XLE Energy Daily Chart H&S Gaps ISM Trade

XLE energy sector daily chart with lots to see technically. Note the blue arrows, what do they show? Keystone will tell you at the end of this commentary. The end of February shows the first chinks in the armour with a rising wedge, overbot conditions and negative divergence creating the red spank down.

Price comes up again for the April high, due to the Middle East turmoil and how oil and energy will be perceived as the currency of the future, and prints a higher high. But negative divergence with the RSI and MACD wanted to see another spank down, which occurred, the purple lines, but the pink lines show long and strong profiles for the other indicators. That means price will want to come back up again to test those highs, and it did with the green lines. Note early May how price came up again but all indicators were negatively diverged so that marked the top once again.

Note the teal circle showing an island reversal in April. The early May high placed a head and shoulders patttern with a neck line at 73. In May, the falling black wedge and positive divergence, albeit slight not strong divergence, bounced price. The BPENER chart had reversed to move back up over 6% verifying the bullish move lately as well.

This leaves us with two doji candles the last two days indicating a potential reversal. The 20 MA is under the 50 MA, bearish. Price sits on top of the 50 MA now making a decision. Only one gap remains above at 79-ish but the gaps below are too numerous to highlight. They all need filled at some point. This bounce should be short-lived. Down from here, or, fill the 79 gap then down. The 79 gap fill would close out all business above and price will no longer have a reason to go back up. The head and shoulders should play out targeting 65, probably as the Autumn leaves fall.

Oh, the blue arrows? They show the ISM trade the professionals play each month. See how energy moves up the last few days of each month into the first of the month then XLE sells off? The trade is buying energy, XLE or your fave energy play, the last few days of the month, and sell on the ISM data release the first of the month.  Thus, this gives you soemthing to watch tomorrow and note XLE's reaction.  If this trend month after month is broken, take it seriously, since it will foreacast bearishness ahead for overall markets.  For tomorrow, watch to see if the typical ISM day sell off occurs.  If not, it is of no matter, the 79 gap will be filled instead and close out all the business above, opening up the way to downside with a failure of the neckline and a move to the 65 H&S target.

This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

Keystone's June Seasonality

June is typically a flatish month, up only +0.2% on average.  June is the end of Q2, and also the end of H1 for 2011.  Company preannouncements occur during June so any companies in danger of missing earnings will have to go to the confessional this month.

Hurricane season begins June 1^st.  Hurricane news is typically released at 2:30 PM EST on Tuesday afternoons. 

The markets are down 18 of last 20 times for the week after June triple witching, which is the week of 6/20/11.

Market bullishness would be expected on June 30^th and July 1^st in front of the three day holiday weekend.

Diabetes Conference this month so those stocks may do well on news.

In general, watch for buoyancy the first couple days of each month as well as each Monday.  Failure of this trend will indicate bearishness ahead.  OPEX Friday is typically an up day.  Markets are typically up from the Tuesday into the Wednesday during OPEX week. For the Monday following OPEX, the markets will typically move opposite to the direction they moved on OPEX Friday. OPEX max pain is a guide from the second Thursday of the month thru the third Thursday of the month.

If markets are weak on a Wednesday, this typically ripples thru into Thursday’s morning session. In bull markets, indexes are usually up on the Friday’s and Monday’s.  Any change to this behavior indicates bearishness ahead.

The third year of the Presidential cycle, this year, is typically bullish, although with the disruptive quantitative easing in the markets, the expected behavior would be suspect.

Congress is in session which is bearish.

Typically, markets are buoyant on the FOMC meeting days; 6/21/11 and 6/22/11. For two day meetings, such as this month, the first day may be unsettled but the second day is typically bullish for markets. If markets are lower on FOMC meeting days, this can be viewed as bearish for markets overall.

Keybot the Quant Turns Bullish 5-31-11

Keybot the Quant, a trading algorithm tracking the SPX, flipped to the long side this morning at the open although the bullishness is not strong.

The positive Greece news bounced the euro which weakened the dollar which strengthened commodities and equities; the asset relationship mentioned often here is in the bulls favor today with euro up=dollar down=commodities up=equities up.

