Wednesday, October 16, 2013

STOCK MARKET BULLISH -- LONG

Keybot the Quant is long as the bulls push markets higher into the closing bell today receiving fuel from the VIX collapsing under 14.94. The algo is at the highest levels since, wait for it, the market top at 9/18/13 when the algo printed +79.  The Keybot algo at its heart is an oscillator so by definition for an oscillator (such as RSI or stochastics), the +70% to +80% level and higher is overbot conditions where a potential market correction is needed to relieve the uber bullishness, and, the -70% to -80% level and lower is oversold conditions where a potential bull rally is needed to relieve the negative pressure. The algo number is +78 which is +78%, on the overbot side. All sectors and nearly all other parameters across the board are bullish; there is simply very little additional upside fuel available for markets.

Watch VIX 14.94 since it holds the key. Bears desperately need to push the VIX back above 14.94 to stop the market upside. Otherwise, markets continue floating higher. Bears also need UTIL under 484.08 which would stop the upside. With two days remaining this week, it is time to watch UTIL more closely as described last weekend (scroll back to read that message). The important comparison numbers for next week for UTIL are 498.03 and 484.08. Equity markets can receive more bull juice if utilities start moving higher tomorrow and through Friday and end the week at or near UTIL 498. This action will virtually guarantee new all-time highs for the SPX and Dow. Conversely, if UTIL remains lackluster in the 480's to finish the week, this will provide a feather in the bear's cap to begin next week's trading.

For the SPX in Thursday trading, beginning at the strong 1722 resistance, the bulls only need to see a smidge of green in the overnight futures and the all-time closing high at 1726 will be tested in quick order then perhaps the all-time high at 1730. The bears are simply trying to send volatility higher (VIX above 14.94) to stop the bleeding. If bears are lucky they will send UTIL under 484.08 and receive further fuel for the market downside. The bulls are cruising with their feet up on the dash. Judging from the September behavior, the markets may be at or near a top. Keybot prints a pre-scheduled number in the morning but it should only tweak the numbers by a point or two. Watch volatility and utilities.

10/17/13; 9:00 AM EST =
10/16/13; 3:48 PM EST = +78; signal line is +46
10/16/13; 3:13 PM EST = +64; signal line is +44
10/16/13; 2:46 PM EST = +48; signal line is +41
10/16/13; 9:48 AM EST = +64; signal line is +39

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