Keystone's Morning Wake-Up 7/3/12

Today is an abbreviated session ahead of the holiday tomorrow with the equity markets closing at 1 PM EST. Traders are already grilling in the back yards and laying on the beach; the laptops and tablets sit idle.  The only folks remaining on the floor are the janitor and security guard. The back door kept swinging open yesterday as traders sneak out.  A tame day is expected but you simply never know in trading. Copper and commodities are in the bear camp, as measured by the metrics of Keystone's algo, and this at least gives something for the bears to hang their July 4th party hat onto. Further, the utilities, UTIL, are universally negatively diverged across the daily and weekly charts, where a double top is now peaking.  If utes roll over and lead the markets lower, this is very serious and ominous for the broad indexes moving forward. So pay attention to JJC, CRB and UTIL. If JJC, now at 44.15, moves above 44.35, that will signal that copper will lead the broad indexes higher moving forward and the bears will be in a world of hurt. If JJC stays below, the bears have game going forward.

To keep it simple as the holiday preparations continiue and trading takes a rare back seat, focus on SOX 383.50 and NYA 7719 today. Both are bullish now, above the levels highlighted. If one or both turn downward into the bear camp, this will provide an early hint of trouble coming. The ECB rate decision on early Thursday morning, as U.S. markets reopen, cannot be understated, as well as the Friday Jobs Report. Who can blame traders for starting vacation early since 7 AM EST Thursday will come soon enough?  For the SPX, if the bulls only punch one point or less higher after the opening bell, the upside will accelerate and a test of the important 1370-1372 resistance will be on tap.  Bears need to push under 1356 to restart strong market negativity. A move thru 1357-1364 is sideways action today and would be anticipated with the early close.

Note Added 7/3/12 at 9:38 AM:  Copper is running higher towards six-week highs, JJC leaped higher to 45, bullish for markets.  The SOX and NYA remain well above the levels listed above staying int he bull camp. Despite the broad indexes showing red, the intitial move after the open is bull-friendly. Note the strength in commodities as traders sniff out potential stimulus coming in light of the weak ISM yesterday.

Note Added 7/3/12 at 9:51 AM:  Keystone added more SDP. This is a very thinly-traded inverse uitlities sector ETF. Keystone is the only one in there today. There are many ways to explore trades shorting the utes. XLU can be shorted as well as individual utilities as well as looking to the options market. As the week continues along the utes will be fun to watch, the projection is that the utilities sector should receive a spank down from the negative divergence moving forward.

Note Added 7/3/12 at 10:01 AM:  SPX resistance above is 1369, 1370, 1370.58, 1372, 1375 and 1378. Support below is 1366, 1363.61, 1360.66 (20-week MA), 1359.89 (100-day MA), 1358, 1356, and 1351. Economic data just hit, better-than-expected, and the SPX attacks 1369 R.

Note Added 7/3/12 at 10:05 AM:  SPX pierces 1369 and immediately jumps to a test of the stronger 1370.  Price has reached the 1370-1372 area highlighted in yesterday's SPX chart. This 1370-1372 is a key resistance area for the bears to defend. If the bulls punch thru, 1378 will come and much higher from there. Okay, bears, it is time to step up and show what you got.

Note Added 7/3/12 at 10:55 AM:  SPX punches up thru 1370.58, now using that level as support.

Note Added 7/3/12 at 12:15 PM:  NYSE volume is vapor fumes, only on pace of about 60% of a regular day recently and about 50% of the pace over a multi-week time frame.  Thus, the jello is pushed around the plate very easily, and the bulls are slapping the bears silly into the holiday.  45 minutes of trading remains.  Just as the utes are of interest on the sell side now, volatility, VIX, is of interest to the upside. VIX is below 17 showing complacency in the markets. CPC was under 0.9 over the last couple days verifying the relaxed mood by traders. Interestingly, markets are typically bullish moving into a full moon, and a full moon occurs tonight. It is amazing how this works out time and time again, about two-thirds of the time or more. Conversely, markets tend to be weak into the new moon which is Thursday, 7/19/12 so mark that on the calendar.  The SPX moved up thru 1372 stabbing the bears severely. Consider the strong R at 1378 a Custer's Last Stand level for bears. The commodities, copper, coal, oil, energy and basic materials strength are creating the strong move higher, as well as the vapor volume. Shorts are covering into the holiday not willing to take a chance into Thursday morning when the ECB rate decision will already be known. Note that the sentiment is becoming loaded on the bull side. The euro is over 126; a green euro moving in concert with green markets, which would be expected. Note that the 1375 resistance level called out above held price in check for now, the HOD at 1374.81, so 1375 and 1378 are the last slivers of hope for bears to cling to. JJC is over 44.35, SOX is well above 383.50, NYA is well above 7721, all bullish indications.

Note Added 7/3/12 at 12:30 PM:  AAPL tags 600 today, Keystone has been waiting for the gap fill at 600 and change so shorts will be considered in the days ahead.  RIMM, a current Keystone position, said 'we are not in a death spiral'.  Is there any better way to get people to think that you are? RIMM remains very attractive, simply put, the cash flow remains favorable, the patent portfolio excellent, and it is beaten down with negative sentiment palpable. Not one of the smart talking heads said the delay in RIMM products may simply be due to RIMM close to a major deal for the company. Their products may need adjustment as a result of this deal, hence a delay.  Downside appears limited while the upside, especially in an overnight announcement, can be explosive. Keystone will likely add to RIMM moving forward and take it day to day.

Note Added 7/3/12 at 12:37 PM:  SPX peaked at 11:36 AM, one hour ago, now printing 1370.86, falling back thru the 1372 support, now resistance again, and testing the 1370.58 support. The close in relation to 1370.58 S/R, which is 2011's HOD for the year, is important.

Note Added 7/3/12 at 12:49 PM:  Ten minutes until fun time begins. Energy sector is performing the best today, telecom the worst.  Perhaps T will finally roll over, Keystone continues to like it on the short side, but it is starting to look like waiting for Godot like the ongoing stubborn retail shorts. SPX 1372 and 1370.58 are important S/R into the close minutes away.

Note Added 7/3/12 at 1:00 PM:  The NYAD shows three days in a row with elevated readings begging to see a snap back sell off move to relieve the uber bullish euphoria. Interestingly, despite the market moving upwards today, the TRIN prints 1.13, above one, which should be favorable to sellers. The bell rings with SPX at 1374. Draghi better deliver a pony on Thursday morning.