Sunday, October 16, 2011


Keybot the Quant remains long to start the new trading week. The algo came close to flipping short late Friday but the bulls launched the markets in the final minutes to keep the party going. On Monday's opening bell, the quant is set up to print a higher number which would result in the first time the algo number is positive since late July, just before the August crash.

The recovery rally over the last couple weeks is driven by semiconductors and retail. Traders are banking on the expected Q4 positive seasonality. Retail data was better than expected last week so the two main bull fuel drivers pushed the indexes higher. For the new week ahead, utilties, financials and volatility will play a key role.

If the XLF stays above 12.58, now at 12.60, then the market bulls will continue with upward market buoyancy. If volatility as measured by the VIX stays under 28.65, now at 28.24, collapsing into the Friday close, then this will favor the bulls as well.  The magic number for the utilites this week is UTIL 436.75 so jot this down at your work station and monitor it closely. UTIL is now at 438.76 to start the week so the quant will pop upwards at the opening bell IF the utes maintain this posture.

For the SPX for Monday, starting at 1225, the market bulls have the advantage. All the bulls need is to see green futures, even a few pennies will be good enough, and the indexes will launch several handles in the early trade. Particularly watch the important resistance cluster at 1225-1227, a break thru and 1233 will appear quickly.  For the market bears, they continue to try to stop the upside momo, and the bears need to keep the futures red overnight. If the bears can see a 1205 handle, they can accelerate the down side with heavier selling, but, at about 20 points lower, this is a formidable task.  A move thru 1207-1223 is sideways markets.

Even though the picture is very bullish now do not rest on your laurels, a turn can occur in a heart beat. Note that the signal line at -32 is climbing substantially now and the XLF and VIX are only marginally bullish. Earnings will play a pivotal role. Do not take the upside for granted, stay on guard. The quant prints out one pre-scheduled number this week on Wednesday 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; signal line is -32
10/14/11; 3:56 PM EST = -10; signal line is -34
10/14/11; 3:48 PM EST = -40; signal line is -37 but algorithm says stay long
10/14/11; 3:40 PM EST = -24; signal line is -38
10/14/11; 3:32 PM EST = -10; signal line is -40

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