Keystone's Morning Wake-Up 5/1/13; ADP; ISM; FOMC

ADP Jobs Report is much weaker than expected. The weakness appears across most sectors; the construction jobs are higher but not to the extent as should be expected. This dampens optimism for Friday's Jobs Report. The 25 million folks out of work or underemployed have a continued difficult road ahead. The top line revenue misses for companies shows there is no growth to feed a recovery. Companies make the bottom line EPS by laying off workers or whipping the current ones to work harder, so the structural unemployment problem escalates. The S&P futures were up a couple, now flat, now down.  The SPX begins at 1598 and the bulls only need a smidge of green in the futures to create a move through SPX 1600 after the opening bell.  The market bears need to push under 1587 to create a downside acceleration. A move through 1588-1597 is sideways action. The 8 MA remains above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead so watch this cross closely today. The 10-year yield is 1.64% continuing to slide lower and creating more of a disconnect between the bond and stock markets. 

Volatility remains key. Watch VIX 14.00 again today to gauge market strength versus weakness. China manufacturing data was weak overnight, the HSBC number is this evening. China markets were closed due to holiday. Today is International Labor Day so the European markets are closed. On this May Day, protesters are taking to the streets in Greece and across Europe. Folks cannot celebrate Labor Day, the pride of having a job, if they do not have a job. Markets will pivot at 10 AM on the ISM Manufacturing data. The Fed statement is 2 PM which may be a non-event today. The Fed will stay the course and Chairman Bernanke may strive to not make waves. Keystone's Inflation Deflation Indicator continues to signal deflationary woes so this would bolster the idea of more QE, however, Bernanke must be aware of all the damage being done now with the easy money policies causing more harm than good. So look for a market pivot at 2 PM although the reaction may be muted as traders immediately focus on the more important ECB rate decision at 7:45 AM EST, less than 24 hours away. In a nutshell, VIX 14 and SPX 1598 and 1587 will dictate market direction.

Note Added 10:28 AM:  The weak ADP Report, weak China data causing the collapse in oil (-2.8%), copper (-3.2%) and commodities today, and the weak MRK and MA earnings all create a negative vibe today. At the opening bell, the VIX moves above 14 which creates the selling pressure. TRIN is 1.42 favoring the sellers today. ISM Mfg was lackluster at 50.7, above the 50% contraction-expansion level, but weaker than last month, and markets pivot downwards at 10 AM. The SPX 1586-1587 support level is important today and has held so far. The 10-year yield drops to 1.63%.

Note Added 11:18 AM:  Markets flat-lining with Fed less than three hours away.  VIX keeping its head above 14 helping bears.  The 8 MA is moving downwards to the 34 MA for a potential bearish cross on the SPX 30-minute chart.

Note Added 11:39 AM:  VIX comes down for a back kiss of the 14 level and it holds as support, for now, favoring bears. Use the VIX 14 level as a gauge for bullishness versus bearishness.

Note Added 1:42 PM:  VIX printing at the highs for today at 14.50. TRIN 1.59, firmly bearish.  SPX breaks under 1586-1587 so several more handles should give way. The 8 MA stabs down through the 34 MA on the 30-minute chart at noon time today signaling bearish markets for the hours and days ahead, however, the Fed is on tap shortly.