Keystone's Morning Wake Up 9-2-11

The jobs report number a short time ago laid an egg in the long traders Cheerio's.  The futures weakened about 10 additional spoo's to an already lower number. The commodities,as measured by CRB, continue to fall from grace after the peaks at 343-ish over the last couple days, now falling under 340, and testing 339. As the CRB moves lower towards 300, that will be one of the signals for Chairman Bernanke to announce QE3.

Sticking to the technicals, the market bears obviously have the wind at their backs to start the Friday session. Commodities, copper and retail, the three sectors that were providing the broad market recovery rally its gusto this week, have all retreated now. If you remember from a couple weeks ago, Keystones' proprietary algo was watching the utilities and specifically, the UTIL 50 week MA, which represents a trap door for the equities markets. This is now on the table again.  Watch UTIL, now at 432.47 to start the day, if the 415.42 level is lost, this will open a trap door in the broad markets and a significant selling event will occur for the indexes. If UTIL can stay above 415.42 today, then the market bulls can minimize todays damage.

For the SPX today, a move to 1203 will usher in accelerated selling, and, considering the poor jobs data and futures, this is a done deal for the open. Market bulls need to move to 1229 to reestablish the recovery rally but at least for today, that appears unreasonable. Thus, the market bears are coming to play today; key SPX support exists at 1197, 1193, 1192, 1188, 1184, 1183, 1181, 1179, 1178, 1177 and 1173.

The 1194-ish level represents the 38% Fib level retracement of the late July to August waterfall crash from 1348 to 1100. The SPX 20 day MA is 1173, also critical horizontal support over the last month.  Thus, the SPX expected to see action today in this 1194-1195 level and 1173 level. The market bulls should view maintaining 1173 support today as mission critical. Also of interest is that markets are typically buoyant in front of a three-day holiday weekend, based on seasonality, so perhaps some of this mojo will help the bulls recover as the day moves along.

The key item to watch is UTIL 415.42, if lost, the broad markets will go into free fall, if this level holds, then the bulls can keep the bleeding to a minimum today.