Keystone's Morning Wake Up 5-16-11

LOW starts the day off with weak earnings.  That will hurt HD in sympathy, as well as cast a pall over the real estate sector in general, ahead of the housing data at 10 AM and housing starts tomorrow morning.

IMF head Strauss-Kahn news, concerning the alleged rape in the States, is plastered across the media.  The news has hurt the euro, Strauss-Kahn missed a meeting with Merkel yesterday, there are euro meetings in progress today he was needed for, what a mess. The IMF detractors now have even more ammo.

Futures are weak currently; SPX set to fall under 1333.36 at the open which, once this level is broken will accelerate the down move several more spoo handles. But, as always, markets can change quickly.

Watch BPSPX; now at the exact point of a six percent reversal from 83% to 77%. Any further drop under 77% verifies continued market weakness ahead, and should the 70% level fail, markets will be moving into a firm bearish trend.

Chairman Bernanke takes a break from the breakfast buffet to talk at 9 AM so perhaps some news bites will hit the wires affecting markets.

Retail earnings and real estate data figure prominently this week.  The debt ceiling drama will be in the news as well since today was the original deadline, that was then pushed to July, now pushed to August.  The Congress clown three-ringed circus will not resolve the debt ceiling crisis until the second half of July.

Watch SPX:VIX, now at 78, market bulls do not have to have major concern unless they see 68, and if 68 is hit, even today, the bears plan on selling for an extended period of time and the markets will fall large.

Watch VIX, volatility, to further help gauge market direction.  Market bulls have the upper hand, for now at least, as long as the VIX remains below 17.6.  If the VIX moves above 17.6, the fear is elevating and the markets will be selling off at an increased pace. Under 17.6 and bulls remain in control of these markets.

Watch semiconductors, SOX, very closely at the bell.  Semi’s are balancing on a bull-bear tight rope today and will fall one way or the other.  SOX is at 440.95.  If the SOX falls below 440.81, which looks likely right now, then the market bears will be running the broad indexes lower.  If the SOX can maintain its current level or manage to drift a bit higher, the market bulls will remain in control.

For today, if the SPX drops under 1333.36, selling will accelerate in the indexes, and the 1331, 1328, 1325 and even 1318 levels may be explored. Watch the other tools above to note the strength of any down move.  Market bulls need to drive the SPX above 1350.47 to show they want to send things higher.  Market bears are favored as the day begins.