Keystone's Morning Wake Up 7-20-11

Housing Starts bounced the markets yesterday.  The bad news is that Keystone's algorithm says that housing has fallen back into a double dip as of 5/17/11, two months ago. Thus, the data next month will be pivotal in determining if housing has placed a bottom, or not.   There are three key elements to watch today to determine if yesterday's upside run has legs; semi's, commodities and volatility. For the SOX, watch 349.60, for the CRB watch 408.90 and for the VIX watch 18.10. All three of these are bearish now with the SOX and CRB under the value shown and the VIX above the 18.10.  If two of these three flip to the bull side, the upside run has some legs.

For the SPX today, the futures are strong and green, and all the bulls need is a point or so higher, to touch 1328+ and it will be off to the races with the upside again today. That appears to be on tap. The trouble is that the SPX is coming up against some formidable resistance at 1329, 1331, 1333. It will take effort to try and get thru this gauntlet.  If the SPX should blow thru this area easily it would be testimony to huge bullish strength in the markets but Keystone does not see an easy jump thru this gauntlet area. 

The utililities sector remains elevated and an extended down move in the broad markets will not occur until the utes roll over so keep watching.   SPX:VIX is back over 68 with a 69 handle favoring bulls so continue to watch this bull-bear line at 68.  SPXA150R at 61-ish, very surprising, this type of number does not bolster the bull case, it should be up over 70 on the way to 80 if the broad market strength was lasting. CPC chart shows a spike down to 0.67 hinting that the broad markets are placing a significant top currently, anytime between now and the next four weeks.

Existing Home Sales hit at 10 AM so watch this as a market pivot point. Ditto Oil Inventories at 10:30 AM. Earnings releases are front and center today with ABT, MO, AXP, AMR, BLK, CLB, EBAY, EMC, FFIV, JCI, KMP, PNC, QCOM, USB, XLNX.