Keystone's Morning Wake-Up 6/22/12

This week continues the bipolar action in the broad indexes. Significant technical damage occurred yesterday. Several of Keystone's signals turned bearish. To gauge the markets today, what better road map than to monitor the action with these specific tools;

SPX:VIX ratio dropped under 68 signaling continued market bearishness, unless the ratio moves back above 68. BEARISH

SPX 30-minute chart shows the 8 MA stabbing down thru the 34 MA after the open yesterday so this was an excellent indicator of trouble ahead. Watch to see if the 8 stays under the 34 MA, or not.  BEARISH

SPX 60-minute chart shows price falling under the 200 EMA at 2 PM yesterday verifying a bear move lower. The 200 EMA is at 1332.46 so watch this number like a hawk today. BEARISH

NYA 40-week MA failure. This is a soap opera this week and verifies the bull-bear struggle ongoing. Monday it failed, then it recovered, only to fail again yesterday. The 40-week MA is 7666 and the current print is 7566. BEARISH

Keystone's algorithm continuously forecasts which sectors/areas/data are affecting the broad indexes to the greatest extent in real-time. Watch XLF, VIX, SOX and RTH;

Watch XLF 14.35, now at 14.20.  BEARISH
Watch VIX 19.00, now at 20.08. BEARISH (remember, volatility moves inverse to markets)
Watch SOX 384.00, now at 372.71. BEARISH
Watch RTH 41.27, now at 41.28. The bears will begin a new leg lower for markets if RTH fails this morning, if not, and the RTH remains above 41.27 and moves higher, than the bulls are regaining strength.  BULLISH

So watch the above eight parmeters, seven are bearish, one is bullish. The movement of these tools will directly push the overall broad markets in that direction.  The NYAD dropped to -1900 yesterday which is surprising. A move lower than -2000 would have been expected therefore, the door is open for the bears to take things lower before uber negativity would be created at an NYAD at -2100 or lower. The TRIN spiked to 3.9 and closed at 3.43 so this tool is agreeable to see a snap-back rally to relieve the uber selling pressure.

There is no economic data today but DRI reports earnings which will show if folks are spending disposable income eating out, or not. Therefore, without any news affecting markets, a meeting in Rome today between the four major European power players takes on large importance. Monti, Merkel, Rajoy and Hollande meet in Rome where a prayer would be advisable. This meeting is perhaps even more important than the photo-op Euro Summit coming next Thursay, 6/28/12. Merkel stands resolute so perhaps she will eat the other three like a chocolate bar, a HollMonJoy (Almond Joy). The Russell rebalancing today should create high volume and volatility especially in the final half hour of trading.

For the SPX today starting at 1325.51, the bears only need one point lower, to push under 1324.50 and the market downside will accelerate. The futures show a five point gain on tap instead, however. The bulls are simply trying to stop the bleeding today and can do that by preventing the RTH failure as described above as well as regaining a foot hold of one or more of the now-bearish parameters listed above. The SPX closed under the strong and critical 1326 support which is a bearish indication. Price also closes smack-dab on top of the 150-day MA at 1325.18, so watch the price move in relation to this moving average once the opening bell rings. SPX S/R is 1337, 1336, 1333, 1332.46 (from above), 1332, 1331, 1329, 1326, 1325.18 (150-day MA), 1324.50 (today only), 1324, 1321, 1319.80 (20-day MA), 1319, 1318 and 1316. The 1326-1333 range is a strong gauntlet of support/resistance and it is a feather in the bears cap that they could punch the whole way down thru in one move. During the last two days, the SPX has dropped thru the entire range identified by the 100-day MA at 1360 above, and 150-day MA at 1325.18 below.

Note Added 6/22/12 at 7:50 AM:  DRI lays an egg.