Keystone's Evening Nightcap 7-5-11

Market bulls did not have the oomph, 11 measly pennies, to push the SPX from 1340.89 HOD to touch that 1341 handle and create an upwards acceleration today.  Thus, finally score one for the bears. Semiconductors weakened today rejoining the commodities as the only two negative sectors as measured by Keystone's proprietary algorithm.  All other major sectors are bullish.

For tomorrow, watch the XLF 15.43 level, now at 14.49, only six pennies above, on the bull side. If the 15.43 level is lost, the market bears will be in control tomorrow driving the indexes lower.   Also watch the semiconductors, SOX, now at 415, is perceived to be bearish by Keystone's algorithm, as long as it stays under 416.40.  If the market bulls are running the indexes higher tomorrow but the SOX does not move over 416.40, then that upward market move will fail.

For the SPX tomorrow, the market bulls get a second chance at the 1341 handle.  Do they got what it takes tomorrow?  Bulls need three points after the open and if they touch 1341 it will be off to the races, 1345 will be tested, then perhaps 1349. The bears will try to keep this firm 1341 ceiling of resistance in place.   At the same time, the bears need to move the SPX down to lose the 1334 handle, or simply get down to 1334 and change, that will be good enough, and the bears will get some revenge accelerating the move down in the indexes a few additional handles.

Since the sideways range of 1335-1339 tomorrow is so tight, one side or the other should win as determined by the 1341 handle (bulls win), or 1334 handle (bears win). The Challenger and ADP jobs reports hit tomorrow morning so this will heat up the employment talk for Friday. ISM Non-Manufacturing index as well and also the 4-week bill auction but none of this is worth getting excited over.

The game starts with the ECB rate decision tomorrow morning. Trichet promised a pony and he must deliver a pony. Today Portugal gets slapped so Trichet's fancy footwork will be a sight to see. The trading intensity should ramp up into Friday.