Keystone's Morning Wake-Up 7/16/12

Empire State Manufacturing Index and Retail Sales are released at 8:30 AM EST.  The Empire will shed light on potential jobs and the health of the manufacturing sector, thought to be pulling the economy out of the ooze but instead, recently, the data is drifting lower again. Retail Sales are extremely important. Trader's are expecting numbers in line or better due to auto sales. A disappointing number will greatly affect markets negatively. Business Inventories are at 10 AM so the markets may pivot on that release. Inventories increasing shows that products are sitting on the shelf. If consumers are not buying, then an economic recovery is in question and obviously companies do not need to hire anyone if there is no demand. Dropping inventories will show the economy much stronger than many think. Trucker earnings are important today since they move the products. CTAS is a uniform provider so if earnings are great, companies are using more uniforms, which means a healthy work force and healthy economic recovery. If the uniforms-supplier's earnings are weak with lower guidance, it would be a negative signal for the recovery. Similarly, packaging is needed when a recovery is healthy, the so-called cardboard indicator, so PKG eanrings are of interest as well. C earnings hit at 8 AM EST and will, or will not, continue the financial sector buoyancy. C will impact the XLF.

On the technical side, the bulls ran hard on Friday using copper and financials, as well as short-covering, as bull fuel.  For the upside move to continue, the bulls need to move the CRB above 295.50. The dollar is important and is stronger today with a weaker euro. This favors equity bears since it should place pressure on the CRB and JJC (copper). Remember the asset relationship; euro down = dollar up = commodities down = equities down, and visa versa.  Key metrics to follow today to determine market direction are CRB 295.50 (now bearish), JJC 44.15 (now bullish), NYA 7738 (now bullish), XLF 14.41 (now bullish) and RTH 41.65 (now bullish). Any changes to these key items will cause the broad indexes to move in that respective direction.

For the SPX starting at 1357, the bulls need to punch up thru the strong resistance at 1358-1360, discussed in the SPX S/R missive a couple of posts back, if so, a test of 1366 will follow in quick order. A move thru 1336-1356 is sideways action today. The NYAD and TRIN would like to see the markets pull back down today to relieve the uber bullishness (see previous charts) although OpEx Monday's are typically positive for markets.  The bears are trying to stop the upward momo and will accomplish that by keeping the CRB under 295.50 while pulling either the JJC back under 44.15 or the NYA back under 7738. U.S. futures are negative indicating a slightly weak start on tap but the Retail Sales will greatly impact the futures, and that data release is less than three hours away.

Note Added 7/16/12 at 10:17 AM:  Retail Sales laid an egg. The 10-year yield is sub 1.45%, all-time lows. Broad markets are down about one-half percent thus far today.