Commodities and copper are on the bull-bear line so do not be surprised if the indexes whipsaw today or tomorrow.  Semiconductors bounced at the open but then collapsed.  Financials remain bearish.  Utilities and retail remain bullish.

Further information at Keybot's site:

http://www.keybotthequant.blogspot.com/

Keystone's Morning Wake Up 5-31-11

Futures are green and strong to start the new week after the Memorial Day holiday. A look at housing occurs with Case-Shiller at 9 AM EST, then the recent weakness in manufacturing will be either confirmed or rejected with the Chicago PMI at 9:45 AM, and sentiment after that with the market-moving Consumer Confidence number at 10 AM.  3 and 6-month bill auctions at 11:30 AM will affect the dollar and treasuries.

Market bulls want to run but they need copper above 419.41 to make it sustainable.  Copper now trading at 419.05 last print so watch this closely.

To close out last week’s action, Thursday and Friday showed market buoyancy as expected in front of a three day holiday weekend.  Keep this in mind for June 30^th and July 1^st in four weeks. Bears could not push markets lower early last week despite having ample opportunity, so the market bulls took over.

Overnight tonight into tomorrow is the new moon so watch for odd market behavior, typically bearish. The eclipse sell-off window a couple weeks before and after 5/15/11 is closing. This resulted in over a 3% sell-off for the indexes.  Next window is a couple weeks on each side of 7/15/11, although you must stay on guard the entire period, 5/15/11 thru 7/15/11 for potential market negativity.

The markets want to make a happy start today but caution is warranted since the ConCon can whipsaw markets at 10 AM.  The bullish utilities, retail and lower volatility continue to be locked against the bearish financials, semi’s, copper and commodities.  This can potentially change at the bell since the bulls want to push everything long.

Levels to watch that will indicate broad market direction include copper at 419.41, RTH at 109.76, SOX at 438.18, VIX 17.58 and CRB at 349.59.  Any changes in these sectors, flipping from bearish to bullish or visa versa, will result in the broad markets moving in that same direction.

For the SPX, if the bulls push up thru 1334.62, the index will jump several more handles, and by the look of the futures, this appears on tap for the opening.  Interestingly, if you scroll back a couple blog posts to the SPX S/R chart, this morning’s futures would fill the open gap at 1342-ish, which only leaves the 1360 gap remaining above.

The SPX downward channel of lower lows and lower highs since the early May top will continue as long as the SPX does not print above 1345. Getting above 1345 and reversing this recent trend would be a big feather in the bulls cap.

Market bears need to push down thru 1326 if they expect to wrestle back control today.  It appears the only way the bears can reverse today’s strong jump is to see bad housing and manufacturing data, as well as sentiment.  If the economic data matches consensus, or at least is not a big negative surprise, looks like the bulls will start the week running. Watch those key sector levels above, they will light the way for the indexes.

Keystone's Key Events and Market Movers 5-31-11

Keystone presents the following underlying market currents, sometimes subtle sometimes turbulent, that move global markets in real time.  The key dates and times below typically correspond to market pivot points.

The euro crisis and U.S. debt crisis figure prominently in June coming to a head the second and third weeks with meetings and demonstrations.  China rate hike will occur any time.  For the U.S., Consumer Confidence and Jobs Report are the most important data to start the month of June.  Markets remain in the eclipse sell off window this week and the Bradley turn windows begin mid June.  Shaping up to be a volatile June ahead.

Keystone’s ‘Short Term’ Key Dates and Market Movers Week of 5/31/11 and on:

·         Tuesday, 5/31/11: The holiday is over and the trading week starts off quickly with Case-Shiller at 9 AM EST (watch housing sector), Chicago PMI 9:45 AM (U.S. manufacturing weakening lately, see if this trend is continuing, watch industrials sector) and Consumer Confidence 10 AM (pivot point, watch broad markets).  3 and 6-month bill auctions 11:30 AM (watch dollar and treasuries).  Also, final effects of the eclipse sell off area are still in place early this week—markets dropped 3% in this eclipse window during May thus far.  Earnings; LAYN (5/30), RENN. India growth rates.

