Keystone's Sunday Commentary for Week of 6-27-11

……….if it’s Sunday, it’s time for Keystone’s Commentary………..

Interesting how the seasonality worked out sa projected last week.  The week after June OPEX is down 18 of last 20 times, and, after last week, now down 19 of last 21 times, so mark your calendars for June 2012 to be aware of this market behavior and use it to your advantage next year.

Well, that was last week, ancient history, what about this week?  Markets are typically buoyant and bull-friendly the two days before a three day holiday weekend.  Independence Day is next Monday, thus, this Thursday and Friday should favor bulls.

We received the QE3 in quick order with the release of the SOR, or SPR, news. POMO pumping ends this week but it looks like the administration is going to now try to stimulate the economy with driving oil prices lower.  This central planning stuff is worrisome, the oil reserve is for an emergency; I guess low poll numbers are now an emergency.   The oil news already has traders questioning the oversupply concerns, more uncertainty moving forward, not less.

Keystone’s secular signals show the first sign of breakdown with the NYA.  The NYA 40 week MA cross has failed (now two weeks in a row) placing the broad markets back into a secular bear market.  This is one of four secular signals Keystone monitors.  The SPX 12-month MA cross is 1236 currently, thus, at 1268, the SPX remains 32 points above failure into a secular bear. The monthly chart receives a new data point on Thursday evening.  The SPX 150 day MA slope indicator teeters every day with a flattening slope, but for now, it remains as a secular bull market.  The fourth secular signal is the UPS 20 and 50 week MA cross, shipping provides a reliable secular call on the markets, and this shows the 20 MA rolling over and starting to come down towards a cross.  The distance between the two MA’s is the closest since the last big market scare in November 2010, so this requires watching, but, like the other three secular calls, it still shows that the broad markets are in a secular bull.

The utilities stopped a broad market collapse last week.  Keystone’s comparison number for UTIL price was the 418 level and UTIL came down within a couple bucks of this level before rebounding up and away.  A failure of 418 last week would have sent the broad markets over a cliff so the market bulls wrestled back control.  This week, Keystone’s comparison number for UTIL is down much lower at 393, so UTIL has to fall 30 points this coming week to signal that the broad markets are going into a free fall.

Keystone has been waiting for the utilities to lead the broad markets down, which is a sign of an extended bear market and serious selling ahead, but, as of yet, the utes have maintained buoyancy up above the fray.  Watch 408 this week; if UTIL falls below here, the markets will be selling off large.  If UTIL then loses 393, the broad markets will be in free fall. If UTIL stays above 408, the market bulls will muddle through in the short term.

Lots of negativity to close out the Friday session, many traders did not want to be long over the weekend.  Well, you never know what traders are actually doing, but, considering the contrarian view, the negativity was thick so the markets will probably surprise with a strong Monday, but, it all depends on Europe/Greece.  At this writing Sunday evening, a red opening is setting up but there are a lot of hours before New York’s open.  The numbers will not matter until the morning.  Greek vote for austerity is Wednesday, 6/29/11, so tension mounts.

For the SPX tomorrow, the Monday session, the market bears only have to push one measly point lower after the open and they will open the door wide for accelerated selling, which would test the 1262 level, and then perhaps test the starting year numbers of 1258-1259.  The daily charts are setting up with positive divergence so a bounce is coming.  The goal for the market bulls tomorrow is to not let 1267.24 give way. If the SPX loses this level the bear scenario plays out.  If the bulls can stay above 1267.24, they can at least muddle thru the day sideways.

Copper will probably be targeted for upside by the bulls tomorrow, perhaps some of the remaining POMO pumps will push this metal higher; the bulls will try to push copper higher thereby pushing the indexes higher. China, $SSEC, has jumped four days in a row, and considering that the daily chart is positively diverged, but the weekly charts remain weak, just like the U.S. charts now, Shanghai may be in leader mode now so this will require close watching; see if $SSEC leads the U.S. indexes as we move along.

As the early week plays out, factor in the likelihood that Thursday and Friday will be up days.  A possible scenario that will of course change as the hours tick by this week, would be an up Monday, with selling coming in Tuesday or Wednesday, possibly to Thursday morning, then up Thursday and Friday into the holiday weekend. Study Keystone’s Key Events and Market Movers to see how this week trades against the potential pivot times.  Volume will trail off as the week plays out and many traders will sneak out the back door on Friday to get an early start on the barbeque.