Keystone's Morning Wake Up 10-18-11

Big drop in the indexes yesterday after Merkel laid an egg, dashing bullish traders' hopes and 'dreams'. The utilities, however, did not break down, so far.  UTIL remains above 436.75 so the market bulls remain in the game. The utes are key to market direction as the bell rings. Above 436.75 and markets will recover to the upside, at the least staying flat. If 436.75 fails, the down side is real and the indexes will move much lower. More than likely, Keystone's algo will flip to the short side if UTIL 436.75 fails after the bell.

Nasdaq futures percentage, at this writing, is green, up 0.39%, as compared to the S&P that is flat so this favors market bulls.  Interestingly, during OpEx week, trading typically favors bulls as well as we move from Tuesday into Wednesday. So, depending on earnings releases this morning, the bulls may try to retrace yesterday's loss.

IBM earnings did not impress last night but the Nasdaq is elevated this morning anyways. Lots of heavy hitters on tap including the banks, BAC, GS and STT, tech heavy weight AAPL, also EMC, INTC and YHOO. Anecdotal evidence of discretionary spending is displayed with HOG earnings, other multi-nationals report like JNJ and KO, even railroads with CSX, and healthcare just reported with UNH beating the bottom line.  These earnings releases will impact futures so this morning will be active all the way into the opening bell. PPI, TIC and housing data also hit this morning, so anyone with ADD will have troubles juggling this smorgasbord of information.

For the SPX today, the market bears only need two more points lower at the bell to bring in the large block sellers. If the SPX drops under 1198.50, then the indexes will lose several more handles in short order. The market bulls will simply try to stop the bleeding, and considering that a move back up to 1224 will be difficult, and this is what the bulls need today to wrestle back control, the best the market bulls can do is to prevent UTIL 436.75 from failing. The bulls are okay if they can maintain UTIL 436.75, if not, then the market down side will accelerate.