·         Wednesday, 6/1/11: Motor Vehicle Sales, Challenger 7:30 AM, ADP 8:15 AM, ISM 10 AM (watch energy sector), Construction Spending 10 AM (watch housing sector), 4-week and 52-week bill auctions 11:30 AM (watch dollar and treasuries).  Earnings: CWTR, DG, VRA (watch retail sector). Bahrain should be lifting the emergency rule today—watch for violence (oil, gold and silver up), or peaceful assembly (oil, gold and silver down). China PMI and HSBC China PMI (HSBC more important). Hurricane season begins.

·         Thursday, 6/2/11: Monster 6 AM, Claims 8:30 AM, Productivity 8:30 AM, Oil Inventories 10:30 AM (one day later because of holiday), Factory Orders 10 AM. Earnings; CMED, JOYG.

·         Friday, 6/3/11: Jobs Report 8:30 AM.  ISM Non-MFG 10 AM. Rosengren speaks 3:30 PM one-half hour before the markets close.

·         June 2011:  PBOC (China) Rate Hike. Probably 25 bips again, target date area for China raise is 6/1/11 thru 6/24/11.

·         June 2011:  EU Bank Stress Test Results, Greek rally against austerity 6/4/11, Euro Finance Ministers 6/20/11, Euro Heads of State meeting 6/24/11—a 24-hour Greece strike also targets this date.

·         June 2011:  OPEC meeting.

·         June 2011:  QE2 Ends.  See the POMO information below. 6/10/11 final POMO schedule.

·         6/15/11:  Bradley Turn date. Market turn window 6/8/11 thru 6/22/11.

·         6/21/11 and 6/22/11: Fed FOMC Rate Decision and Policy.  No change expected, note the same date as the Bradley turn, perhaps a surprise is on tap.

·         6/22/11:  Bradley Turn date. Market turn window 6/15/11 thru 6/29/11.

·         7/15/11: Eclipse Sell-off Technique targets this time frame as a potential large market sell off area. The May time frame that was targeted sold off over 3%.  Therefore, this lessens the likelihood of a sell off in July ever so slightly since the May sell off absorbed some of the negativity for this May to July eclipse zone. But, remain on guard for a substantial July sell off nonetheless.

·         7/29/11 and 7/30/11:  Major Bradley Turn date. Major market turn window 7/22/11 thru 8/7/11.

·         8/9/11:  Fed FOMC Rate Decision and Policy. No change expected.

Keystone’s Short Term to ‘Intermediate Term’ Key Dates and Market Movers June and on:

·         POMO Pumps for QE2 thru 6/30/11:  Markets receive bullish pumps between 10:00 AM and 11:30 AM each trading day favoring market bulls.  Pumps continue thru 6/10/11 when the final QE2 schedule will be announced. N-D 75, D-J 75, J-F 80, F-M 80, M-A 80, A-M 80 B, M-J 80, thus, a total of 550 billion.  The POMO program was slated to be 600 billion total so on 6/10/11 the Fed will release the final schedule thru 6/30/11 which will be most likely the final 50 billion where the Fed uses the entire amount they originally targeted.  This reinforces Chairman Bernanke’s dovish view concerning the weakening economy and transitory inflation.  Thus, POMO pumps continue for 5 more weeks but traders will now worry about what happens when the punch bowl is taken away, probably falling equities markets. POMO pumps=bullish equity markets. POMO pumps end=bearish equity markets.

·         FOMC Meetings and Rate Decisions:  6/21-22/11; 8/9/11; 9/20/11; 11/1-2/11; 12/13/11. Fed should keep the Zero Interest Rate Policy (ZIRP) in place for the foreseeable future.

