Keystone's Morning Wake Up 9-29-11

Despite the sell off yesterday, the retail sector held its ground. The retail and utility sectors remain bullish as measured by Keystone's algo. All other major sectors are bearish. If the RTH, now at 104.50, stays above 104.00, then the market bulls are fine. Similarly, if UTIL, now at 431.81, stays above 426.79, then the market bulls are fine. Should either of these levels fail, then the markets are in trouble. If both levels fail, the markets are huge trouble and will already be tumbling.

The futures are up due to the happy German vote that occurred about an hour ago.  The market bulls can accelerate the upside if the socks (semiconductors) cooperate.  If the SOX, now at 355.36, moves above 363.40, then the broad market bulls will be having a party. Back to the bear side, Keystone's SPX:VIX Ratio Indicator remains below 35 at 28 so the market bears still have a strong hold on the markets in the background. Should the ratio move above 35, that would confirm a bull recovery rally. If it stays below 35, bears are favored moving forward.

Put/Call ratio CPC popped to 1.46. This is important and fully consistent with a strong move to the upside coming. The negative sentiment is building, and especially after yesterday's bear action ahead of the German vote, the put/call spiked higher. Once the ratio is over 1.2, the selling is becoming overdone, it is approaching 1.5 now, thus, Keystone would expect a strong move back up in the markets solely based on the CPC metric.

Advancers and decliners NYAD printed an intraday spike low four days ago at -2500.  Remember when good ole Keystone told you to watch for a move back up in the markets, since this is such a low number, and that brief recovery market rally occurred, and the NYAD spiked to +2500.  Oy vey! From one extreme at the bottom (-2500) forecasting a large bounce to occur, it did, then immediately to an extreme high value (+2500) to forecast a market sell off, which occurred, now a spike back down to another low reading of -2001.  Do you see the pattern? Negative 2000 is not as low as negative 2500 but it is down there consistent with a reversal back up for the indexes.  Thus, the CPC and NYAD both indicate bounce time for the markets.

GDP and Jobless Claims are out in a short while and they should impact futures.  Pending Home Sales at 10 AM serves as a potential market pivot point.  The ole Wall Street adage says, "Sell Rosh Hashanah and buy Yom Kippur (10/8/11)," but the comical aspect is you will find others telling you the opposite, so do not put much credence in this ole adage. The markets are taking on a sideways look moving forward. In summary, simply watch the behavior of RTH, UTIL and SOX as described above and these will dictate broad market direction today. Tomorrow is EOM (end of the month) and EOQ3 (end of the third quarter of 2011; Jul-Aug-Sept).