Wednesday, December 14, 2011


Keybot the Quant remains short to start the Wednesday session. No whipsaw has occurred as yet as the algo's flip to the short side is now approaching two days old.  The drama yesterday was around the financials, XLF, dancing above and below the critical 12.82 level identified by the quant.  When the Fed released their announcement in the 2 o'clock hour, without any mention of future quantitative easing, the financials collapsed. XLF plummeted taking the broad markets down.  Retail was weak all day due to gloomy Best Buy news and weaker than expected retail sales data. RTH dropped significantly which accelerated the late day market selling.

The utiltites are remaining elevated so this hints that a more sustainable broad market move down is not in the cards currently, the utes typically lead or are coincidental with such a move lower.  Financials and retail are key to determining market direction today.  Watch XLF 12.82 and more importantly, RTH 109.40. RTH starts the day at 109.89. If 109.40 is lost, a significant increase in broad market selling will occur.

For the SPX today, starting at 1226, the market bears have the ball and need to push lower to lose the 1220 handle.  If so, the large block sellers will enter the markets accelerating a further down move and the bears will clearly have the momo.  Bulls are simply trying to stop the bleeding today by preventing deterioration in the retail sector, boosting the banks and making sure that the critical 1220 support holds. A move thru SPX 1221-1248 is sideways action. The caution flag remains out since the indexes are very jumpy now and the low readings of volatility, VIX, relatively, hint that the market downside would be limited. Markets remain at the mercy of Europe news.

12/18/11; 7:00 PM EST =
12/13/11; 2:19 PM EST = -26; signal line is -1
12/13/11; 11:24 AM EST = -10; signal line is -2
12/13/11; 11:05 AM EST = -26; signal line is -4
12/13/11; 9:30 AM EST = -10; signal line is -5
12/12/11; 10:25 AM EST = -26; signal line is -6; go short 1234; (Benchmark SPX for 2011=-1.9%)(Keybot this trade=+3.4%; Keybot for 2011=+31.7%)(Actual this trade via IWM=+4.7%; Actual for 2011=+37.0%)

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