The bulls are stretching their muscles again today. The AIG news is all the rage and this is helping lift the financials sector. The XLF is over 16 pre-market emboldening the bulls. Watch the SPX 50-day MA at 1416.86 and 20-week MA at 1419.39. The bulls need to touch 1422, and hold it a few minutes, to ignite an upside acceleration likely targeting 1429. The bears need to push the SPX under 1416 to accelerate the downside. VIX 15.79 is key today. If the markets launch higher, watch the VIX, since a move under 15.79 verifies the market rally and a test of 1433 will likely be on tap. If the markets bounce but the VIX does not drop under 15.79, the bulls got nothing. A move thru 1417-1421 is sideways action. If the VIX drops under 15.79 and/or the SPX moves above 1425.90, Keybot the Quant will likely flip to the long side. The markets are in a sideways funk with a deadline for the Fed's decision only a day away, and the fiscal cliff deadline only two maybe three days away. The two-day FOMC meeting begins today. Wholesale Trade at 10 AM may create a stutter step. Hang on to your hat.
Note Added 12/11/12 at 10:41 AM: The bulls are running higher. The VIX fell thru 15.79 which now verifies the strong bullish rally. The bears will not make any headway unless they push the VIX back above 15.79. The SPX punched thru 1429 R and likely wants to test the strong 1433 resistance. Keybot the Quant, Keystone's algo, finally committed to the long side after the four days of indecision. The 10 AM pivot provided a launch pad. The bulls are in firm control but stay alert for a whipsaw at any time. The light volume allows the bulls to continue squeezing the bears forcing them out of short positions which adds more upside. The euro is at 1.30. The 10-year yield is 1.65%.
Note Added 12/11/12 at 11:32 AM: There's the first test of 1433 resistance, punching violently up thru to a HOD at 1434.27, but quickly falling away. Watch to see if price can punch up thru 1433, and hold it as support, to signal further bullishness ahead. SPX 1433. VIX 15.60. Euro 1.299. TNX 1.65%.
Note Added 12/11/12 at 12:37 PM: Speaker Boehner spoke on the floor of the House stating the same old stuff. The SPX dropped a few handles but recovered, moving back up to test 1433 again, resulting in another push back. VIX remains under 15.79, bullish. Note that the TICK hit +1000 identifying the two attacks of 1433 R so far, the first at 11:20 AM and second at 12:20 PM. TRIN is 0.75 uber bullish.Note Added 12/11/12 at 3:08 PM: Senator Reid lays an egg saying there will be no solution to the fiscal cliff before Christmas and the democrats have no plans to offer any spending cuts. The markets sell off. VIX moved above 15.79 at 2:59 PM; the bears are pushing back. The election day top was at SPX 1429 so President Obama circled the wagons and recovered all the last ground from the post-election selloff. SPX S/R is 1441, 1440.24, 1438 (where Bernanke announced QE3 Infinity in early September), 1435, 1433, 1431, 1429 (President Obama election day top), 1426.63, 1424, 1422 and 1419. The strength of the 1433 resistance level is apparent from today's action and now serves as a useful bull-bear gauge. The euro remains at 1.30 and the 10-year yield at 1.65%.
Note Added 12/12/12 at 3:44 AM: Volatility folded like a cheap suit late day dropping back under VIX 15.79 in the final minutes. VIX 15.79 is a key parameter to watch moving forward. Bulls are happy below VIX 15.79. Bears do not have a chance unless they push volatility higher moving the VIX back above 15.79.