Keystone's Morning Wake-Up 9/24/12; Hollande and Merkel Disagree on Banking Union Schedule

Hollande (France) and Merkel (Germany) are at odds over how to proceed with developing the banking union. Hollande says time is of the essence and let us set the union up asap but, Merkel prefers the slow and steady approach. Futures are weak overnight into the U.S. open today.  The SPX begins at 1460. The bulls need to touch 1467 to ignite an upside acceleration to test the 1475-ish high.  The bears need only a smidge of red to create a downside acceleration and this appears on tap from the futures. The 10-day MA is at 1453-ish which may provide support. SPX 1446 and 1440 are strong levels of support.

As we watched last week, semiconductors will play a key role as trading begins and all week long (check out the tight BB's on the daily SOX chart which forecasts a very large price move coming).  Very simply, market bulls will rule if they can move the SOX back above 395.43 (SOX begins at 395.16). The bears will sustain market negativity if they keep the SOX under 395.43.  Watch semi companies such as TXN, TSM, INTC, etc.., to note their impact on the SOX. Likewise, SMH tracks the same as the SOX. Another notable item this morning is copper. The doctor is ill to start the week, puking 1.8%. JJC starts at 48-ish, this negativity may shave 75 cents to a buck off of the price, call it 47-ish, but bears need to see JJC drop under 46 before it will start to do significant market damage.

LEN beat on earnings, top and bottom lines, so the housing stocks start out happy. Keystone still believes the housing bottom needs to occur over the next couple years. SRS may set up for a nice buy especially if the real estate sector receives a lift this week, but probably best to wait for 22.80-23.50 for an entry, if it comes back down, which it should in the coming days/weeks.  Utilities continue to play a key role in this current market drama.  The rolling over of utes two months ago is an ominous broad market signal. The bulls need to overtake UTIL 483.05 (starting the week down at 471) to continue taking markets higher. The market upside is limited if the utilities stay weak.  The Trannies continue to non-confirm as per Dow Theory as was discussed by traders here on the weekend. Reference the UPS chart for information on Dow Theory.

Watch to see if the 8 MA stabs down thru the 34 MA on the SPX 30-minute chart which would confirm bearish action moving forward, or not, if the 8 stays above the 34 as is now favoring bulls for the hours and days ahead.  Also, watch the COMPQ versus the SPX to gauge which way tech is leading the broad markets. If the markets leak lower at the opening bell but you see that the percentage to the downside is less for COMPQ than SPX, then tech is not leading lower, and the markets will recover as the day moves along. If the COMPQ is down a stronger percentage than the SPX, tech leading the broad market lower, the market selling will be maintained all day long.

The Monday action after Friday OpEx tends to move opposite of the Friday action which was a slow leak lower all day.  However, markets have sold off on Monday's on a trending basis recently.  This week after OpEx in September the markets are typically down 80% or more of the time so keep this in mind as the week moves along.  Window dressing should occur with losing stocks this quarter hit harder, and winning stocks rewarded in the final days. Friday is EOM and EOQ3. AAPL is down pre-market so that will negatively impact the Nasdaq.  iPad5 sales top 5 million this weekend but interestingly, the original projection was 10 milliion, then on Saturday, it was lowered to 8 million, and now on Monday morning the number is 5 million actually one-half of the rosie estimates on Friday.  SOX 395.43 tells you everything you need to know for market direction today. Note the futures markets right now, the Nasdaq is down -0.6% while the S&P's are down -0.4%, thus, tech weakness (AAPL) is leading the broad markets lower, the bears may growl strongly and sustainably today. Euro is 128.96, falling under the 130 level.  The markets move in the same direction as the euro.