·         Congress to Raise Debt Ceiling: Geithner said 5/16/11 first, then 7/8/11, but now he really, really means it, with a drop dead date of August 2nd. Some in Congress say if Geithner has already moved the deadline forward, maybe it is not that big of a deal after all, and this is fostering complacency in Congress.  Congress never makes a decision until a deadline is in place.  Some republicans already saying the consequences will not be too bad if the deadline is missed—‘we’ll just shuffle some money around’.  Congress clowns now have 9 weeks to raise the debt ceiling, tick, tock, tick…

·         Congress In or Out of Session:  Market bullish when not in session, market bearish when in session. Congress is in session, so market bearish.

·         Europe Debt Crisis Continues:  Portugal, Ireland, Italy, Greece and Spain, the PIIGS.  Italy’s bad paper may become exposed due to Libyan War.  Portugal, Ireland, Italy and Greece the focus, Greece is a lost cause. Greek public rally 6/4/11 against new austerity measures perhaps weakening euro late in the trading week 6/2/11 and 6/3/11. 6/24/11 target date for Greek 24-hour strike to protest austerity. Greek unemployment data 6/6/11. Eurozone Finance Ministers meetings 6/20/11. Euro Heads of State meeting 6/24/11, thus, euro woes continue to heat up possibly reaching a head in mid June, a couple weeks away. Greece to repay a 5-year bond 8/20/11.  Weaker euro=stronger dollar index=weaker commodities=weaker U.S. equities.

·         ECB Rate Hikes:  Trichet announces next rate decision early June, but the bite has came out of his bark.  No change occurred 5/5/11.  Trichet is less hawkish no longer talking about ‘strong vigilance’. Trichet raised rates 25 bips on 4/7/11.  An informal target of 2% by the end of 2011 was the consensus but this is dropping after no change 5/5/11 and Trichet’s less hawkish mood.  Trichet may have unwittingly called another top in the commodities markets just like he mistakenly did by raising rates at the wrong time in July 2008.  Trend has been euro up=dollar down=commodities up=equities up.  Euro propped up by Trichet’s hawkishness, thus, if euro now reverses, euro down=dollar up=commodities down=equities down.

·         Ongoing Wars: Libya, Iraq and Afghanistan. Libya not a big oil producer; Saudi’s can easily step up production to handle any Libyan oil loss.  Premiums remain in gold, silver and oil prices.  Any positive resolution to the Colonel Gaddafi situation, or ME tensions in general, will cause this premium to come back out.  Rational price of oil is low to mid 80’s but rationality never matters in trading. Oil will probably settle in the low to mid 90’s as the months tick along.  Wars and ME problems continue=bullish for commodities, gold, silver and oil, and, visa versa.

·         Continuing Geopolitical Events other than Ongoing Wars: Egypt, Syria, Saudi Arabia, Bahrain, N. Korea:  Dollar bullish and equity bearish.  Gold, silver and oil bullish.  Bahrain is the big worry since, unlike Libya, further unrest will impact oil supply.  Emergency rule in Bahrain is to be lifted June 1, so the coming days violence, or lack of violence, will move the oil price accordingly. Yemen is important as well since it is a southern Saudi border. Bahrain news impacts commodities in real time.  Any bad Bahrain news=higher gold, silver and oil prices, and, visa versa.

·         State and Muni Crisis; Union Busting:  Muni’s should experience pain first.  Muni’s rely on State funds.  Many State budgets turn over in June and July.  Colleges relied on State funds. Lingering unemployment lessens government tax inflows. U.S. will probably see an increase in the cash society, due to higher taxes, hurting government coffers more.  Multiple U.S. cities now experiencing budget fights and protests.  Governments trying to reduce burden of high union costs.  California financial decisions are occurring now.  Will these decisions spook the country? State and Muni problems are a H2 2011 and 2012 story.

·         College Debt Bubble: Students continue to take on mountains of debt and cannot get a job after education.  No effect near term but in the months forward the loan defaults will be a problem.

·         China Property Bubble and China Contagion:  When it pops, anytime now, it will be extremely negative on global markets causing contagion in Asia and elsewhere. China has built uninhabited cities to fuel their explosive growth during this century. Some evidence of Chinese now using hoarded copper supplies as collateral to continue the building.  This is going to end very badly.  Keystone agrees with Jim Chanos on China. China bubble pops=global markets down.

