, 2011


Keybot the Quant idles along on the long side this weekend. The new trading week, however, starts off on an interesting note. The algo number is closing in on the signal line, now only 10 points away so it does not take much for the quant to want to flip back to the short side again.  In fact, looking back from 2 1/2 weeks ago, Keybot flipped short at SPX 1150 on 9/22/11, long at 1148 on 9/26/11, short at 1146 on 9/29/11 and now long at 1146 on 10/6/11. These quant turns highlight the importance of the 1146-1150 S/R cluster, above and market bulls are happy, below and market bears are happy.

The interesting aspect for this week is that the quant will immediately want to flip short the second the opening bell rings tomorrow morning. That is, as long as the utilities, UTIL, stay under 439. With UTIL starting at 431, eight points lower, this looks like a done deal but in trading always expect the unexpected. If a Greece resolution is announced overnight, UTIL may be at 440 before you even pour the morning coffee, but, the likely move is that UTIL will not regain 439 by the early Monday trade.  This 439 level is in play all week long so write it on the desk top in front of you. Market bulls will have a party if the UTIL 439 is achieved. Market bears will have a better party if the utes stay under 439 since this means they have the upper hand. An even more interesting aspect is that the quant will be watching for ute numbers in the 430's for the next 5 weeks! If the utilities cannot meet this requirement, the broad markets will continue to falter.

RTH 103.90 and SOX 359.80 levels are also being watched by the algo. Below these levels and market bears cheer, above and market bulls are running higher. Retail currently favors the bulls while the semi's favor the bears.

For the SPX tomorrow, starting at strong support at 1155, the market bulls must push up to 1171 to regain the upside momo. With the utes in the predicament described above, however, this is unlikely. The market bears have an easier road to hoe. Since the utes look to favor the bears as soon as the markets open, Keybot the Quant will want to go short, but other algo rules will have to be satisfied as well.  If the SPX drops to an 1150 handle, watch carefully, if you see an 1149 flash, that will be a loud and clear signal for the sellers to enter the markets in force, and the indexes will drop several handles in quick order.

If the utes stay under 439, a turn will be imminent, and if the SPX drops under 1150, it is likely that Keybot the Quant will flip short, so even if the posting is delayed here tomorrow, these two criteria will give you something to watch. Both must be satisfied. There is only one pre-scheduled number that the algo clicks off this week and that is on Friday morning.

10/31/11; 7:00 PM EST EOM =
10/30/11; 7:00 PM EST =
10/28/11; 10:00 AM EST =
10/25/11; 10:00 AM EST =
10/23/11; 7:00 PM EST =
10/19/11; 9:00 AM EST =
10/16/11; 7:00 PM EST =
10/14/11; 10:00 AM EST =
10/9/11; 7:00 PM EST = -40; signal line is -50
10/7/11; 3:40 PM EST = -40; signal line is -51
10/7/11; 3:22 PM EST = -28
10/7/11; 9:00 AM EST = -40; signal line is -52
10/6/11; 10:21 AM EST = -40; signal line is -53; go long 1146; (Benchmark SPX for 2011=-8.9%)(Keybot this trade=+0.0%; Keybot for 2011=+23.9%)(Actual this trade via DOG=+0.3%; Actual for 2011=+35.5%)

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