Tuesday, July 19, 2011


Keybot the Quant remains short despite the euphoria in the broad markets today.  Note that the SPX, at 1327, is now three points above Keybot's entry for the short side nine days ago at 1324. The algorithm scanned today and did not click off any numbers during the session. The semi's, financials, volatility and commodities all remain in the bear camp, at least for now, and the utes, retail and copper are in the bull camp.

Thus, tomorrow will be a critical day. If the markets continue up, Keybot will have to flip long at some point so it will be interesting to watch. The algorithm is fixated on three key areas; commodities, semi's and volatility. Use the CRB, SOX and VIX, respectively, to determine if the bulls really plan on rocking higher, or not. The algorithm will more than likely need to see two of these three move to the bull camp for Keybot to flip long.

If the CRB, now at 347, moves above 349.60 (value calculated by Keybot) tomorrow, place a feather in the bulls cap. If the CRB stays below 349.60 as it is now, then the market bears are putting up a fight and the path up for the markets will not be easy.

If the SOX, now at 397, moves above 408.90 tomorrow, which is 12 points higher, a big 3% gain, place a feather in the bulls cap.  If the SOX cannot get above 408.90, the bears are putting up a fight.

If the VIX, now at 19.21, moves below 18.10, only a buck lower, not a big deal for volatility moves, then place a feather in the bulls cap.  If the VIX remains elevated and does not dip under 18.10, let's call it the 18.0-18.1 area, then the bears are putting up a fight.  So the market bulls probably need two of these three sectors to turn bullish to show that the rally mode is real, if not, then this move up in the broad markets today is a fake out. Semi's are the most likely to move to the bull side since the charts already started to bounce off of positive divergence.

For the SPX in Wednesday's session, if the SPX now at 1326.73, moves to 1328+, only a point and a half higher, it will be off to the races for the buyers, with several more handles higher on tap.  The only problem is that the SPX is coming into formidable resistance at 1329, 1331 and 1333 and if the SPX is headed up tomorrow, these levels are all three heavy duty overhead resistance values. The market bears need to drive lower to the 1307 level to get any strong negativity going again. If a 1306 handle is touched, the markets will flush lower with 1300 and 1297-1298 coming in quick order. The 1308-1327 range is sideways stuff.

Tomorrow we find out if the bulls plan on running, or not. If you see green futures it will be a bull's party tomorrow, since only a point or so is needed of upside to begin a wild buying orgy again.  Red futures will signify that the upside is not so guaranteed. Markets remain unstable, caution is warranted.

7/31/11; 7:00 PM EST EOM =
7/29/11; 10:00 AM EST =
7/26/11; 10:00 AM EST =
7/24/11; 7:00 PM EST =
7/19/11; 9:00 AM EST = +4; signal line is +19
7/18/11; 3:54 PM EST = +4; signal line is +17
7/18/11; 10:06 AM EST = -10
7/17/11; 7:00 PM EST = +4; signal line +15
7/15/11; 10:00 AM EST = +4
7/11/11; 10:34 AM EST = +4; signal line is +12; go short 1324; (Benchmark SPX for 2011=+5.3%)(Keybot this trade=+3.0%; Keybot for 2011=+7.8%)(Actual this trade via IWM=+3.7%; Actual for 2011=+2.8)

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