·         PBOC; China Rate Hikes:  First hike 10/19/10, 25 bips; second hike Christmas 12/25/10, 25 bips; third hike at end of China New Years on 2/8/11; fourth hike 4/5/11.  China said in 2010 that it will project about five hikes into June 2011.  Hikes have occurred October, December, February, April so the pattern reinforces the June hike next.  Bank reserve requirements are now ratcheting up continuously to slow down inflation but these appear to have less of an effect now.  Rate hikes cause commodities, gold, silver, PM’s and copper to sell off.  The 4/5/11 rate hike had a muted effect since Chairman Bernanke’s hot easy QE2 money is more powerful. Typically, rising rates reflect a countries currency, economic and market strength, but, China growth is slowing now, not increasing, which creates an odd rate raising environment. Target for China rate hike is 6/1/11 thru 6/24/11.  China raising rates and reserve requirements=lower commodities=lower US equities.

·         China New Premier:  Chosen in 2012, will it be a smooth transition?

·         India, Brazil, Taiwan, South Korea and other Emerging Market Rate Hikes:  Same effects as China rate hikes; commodities will sell off.  China, India and Brazil hikes are most important to global markets. Some emerging countries now choosing to stay on hold reinforcing the belief that inflation is transitory in nature. Chairman Bernanke’s hot easy QE2 money pumped up emerging markets and commodities for the last nine months.

·         Japan Disaster; Yen Currency Intervention:  The global markets are treating the disaster as a Japan problem with limited global impact.  Supply and parts concerns are occurring now due to Japan factory outages; automobile and technology markets most affected.  Additionally, Japan is performing policy manipulation and currency intervention to target the 85-86 dollar/yen area.  This could not be maintained so far, or 83, or 81.  Expect further coordinated intervention now. Dollar/yen up=dollar up=euro down=commodities down=equities down.

·         Oil; OPEC; Strategic Oil Reserve (SOR); Hurricane Season:  SOR adding some supply each month due to renovations.  OPEC meeting in June, Ahmadinejad will object to any Saudi production increase. Hurricane season now so that may keep oil price buoyant. Higher oil supply=lower oil price. Hurricane=higher oil price=good for construction material companies. Rational oil price is 80-85 so a 20 dollar premium remains; oil likely to move sideways thru the low to mid 90’s as the year progresses, or lower.

·         Wiki Leaks; Financials:  Embarrassing bank information rumored to affect BAC most of all.  2-10 spread nearing 255 number as per Keystone’s 2-10 Spread Indicator, where the yield curve is no longer as attractive for banks.  Watch the spread closely since a spread under 255 will exacerbate the fall in financials.  Weak financials places a cap on broad market upside. Also, financials and technology go hand in hand, thus, weak financials weakens technology further limiting upside potential for the broad market indexes.

SPX S/R for Week of 5-31-11

The critical SPX ceiling, as discussed in the previous blog post, is the 1341-1344 area.  Up thru this level and bulls should run to fill the gap above at 1360. Bears need to push under 1329 and 1319 to move prices much lower towards the April lows and the psychological 1300 level.  1298 then 1294 are lines in the sand that if broken will result in price collapsing much lower.

For Tuesday's session, the first trading day of the week, 5-31-11, if the market bulls can push the SPX above 1334.62, the bulls will run price up to test that 1341-1344 resistance.  If the market bears can push under 1325.69, a move to test 1319 will be in order.

The futures and fair value will be extremely important Monday night into the opening bell Tuesday.  Watch 1334.62 like a hawk.

The winner of this bull-bear struggle the last couple weeks will surface when the SPX decides to either shoot up thru 1341-1344, or, collapse down thru 1319.  Whichever occurs will tell the story for the subsequent days and the direction of the short term trend. The battle begins at 1331--in the middle of this 1319-1341 decision range.

