Keystone's Morning Wake Up 8-3-11

Market bears only need to start the indexes off red today and the strong selling will continue, but, by the look of the futures, the markets want to take a bounce today.  Other indicators such as NYMO, NYHL, NYAD, TRIN are all agreeable to seeing a relief rally for the markets.  Volume yesterday was not as strong as prior days. Utes and copper remain elevated.  Semiconductors and financials are set up with positive divergence ready to bounce.  Thus, a pop in the indexes would be expected today.

Serious technical damage occurred yesterday, the SPX lost the 12 month MA, which will probably reverse today, but the very nature that it has now stabbed this MA, is bearish for the markets over the IT and LT.  The slope of the SPX 150 day MA has now went negative as well, first time sine the end of last year, so these indicators are serious indeed.

The Challenger and ADP reports provide an early read on Friday's job report. With all the negativity the last couple days, the expectations are lower for the jobs report, thus, the markets are or have built in much of the negativity more than likely.  Markets may pivot this morning at 10 AM on the Factory Orders and ISM Non-Manufacturing data. Oil Inventories are 10:30 AM.

Joe Six the retail investor may have hit the rip cord during the market sell off yesterday and sold equities, then, not knowing where to put the money, jumped into gold. This timing may prove unfortunate. Meanwhile, traders were shorting gold in anticipation of a pull back after the debt celing raise, but, the gold markets received some juice on central banks buying, so the shorts playing the debt ceiling trade jumped ship, causing a short covering rally and for gold to jump higher. Joe Six may have had bad timing yesterday since he may see the equity positions he sold yesterday rebound nicely today.  At the same time, gold is about to pull back on the negative divergence across both weekly and daily charts across all indicators. Watch for changes in margin requirements as well that would spark selling in PM's.

Even though the equities markets sold off strongly, and technical damage was done, the utilities as yet have not broken down, so the indexes should head back up until the utes can set up properly. This may only take a matter of days, perhaps enough time for a quickie relief rally for the indexes. This entire Bradley turn window is down, eight days of selling, we are now moving away from that major Bradley turn area that ran from last Wednesday into today. That March intraday low at 1249-ish is very important support.