Monday, June 3, 2013

Keystone's Morning Wake-Up 6/3/13; ISM

The bulls are trying to start the new month off on a positive foot. New money typically comes into markets the first couple days of a new month. The Asia markets react to the weak U.S. markets on Friday. The Nikkei plummets over 500 points losing -3.8%. The yen strengthened with the dollar/yen dropping towards the psychological 100 level but over the last couple hours the dollar/yen recovers and the S&P futures move from flat to up several handles as the dollar/yen moves higher. A down Friday and down Monday is indicative of continued weak equity markets so today's action will be interesting. The 200 EMA on the SPX 60-minute chart at 1630.15 is key as highlighted this weekend. Bad things happen to markets under 1630. Likewise, watch the 8/34 cross on the 30-minute chart, now signaling bearish markets for the hours ahead.

Three sectors are currently affecting market direction; copper, volatility and utilities. Copper and oil are buoyant today after the slightly better than expected PMI's. The HSBC China PMI, reflecting small companies, remains weak in contraction while the official China PMI number stays above 50. European PMI's all remain in contraction, Spain and Italy for two consecutive years, but the numbers were slightly better than expected. The 10-year yield is 2.17%. The bulls need either JJC to move above 41.50, and/or the VIX to drop under 13.23, to signal the all-clear for market upside. The bears need UTIL to drop under 481 which will create increased selling pressure, and then for UTIL to drop under 478, any day this week, and that will create a whoosh lower for equities markets. Independent of how the broad indexes move today, up or down, if JJC stays under 41.50, and VIX stays above 13.23, and UTIL stays above 481, then the markets meander sideways unable to make a bull or bear commitment.

For the SPX today starting at 1631, the bears need to push under 1631 to accelerate an immediate move lower to test the strong 1626-1627 support. The bulls will try to prevent UTIL 481 with all their might since this will stop the downward market slide. A move through SPX 1631-1658 is sideways action today. Watch the SPX 20-day MA ceiling above at 1644.81 and 50-day MA floor below at 1599.64. Markets will pivot at 10 AM on the ISM release so the first hour of trading needs to play out before the markets settle-in for the session.

Note Added 9:08 AM:  S&P's +4.5. Dollar/yen 100.27. The 10-year Treasury yield 2.16%. Euro 1.3000. Copper, oil, gold and silver all higher.

Note Added 9:13 AM: S&P's +5.0. Dollar/yen 100.32.

Note Added 9:18 AM:  S&P's +4.0. Dollar/yen 100.22. The yen dictates direction. For today, it looks like a dollar/yen at 100.10 and lower will turn the broad indexes negative. The 100.20-ish area results in the SPX up about 2 to 4 handles today while the 100.30-ish and higher will lead to gains of 4 or 5 SPX handles and higher. The utilities are the key at the opening bell.

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