Wednesday, October 19, 2011


Keybot the Quant remains long. The algo came close to flipping short during the big sell off yesterday morning, but stayed the course.  Utes broke down, but only for one-half hour, then recovered adding buoyancy to the broad markets. Then financials kicked into gear and the indexes never looked back.

For today, Keybot prints out a pre-scheduled number before the open. Financials, XLF, and volatility, VIX will tell the tale in early trading. As long as the XLF stays above 12.60, now at 12.79, the market bulls will maintain upward buoyancy in the indexes. VIX should be a pivotal sector area to watch. If the VIX, now at 31.56, drops under 29.30, pop the champagne corks since the market bulls will be partying like it's 1999. The market bears need to keep the VIX elevated, a move under the 30 level can serve as an early signal that the bulls are making a further run.

For the SPX today, starting at 1225, if you see a 1233 handle the large block buyers will enter in force, and the indexes will jump several more handles with a bull celebration. SPX 1242 would be the next upside target. The market bears have a long road to hoe today since they would need to retrace yesterdays up move to regain any control, and that is unlikely at this juncture. The bears will instead try to limit the market upside and they will attempt that by preventing the VIX from falling under 30 or especially 29.30, while at the same time trying to move the XLF back under 12.60. A move thru SPX 1192-1232, although a 30 point range, would be considered sideways slop for today.

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 =
10/18/11; 1:30 PM EST = -8; signal line is -26
10/18/11; 1:20 PM EST = -24; signal line is -27
10/18/11; 12:41 PM EST = -8; signal line is -27
10/18/11; 11:37 AM EST = -24; signal line is -28
10/18/11; 9:53 AM EST = -40; signal line is -30 but algorithm says stay long
10/17/11; 9:37 AM EST = -24; signal line is -31

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