Keystone's Morning Wake Up 1/5/12

ADP survey is rosier than expected showing gains in small business jobs, but, a higher number was already expected due to December seasonality adjustments. Nonetheless, the futures markets improved, the spoo's gained about 3 handles. Jobless Claims just hit indicating a drop so that is the second data point in the last 15 minutes, and the futures markets recover further.  The S&P futures were down 11 this morning and now are only down three. The euro dropped after the France bond auctions this morning so the dollar is higher and equities lower.

Keystone's algorithm, Keybot the Quant, is very close to flipping to the short side (this is the market signal shown continuously in the left margin on this site).  If the SOX drops under 367.85 and the SPX loses the 1268 handle, the algorthm should flip to the short side. So today is key.

Utilities are weak to start the year. Major sustained broad market down moves are typically led by the utes and since the utilities were the top sector performer in 2011, this adds serious drama to 2012, and is very bear favorable. Germany retail sales were lower than expected this morning matching the U.K. data.  The retail charts, RTH, show rising wedges, overbot conditions and negative divergence, across weekly and daily charts, which makes the sector ripe for picking--a smack down appears imminent, perhaps a catalyst is weaker-than-expected holiday retail sales numbers? Watch the RTH 110.25 level which would signal serious trouble and impact broad makets very negatively.

For the SPX today, starting at 1277, the market bulls had an easy path ahead, only needing a point or so higher to launch further upside.  Alas, however, the futures remain red ahead of the bell.  The market bears need to push lower under the 1268 level. If the 1268 handle is lost and you see a 1267 handle print, the markets should accelerate the downside significantly.  In a nutshell, watch SOX 367.85, SPX 1268 and RTH 110.25 to determine broad market direction today.