·         1565 (10/9/07 top)

·         1500

·         1440

·         1427-1428 (5/19/08)

·         1424

·         1419-1420

·         1413

·         1409

·         1407

·         1404

·         1399-1400

·         1391

·         1388-1389

·         1386

·         1377

·         1370-1371

·         1368

·         1365

·         1360-1361

·         1357-1358

·         1354

·         1349

·         1343-1344

·         1341

·         1338-1339

·         1337 (strong S/R)

·         1335-1336 (1336 important)

·         Friday HOD 1334.62

·         1331-1333 (very strong S/R)

·         1329 (very strong S/R)

·         1325-1327 (very strong S/R; 1326 important)

·         Friday LOD 1325.69

·         1318-1323 (very strong S/R zone; 1319 important)

·         1315-1316

·         1314 (very strong S/R)

·         1310-1312 (1312 important)

·         1307

·         1298-1301

·         1294-1295

·         1286-1287

·         1252 (9/14/08 pre-LEH bk)

·         1220-1225

·         1192 (9/15/08 post-LEH bk)

·         1140

·         987

·         666 (3/6/09 bottom)

SPX Daily Chart Lower Highs Lower Lows Gaps S/R

SPX daily chart showing volume by price candles on the left side to help identify key support and resistance. SPX S/R numbers are highlighted below and will be posted in the next blog post to set up Tuesday's trading.

The long candle focuses on the 1329-1341 zone--exactly where we are at now. The bounce last week from 1312-ish occurred without a test down to the April lows, and also without any positive divergence to create the bounce, except for a smidge of positive divergence with the money flow. Note the green bars that show the indicators weaker with price higher. Picture this as a weight hanging on price trying to pull price down. The gap fill at 1312-1319 and the smidge of money flow positive divergence helped create the bounce, but the Fed's POMO pumps and expected holiday buoyancy did the heavy lifting.

Note the other open gaps lower that will require filling as well as tiny gaps at 1320-ish and 1327-ish from the bounce last week. The black lines show the downward channel in place now and the lower lows and lower highs. Note the two tiny gaps in this current area that can fill and still maintain the lower high trend in place. The tiny gap above at 1360, however, is reminiscent of the tiny gap at 1340 left behind in February which told us that the SPX had to come back up for, which the index did in April.

Thus, the 1341-1343 gap fill area is currently in play but the bears are still in the game even if this occurs. If price moves above this 1341-1343 area, lookout above, price will probably head up to fill the 1360 gap.

RSI under 50% favors bears so keep an eye on that as well as if the 20 MA crosses down thru the 50 MA which would be bearish. Watch for the gap fill at 1333-ish which also is resistance from the top rail of the downward channel. Should price get above there, watch that 1341-1343 gap fill area as discussed above. Bears have the upper hand currently despite last weeks bounce. Volume participation continues to trail off so bulls show no real conviction. Price parked itself at the 50 MA for the Memorial Day weekend as it makes a decision.

Key SPX Support and Resistance:

·         1341

·         1338-1339

·         1337 (strong S/R)

·         1335-1336 (1336 important)

·         Friday HOD 1334.62

·         1331-1333 (very strong S/R)

·         1329 (very strong S/R)

·         1325-1327 (very strong S/R; 1326 important)

·         Friday LOD 1325.69

·         1318-1323 (very strong S/R zone; 1319 important)

This information is for educational and entertainment purposes only.  Do not invest based on anything your read or view here or any links attached to this information.  Consult your financial advisor before making any investment decision.

SOX Semiconductors Daily Chart Descending Triangle

SOX showing the collapse out of the blue sideways symmetrical triangle mid-May. A multi-month descending triangle is now in play for semi's with the base line across that 409-413 zone and vertical segment in February from the 411-ish up to the top at 475. Taking the difference, 475-411=64, and subtracting from the projected baseline, 411-64=347, yields the 350-ish target, if price collapses thru the base line. The neon green lines show the boundaries of the descending triangle moving forward, now a range of 409 to 435 is in play and this will become tighter and tighter as the downward-sloping trend line moves toward the base line.

Interestingly, the 20 and 50 MA's are in this 435-437 area providing a confluence for overhead resistance. Watch to see if the 20 MA falls under the 50 MA, now only one buck above, if so, that is bearish. Note the falling black wedge that helped jump price from 420 over the last couple days, but, this jump did NOT occur because of positive divergence, the indicators actually want to see price fall moving forward.

