STOCK MARKET BEARISH -- SHORT -- CAUTION

Keybot the Quant is short to start the new trading week.  The France and Greece election results will provide drama in the Sunday overnight futures markets. Keybot appears most interested in the financials, volatility and retail sectors. XLF 15.18 triggered the Friday trouble so the first sign of any recovery for bulls will occur if XLF moves above 15.18. Below, and the bears will be driving markets lower. VIX whipped the markets further south once the 18.14 level was taken out to the upside. Thus, the bulls need the VIX back under 18.14 to move markets higher.  It appears that Keybot will need to see both the XLF and VIX to rejoin the bull camp for the algo to flip back to the long side, if one or both remain bearish, Keybot will likely remain short.

Watch RTH 41.35, now at 41.81. With all things staying equal, Keybot is targeting this sector next. If RTH stays above 41.35, the bulls stay in the game overall and will simply let the market negativity play out and begin a recovery move. If RTH loses 41.35, the broad indexes will take a strong leg lower and the bears will move into a more sustainable downside market move going forward.  The strength in the utilites sector, UTIL, is a key feather in the bulls cap that also keeps them in the game overall. UTIL 448 is a critical level the algorithm is locked onto which will remain in place all week long. UTIL is at 467.88, twenty points above this danger level. For the next two months, the bulls must keep UTIL above the 448-454 zone. If price falls into this zone at anytime, markets are in big trouble, if price collapses thru, you will see the broad indexes tumbling substantially lower.

For the SPX for Monday, starting at 1369, the market bears only need to see one red point in the futures overnight and the broad indexes are set up for another leg down, likely to test 1364 and/or 1361 in quick order. The bulls must retrace Friday's move which is a formidable task. One possible way this bullish outcome could occur is if Sarkozy wins the France election, but he is not favored. We will know this answer in the hours ahead. Thus, the bulls are simply trying to stop the bleeding and can do this if they keep the futures green. When the opening bell rings, watch XLF 15.18 which will provide an immediate indication of market direction. Then watch VIX 18.14 and RTH 41.35 as well.

Markets remain highly unstable and erratic. Caution is warranted. Keybot prints only one pre-scheduled number this week on Friday morning.

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

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

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

5/4/12; 10:05 AM EST = +0; signal line +26

5/4/12; 9:55 AM EST = +14; signal line is +27; go short 1382; (Benchmark SPX for 2012  = +9.9%)(Keybot this trade = -0.4%; Keybot for 2012 = +1.6%)(Actual this trade = -1.0%; Actual for 2012 = +2.0%)