Sunday, November 27, 2011


Keybot the Quant begins the new week of trading remaining on the short side. The market bulls showed signs of life on Friday morning but petered out by the close. The utilities are critical and are in the bull camp to start the week. UTIL starts the week at 426.01, above the 424.35 level, favoring buoyancy in the broad markets. If UTIL loses 424.35, the selling in the broad markets will significantly increase. Should the market bears push hard this week, if UTIL loses the 417 level, the broad markets will go into free fall. This outcome is not anticipated to occur but the behavior of UTIL will dictate the outcome.

The SPX:VIX ratio is 33.61, under the 35 level, thus, market bearish. If the ratio moves back above 35, that signals the bulls regaining control and markets will move higher. Broad market weakness will continue as long as the ratio stays sub 35.

For the SPX, any amount of red futures overnight tonight will cause strong selling at the open. SPX 1158 and 1155 are important support levels and any rupture verifies continued market weakness. If the bulls want to bounce the indexes, it will show itself by the UTIL staying elevated, SPX:VIX moving above 35 and SPX staying above 1158. SPX 1173 is the magic level for market bulls. If SPX touches 1173, the broad indexes will accelerate upwards.

The market bears remain in control and UTIL and SPX:VIX will dictate market direction. The algo prints out two pre-scheduled numbers this week, one on Tuesday morning and the other Wednesday evening for the EOM. Note that the closer the algo number gets to the signal line number, now 19 points difference, the closer the quant comes to flipping to the long side. For now, Keybot remains comfortably short.

12/4/11; 7:00 PM EST =
12/2/11; 9:00 AM EST =
11/30/11; 7:00 PM EST EOM =
11/29/11; 10:00 AM EST =
11/27/11; 7:00 PM EST = -56; signal line is -37
11/25/11; 9:30 AM EST = -56; signal line is -35
11/23/11; 3:59 PM EST = -72; signal line is -33

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