Keystone's Morning Wake Up 5-20-11

LinkedIn IPO was all the rage yesterday.  Keystone was skeptical when GOOG came to market and that turned out fine, but, boiling it all down, what do you have? A cyberspace site that allows professionals to brag to each other about how smart they are, as well as network to try to get more than they give.  Networking is overrated.  Lose your job and contact your network for leads.  Don't hold your breath with the results.  Keystone boils things down to basic elements.  If LinkedIn went off line a few days, would it really matter?  Compare that with manufacturers, commmodities and parts suppliers, security service providers or a multitude of other businesses that make something or provide vital services.

Thus, time will tell with LinedIn. Just because it does not produce hard goods or provide a 24/7 vital service does not mean the company cannot be wildly successful and profitable.  Keystone simply sees much better opportunites with the other fish in the ocean. A dotcom odor wafts thru the air. The social media revolution has begun.

Let's discuss something more useful.  Euro woes are on a steady and strong pace negative.  Uncertainty grows each day which will add to further weakness in the euro.  Thus, the following asset relationship needs monitored; euro down=dollar up=commodities down=equities down=gold down=treasury price up (yield down).

The bull-bear struggle all week continues. SPX has moved between 1320 and 1370, a 50 point range, for the last month.  SPX now at 1344; 20 day MA is 1346 (resistance); 50 day MA is 1325 which served as support to create the Wednesday bounce.  SPX is trending with lower lows and lower highs for May.

Volatility collapsed at Wednesdays close and the VIX remains low at 15.52.  If VIX gains 2 points and moves above 17.54, then the market bears will be selling the markets off hard into the weekend.  If, however, the VIX remains below 17.54, complacency will continue to reign, market bulls will continue to have no worries or fears.  Volatility is positively diverged on the minute charts so a bounce is expected which would correspond to market selling but substantial extended market selling will not occur unless the VIX gets above that 17.5-17.6 area.

Retail showed cracks yesterday; GPS will open lower today and the negative divergence on the daily chart will help push it lower.

Utilities remain at lofty levels, some traders using the utes defensively.  Markets typically do not experience major extended selling events unless the utilities lead the move down or are at least coincidental, so any move down in the broad markets should bottom and the indexes will want to come up again until the utlities cooperate with the market bears.

The window for a substantial market sell off remains open currently based on Keystone's Eclipse Sell Off Indicator, so continue to monitor market conditions closely.

The debt ceiling discussions are heating up but with the new August 2 deadline, politico's will not get around to doing anything until July, so this should cast a pall on the markets. Euro woes can increase the negative vibe throwing the euro down=dollar up=equities down relationship into play.

Typically, Friday's see shorts covering some positions in the afternoon so markets are buoyant from 1 PM EST on. If markets are weak on a Friday afternoon, that would add to a negative vibe.

For today, if SPX gets above 1345, then the market bulls will finish the week on a positive note and the indexes will run up a few handles today.  If, however, and the futures are red, the SPX drops under the 1337 handle, then the market bears plan on accelerating the selling. Between 1337 and 1345 the sideways funk continues.