The ADX is in the teens signaling that price is not in a strong trend and this is apparent from the sideways behavior over the last three months. The ADX favors sideways action thru the descending triangle boundaries moving forward, then, should price collapse thru the 409 area, watch to see if the ADX moves up into the 20's and 30's, if so, that would mean that a strong trend is in place and further downside is expected, with the 350-ish descending triangle target firmly in play at that point.

Projection is a move thru the 409-435 range until a test of the 409-413 base line occurs. At that time probably a bounce back up to touch the top of the triangle again at a 420-ish, then back down to collapse thru the base line and target the 350 as the weeks and months roll along. This information is for educational and entertainment purposes only. Do not trade based on this information. Consult your financial advisor before making any investment decision.

Keystone's Morning Wake Up 5-26-11

The battle of the weaklings continues today.  Bears too weak to go lower, bulls too weak to go higher, but, one side will win out.  Seasonality-wise, ahead of a three day holiday weekend, the Thursday and Friday sessions tend to be bullish, so that is a consideration, a natural buoyacy should exist in the markets, and, along with continual POMO pumps, the bulls have a slight wind at their back.

Retail cracked yesterday, then recovered, but the writing is on the wall.  The high gasoline prices must have finally dented the retail sector.  To start today's session, retail, measured by RTH, is a hair on the bullish side, any weakness lower will verify the coming swoon with the consumer.

Commodities and copper bounced the last couple days but remain in the bear camp as measured by a proprietary algorithm.  So the beat goes on.  The broad market Kabuki Dance continues, with bulls and bears each trying to take control, but neither side breaking out, yet.  If retail weakens at the open, then the bears will have an upper edge today.  If commodities, copper and semiconductors are buoyant then the market bulls will continue to frustrate the bears.

For the SPX, if the 1326 handle is touched, the bulls are going to run strong today and tomorrow into the barbeque weekend.  If, however, the bears push the SPX lower and get below 1312, to heck with seasonality, the market bears will be in control and the indexes will drop several more handles as we near the weekend.

SPX:VIX ratio is at 77 well above the critical 68 level, but this indicator can move quickly.  Keep watching since as soon as 68 is lost, the broad markets will be selling off large.

SPXA150R well below 80 now, at 73, thus, fully agreeable to see market selling as it ventures lower.

BPSPX at 72.65, has already confirmed the equity selling since it moved in excess of six percentage points, from 83 to 72 now, but the failure of the 70 level is critical.  If BPSPX loses 70, this corresponds to wide spread index selling occurring.

Markets will have trouble moving up without financial cooperation.  Keystone uses the 2-10 spread to gauge happy bankers versus sad bankers.  The spread is around 260, once the spread loses 255, the bankers will become more negative, so keep an eye on the spread.  Perhaps the bulls pull it out and move the spread higher, back to the 260's and 270's, this would turn the whole situation around.  Keystone forecasts the former scenario not the latter one.

CPC put/call closed at 0.73 yesterday, traders have no respect for bears at all.  Traders are complacent, no fear at all, VIX is below the critical 17.64 level, at 17.07, traders continue to view the markets with wine and roses in hand. A contrarian takes key interest in these numbers.

Let's keep it simple today. Watch VIX 17.64 level. Watch RTH 109.69 level. If the VIX stays below 17.64 and RTH stays above 109.69, bulls are going to start the weekend party early.  If the VIX moves above 17.64 instead, while the RTH moves below 109.69 instead, then the market bears plan on slapping the bulls on the grill ahead of the weekend.  As this is sorted out after the opening bell, whichever direction runs, bulls need to hit 1326 to accelerate buying, and bears would need to fall below 1312 to accelerate selling. Otherwise, markets are sideways thru this range. Continue to watch the SPX:VIX ratio 68 level as well, it will sneak up on you.  Lastly, check to see if you have the barbeque in working order, it is always important to pay attention to the priorities in life.