Keystone's Morning Wake-Up 8/1/13; August Begins; BOE; ECB; ISM Mfg

Today is the first day of August trading and markets are typically bullish from the last day of the month through the first four days of the new month (see the Other Market Signals page). China PMI is a touch better than expected indicating expansion but the HSBC print is weak indicating contraction. China vows to maintain a high growth rate so this statement sends commodities, oil and copper higher, as well as S&P futures now up +12. The yen weakens pumping the dollar/yen pair up to 98.80 and sending the Nikkei and Shanghai markets up about +3%. The weak yen pumps U.S. stocks higher. The SPX rallied after the Fed announcement yesterday afternoon from 2 PM to 3 PM but then fell on its sword into the closing bell ending at 1686 under the Fed announcement level. For today, the bulls need to push above 1698.50 and the upside will accelerate to 1700-1710. Futures are set to make a run for this resistance.  The bears need to push under 1685, only one-point lower, to accelerate the downside, but this is not on tap at the open. A move through 1686-1698 is sideways action today.

BOE and ECB leaves rates unchanged and the meetings go without incident. The Fed dovishness along with the China promise of high growth are providing the global lift in equities. ISM Mfg Index is important at 10 AM and will create a market pivot point. PG beats on earnings but XOM misses. Markets can be boiled down to a fight between copper and volatility. Bulls win with higher copper and bears win with higher volatility. Watch JJC 38.95 and VIX 14.26. These numbers may adjust slightly as the day proceeds. If JJC moves above 38.95, the SPX is headed above 1700+. If VIX moves above 14.26, the markets will sell off. If JJC stays under 38.95 and VIX under 14.26, the broad indexes will continue sideways with a slight upward bias. Bulls win with JJC 39 and bears win with VIX 14. Copper is up strongly this morning and JJC will attack 39 at the opening bell. The session is starting off very bull favorable. The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead. Watch JJC 38.95, VIX 14.26 and SPX 1698.50 to determine market direction.

Note Added 10:04 AM:  ISM Mfg Index is far stronger than expected at 55.4 compared to the 52.0 consensus estimate. Equities are moving wildly higher today with the central bankers in the rear view mirror and China promising to goose their economy. The markets continue to print new highs today so the good news is acting as good news for markets even though the stronger ISM should place the Fed taper talk back on the table. Copper jumps higher with JJC at 39.15 above the 39.01 bull-bear line in the sand. The 10-year yield is up to 2.68% so money is leaving bonds and moving into stocks. The bulls have the advantage that a new month begins and new money typically enters the markets creating upside lift.

Note Added 10:10 AM: The SPX prints above 1700 for the first time in history with a new all-time intraday high at 1704.57 moving higher. Oddly, copper is leaking lower with JJC at 38.94 losing the 39 level.

Note Added 10:37 AM:  The SPX prints a new all-time intraday high at 1704.97. JJC is 39.09 moving back to the bull camp above the 39.02 danger line. VIX 12.90. TRIN 0.69. The low volatility and low TRIN day after day provides the market upside. Bears got nothing unless they push JJC back under 39.02. The dollar/yen is 99.32 far higher than the sub 98 numbers a few hours yesterday.  The weakening yen (BOJ QE) creates the higher dollar/yen pair and provides bull juice for markets. The weaker yen was the main market driver for the new all-time highs in equities in February through May and today creates new all-time highs again.

Note Added 11:13 AM:  JJC at 39.03 testing the 39.02 bull-bear line. Bulls have to hold this support, otherwise, equities will sell off if JJC 39.02 fails.

Note Added 11:21 AM:  JJC 38.99 now under the 39.02. The next few minutes are key. Bears are trying to keep JJC under 39.02 for 7 to 10 minutes to lock it in. Bears will place a top in equities for today if they keep JJC under 39.02. Bulls need to move back above 39.02 to restart the upside move.

Note Added 11:39 AM:  TRIN 0.48!! Uber bullish. The Arms Index shows that the bulls rule the roost and there are no bears to be found anywhere. Traders are 100% convinced that markets will go up forever now. When the TRIN prints this low it desperately needs a snap-back within one-day's time to levels above 1.00 to relieve this bullish euphoria. The put/call ratio's will be interesting tonight to see if very low numbers are printed for CPC and CPCE to verify this complacency and lack of fear. Markets are not moving up on a wall of worry but instead are moving up on a wall of euphoria and central banker stimulus. JJC 38.99. Dollar/yen 99.24. Market bulls need to see the dollar/yen moving higher while bears need to move this pair under 99.

Note Added 11:53 AM:  SPX 1703. HOD 1704.97.  VIX 12.90. TRIN 0.49. JJC 38.91 leaking lower. Dollar/yen 99.29. 10-year yield 2.69%.

Note Added 12 Noon:  TRIN 0.45!! showing uber bullish euphoria.

Note Added 1:57 PM:  SPX 1703. Dollar/yen 99.43. VIX 12.98. TRIN 0.54. JJC 38.85. 10-year yield 2.70%. Copper continues to leak lower so it is surprising that more air is not coming out of the markets, however  the weaker yen (dollar/yen moving higher), as well as low volatility and low TRIN keep equities elevated.

Note Added 2:06 PM: A whoosh higher occurs with SPX printing a new all-time high at 1705.70 as the fifth 65-minute trading segment begins for today from 1:50 PM through 2:55 PM. Volatility is pushed lower.

Note Added 2:16 PM:  SPX prints a new all-time high at 1706.45. SPX jumps 4 handles in fifteen minutes time. This is in sync with the Berlesconi decision in Italy but unknown if it is the reason for the jump higher in equities. Volatility is pushed lower.

Note Added 2:55 PM:  The 10-year yield is 2.72% at the early July high and high going back to July 2011, bounce or die. SPX is 1705.68. VIX 13.07 inching upwards. TRIN 0.55 keeps the bulls in control today.  JJC 38.84 just printing a low at 38.81 minutes ago. Dollar/yen 99.51 so the weaker yen pumps equities higher.