Keystone's Morning Wake Up 6-20-11

For the SPX today, if the market bears can push price under 1267.40, and it looks that way, the futures are in a bad mood to start the week, then 1262 test would be in order.  If that fails, then the starting year number of 1257.64 will be tested.  The market bulls need to touch a 1280 handle today, if so, the buying will ramp up substantially.

Europe did not resolve Greece over the weekend so everyone is in a tizzy.  The sides will kiss and make up and a deal should move thru in the days ahead.  Any positive news on the wires will instantly bounce the markets.

But it is a messy start to the week.  FOMC two-day meeting begins tomorrow.  There is no data today, or earnings to speak of, RENN reports, but this is not worth any attention.  AGU investors day will effect commodities trading today.  The tape is at the mercy of the euro news. The euro newswill effect hte euro and the dollar which have an inverse relationship. Commodities and equities move with the euro direction and against the dollar direction.

The utilities require close watching this week.  Keystone's magic number for UTIL this week is 418. UTIL now with a 426 handle so only 8 handles higher.  If UTIL loses the 418 handle this week, the markets are in serious trouble and being long would no longer be an option. Currently, if the UTIL would lose the 407 level, the broad markets will go into free fall.  Thus, price is safely 20 points above this dangerous cliff number.

China rate hike should occur any day.  The Chinese have been careful to not step on Chairman Bernanke's toes when an FOMC meeting is taking place, thus, China will probably hold off until the smoke clears from Bernanke this week.  Thus, look for the China hike Friday, Sunday or next Monday morning.

Stay nimble in this environment.  Volatility is elevating which means the point swings in the indexes are becoming more violent.  A great environment for seasoned traders but difficult for less experienced traders.  In these saw tooth up an down markets you cannnot wear out your welcome on a profitable trade.  Take the money and run since markets can turn on a dime now.  Even a move down this morning must be viewed skeptically, since the slightest hint of good news from Europe and the index shorts will get their faces ripped off. Do not be greedy in this environment, take the money if its there; nothing wrong with strong cash positions now.

Note copper weakening coming down to lose the 400 level again, perhaps today. Note Keystone's 2-10 Spread Indicator. Ten year is 2.92%, 2-year is 0.37%. The spread is 255, exactly Keystone's line in the sand for an advantageous yield curve versus disadvantageous yield curve.  If the spread falls under 255, do not look for the financials to feel any love for a long time.