STOCK MARKET BEARISH -- SHORT -- CAUTION

Keybot the Quant remains short.  The algo printed three numbers yesterday. Lots of drama surrounded the financials, and the XLF closed right at Keybot's level of interest at 15.18, actually one penny higher as markets settled after the close. How does Keybot know these numbers ahead of time?  Copper recovered strongly yesterday and it went relatively unnoticed. Thus, the algo is now scanning four sectors with great interest; financials, copper, volatility and retail, XLF, JJC, VIX and RTH, respectively.

Watch XLF 15.18 (now above at 15.19 helping bulls), JJC 48.15 (now below at 48.01 helping bears), VIX 18.14 (now above at 18.94 helping bears-remember, volatility moves inverse to the markets) and RTH 41.35 (now above at 41.72 helping bulls). The juxstaposition of these four characters will determine broad market direction moving forward. Since the futures project a lower open today, XLF will likely fail at the open helping bears. Watch to see if RTH fails 41.35, if so, the markets will take another significant leg lower.  The market bulls need to keep XLF above 15.18 and heading higher while also pushing copper above 48.15 and this will begin a recovery bounce that will have legs.

For the SPX today starting at the important S/R at 1370, the bulls need to see four points to move up and touch the 1374 handle, if so, the upside will accelerate. Bears need to see six points lower to drop under 1364 and the downside will accelerate.  A move thru 1365-1373 is sideways action. The lower futures show that the bears have a shot at the 1364 after the opening bell. Markets remain unstable. The caution flag remains out as this tug-o-war between bulls and bears continues.

5/13/12; 7:00 PM EST =

5/11/12; 10:00 AM EST =

5/7/12; 1:22 PM EST = +16; signal line +24

5/7/12; 12:45 PM EST = +32; signal line +25 but algorithm says stay short

5/7/12; 12:39 PM EST = +16; signal line +25

5/6/12; 7:00 PM EST = +0; signal line +25