Keystone's Morning Wake Up 7-15-11

Yesterday, despite the early move upwards, the bears pushed the SPX under 1314.50, and then as projected, filled the 1307 gap.  There is a confluence of the 1307 gap, 1309 Fibonacci 50% retracement and the 20 MA at 1309 that stopped a further slide.

The bull and bear camps are firmly entrenched on each side.  Major sectors such as financials, semiconductors, commodities (ex-copper) and volatility are bearish while retail, copper and utilities are bullish.  GOOG earnings were positive last night so this may boost tech and the broad markets today. Oddly, S&P threats of a downgrade for the U.S. are being outgunned currently by GOOG since the futures are green this morning.

Semiconductors, SOX and SMH, are very beaten down and ready to pop so watch these names closely today for possible entries, perhaps today thru early next week for long entries.  We can look at the charts this weekend.

Typically Friday's are sleepy days in the summer with traders sneaking out the door early but the European stress test results at noon time will keep everyone interested today.  CPI data drifted futures lower a few minutes ago. Empire State Manufacturing data prints a negative number not seen since last year which also adds to a couple spoo's lower in futures but a positive start remains.  Industrial Production hits 15 minutes before the opening bell and Consumer Sentiment will be watched closely at 10 AM.  C earnings followed along with JPM so perhaps that will provide some financial buoyancy today.  Markets will tend to open on Monday the opposite way they close today so watch the final hour of action for hints today.

For the SPX today, the bears only need two points lower to get under 1306.50, if so, the markets will sell off in force, and the SPX will move down to fill the gap and test support at 1298-1300.  The bulls have a formidable task ahead today since they need a lofty 1326 handle to signal an all clear for sustainable upside. Thus, the bulls will be happy simply to get into the weekend with a sideways move.

1307 is a key area from which a bounce can occur, but, if the stress test results drops the euro today, the indexes will trail off as well, and the move to 1298-1300 should occur. SPX 1306.50 is a key level to watch this morning, above, and bulls will be content to move towards the weekend to regroup. If 1306.50 is lost, the sellers will come into the markets.