Keystone's Morning Wake Up 7-14-11

The Moody review for downgrade hurt stocks yesterday; Keystone's Key Events and Market Movers has called this out as a potential impact for the last couple weeks.  There are now worries about missed payments, since the Congress clowns play their games, and a potentially short default.  The bond market has yields level this morning, thus, they view Congress as performing their typical clown act of wringing hands to make it look like each side is fighting hard, but, in the end, they will kiss and make up the day before default.

That debt crisis aside, the move up in the markets yesteday was suspect when the volatility, measured by the VIX, came down to 18.10 but could not dip under 18, a critical level watched by Keystone's algorithm.  As the VIX then recovered to move higher, it was obvious that the bulls did not have the oomph to keep the markets moving higher, so they trailed off into the close.

The key item today is commodities.  CRB is now trading at 348-349, only pennies below the critical 350.55 level.  If the CRB moves above 350.55, the market bulls will be running strong, otherwise, this malaise in the markets continues.

The 2-10 spread fell to 252 late day yesterday, now at 256, so it continues to oscillate above and below Keystone's critical 255 number.  JPM earnings are trying to cheer up the financials, the spread is now above 255, so watch the XLF today.  XLF starts at 14.99 and is the sector continues to be bearish unless the XLF would move above 15.34.  We'll see how much oomph JPM supplies after the opening bell.

The 3-year bond auction at 1 PM may be a market pivot point today but the earnings releases are much more important.  GOOG is after the bell today.  CHNR, COR, CBST, FCS, GOOG, JBHT, JPM and PPHM will provide a nice cross section to gauge the economy.

For the SPX for today, starting at 1318-ish, the bears only need to move three points lower to the 1314.50 level, if so, the selling will come in force and much lower support levels will be explored with the 1307 gap as a likely target.  The bulls must gather some intense strength to be able to touch a 1331 handle, but that is what they have to do if they want to regain and maintain control of the equities markets.  Today's pivot area is 1321.22 so watch the behavior here, above and bulls are happy, below and bears are happy.  A move thru 1315-1330 today is sideways slop.