Wednesday, December 28, 2011


Keybot the Quant remains long as broad indexes languished all day long.  The algo idled along calmly all day without printing any numbers. The Italy bond auctions in the morning have traders on edge and prone to hit the sell button today. The SOX collpased at the open and a run up to 368.60 was never considered. This semiconductor weakness fueled the Nasdaq downside and overall market weakness.

Since semi's have now given up the ghost, retail, RTH, and financials, XLF, are now in the algorithm's focus.  The RTH is two points above danger at 110-ish but the XLF is at 12.86 only six pennies above danger at 12.80. If the XLF drops under 12.80, all Hades will break loose, the broad markets will tumble lower.  The market bulls will try to prevent the loss of XLF 12.80 with all their might. XLF will determine the fate of the markets when the bell rings to begin the Thursday session.

For the SPX, starting at 1250, the bears have the wind at their backs since the close was near the lows.  If the market bears can push the SPX under 1248.50, the downside selling will accelerate. The market bulls need to retrace today's tumble to regain the momo but since that is a fomidable task, the bulls will simply fight to stop from losing XLF 12.80.  A move thru SPX 1250-1264 is sideways action.

SPX support exists at 1249, that held today, and 1247.  A breach of 1247 to the downside likely correlates to the XLF losing the 12.80 level and serious selling entering the broad markets, and, most importantly, Keybot probably flipping to the short side. XLF 12.80 is the key tomorrow, it will determine broad market direction.

1/1/12; 7:00 PM EST EOM EOQ4 EOY2011 =
12/27/11; 3:37 PM EST = -10; signal line is -21
12/27/11; 11:09 AM EST = +6; signal line is -21
12/27/11; 10:52 AM EST = -10; signal line is -22

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