STOCK MARKET BEARISH -- SHORT

Keybot the Quant remains short. What a day. The algorithm was very active today printing out seven numbers.  The quant locked onto VIX, XLF and RTH and all three failed today triggering the next leg down for the broad markets.  The technical damage to the markets is severe.  In one short week, the broad indexes has lost the support of seven major sectors that are now fueling the downside. A move of this severity typically has legs.  If the NYA, now at 7842, loses about 200 points, less than what it lost today, the broad markets will fall into a secular bear pattern, so the selloff is not to be taken lightly.

For Wednesday, watch VIX 19.50 (now 20.39 and bearish), XLF 15.05 (now at 14.97 and bearish), and RTH 40.63 (now 40.60 only three pennies on the bear side). If these three compadres stay bearish, the markets will continue the downward slide.  If any of these three turn bullish, it will signal a recovery rally, and if two or all three flip back to the bull side that will signal the strength of the recovery bounce. Also of interest is the utilities that are drifting lower; UTIL is now at 449.84.  The 441 level represents a trap door in the broad indexes; if UTIL fails at 441-442, the broad markets will likely go into free fall and Chairman Bernanke will have to step in with QE3, but, this is more likely to happen in the days and weeks ahead rather than right away.

For the SPX starting at 1358.59, the bears are trying to stop the bleeding and they can accomplish this task by moving at least one of the three sectors (VIX, XLF, RTH), as described above, back into the bull camp.  The market bears are on cruise control now, and only need to see one red spoo point in the overnight futures markets to ignite further accelerated downside action.  A move thru 1358-1382 is sideways action.

Markets remain unstable but obviously the selloff that Keybot was projecting occurred today. For now, the quant remains short and it appears the bulls cannot reverse the trouble in a sustained way unless the VIX, XLF and RTH sectors return to the bull camp.

4/15/12; 7:00 PM EST =

4/13/12; 10:00 AM EST =

4/10/12; 3:46 PM EST = -32; signal line is +21

4/10/12; 3:33 PM EST = -16; signal line is +24

4/10/12; 3:10 PM EST = -32; signal line is +27

4/10/12; 2:53 PM EST = -16; signal line is +31