Wednesday, June 5, 2013

Keystone's Morning Wake-Up 6/5/13; Beige Book

The Nikkei commits hari-kari overnight dropping -3.8% to 13K.  Dollar/yen remains key, dropping under 100 down to 99.70, which created the weakness in the Nikkei. The lower dollar/yen also creates lower U.S. equity futures. Dollar/yen bounced to 99.80, then fell lower now down at 99.40 so the futures respond in sync, recovering a bit, then deteriorating further.  Mortgage Applications are weak for three consecutive weeks signalling that the housing recovery is likely in jeopardy. HOV earnings will provide insight into the housing sector. The ADP Jobs Report minutes ago announces +135K jobs created last month lower than expected. ADP projects a +169K jobs number for Friday morning with the consensus a bit higher. Futures remain weak with the S&P's down about -6. Lots of data today will create market drama. Productivity and Costs are only a few minutes away. ISM Non-Mfg and Factory Orders are at 10 AM where a market pivot point will occur. Oil Inventories are 10:30 AM.  Markets will pivot at 2 PM on release of the Fed's Beige Book.

Keybot the Quant wants to flip long and likely will if the SPX moves above 1647. The utilities sector is the key to market direction today. Watch UTIL 480.83.  UTIL begins at 481.33 fifty-cents bull-friendly.  If UTIL stays above 480.83, the bulls will send the broad indexes higher moving up to test the SPX 1647 break out level for today. If UTIL loses 480.83, the broad indexes will noticeably sell off.  If UTIL 477.91 fails, a trap-door may open in the markets with the SPX losing 10 or 20 handles in a heartbeat. Thus, choose your poison for today.  For the SPX starting at 1631, the bulls need to touch the 1647 handle and an upside bull party will begin into the 1650's.  The bears need to push under 1624 and 1618 will likely print quickly. A move through 1625-1646 is sideways action today. Important support below is 1626-1627, 1618, 1614, 1597-1600 and 1593. The 8 MA remains under the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead. Watch the drama with the 200 EMA cross on the 60-minute chart at 1630.60. Bad things will happen to the markets with the SPX sub 1630.60. The BPSPX is very near a market sell signal (Other Market Signals page). In a nutshell, UTIL 480.83 is more important than actual market direction since the markets will move depending on how UTIL responds to 480.83.

Note Added 8:32 AM:  Big revision to the unit labor costs. The disinflationary and deflationary band wagon rolls along. Companies are producing more goods with less labor.  Buy stock in whip stores since employees are either laid off, or, the ones that keep their jobs are whipped mercilessly each day. This is great for company earnings, not so much for society and folks that desperately want to find a job. The 10-year yield drops to 2.10%. Falling yields create a disinflationary vibe.  S&P's -7. Dow -60.  Nasdaq -12. Dollar/yen is 99.39, hence, lower dollar/yen means lower equities.

Note Added 8:47 AM:  Dollar/yen moving higher to 99.48 so this should help futures recover.


  1. KS, do you yet know what the ute targets will be for next week? Many thanks.

    1. The utes sector is one of the sectors where you can easily get the numbers yourself. One number is the 50-week MA which is the 480.83 and the other is the weekly close 15 weeks ago. You can go to Yahoo Finance and use the historical data for ^DJU on weekly basis, count back 15 weeks. This gives the number for this week, 477.91. Next week the numbers will be again the 480.83-ish, and 481.39. This flip flops the trap-door call. If utes collapse this week all this will not matter but if not, next week, the failure of 481.39 signals market weakness and the 480.83-ish will open the trap-door for the broad indexes.

  2. Maybe the minimum wage will rise to $7.95 and the IRS will donate money to the poor that it stole in lottery ticket vig. Hope is on it's way, it will be a trickle down effect, like a slow drip IV, that will drip genetically modified corn syrup into prozac and make the poor watch more large screen TV. Just a hope;)


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