Keystone's Morning Wake Up 9-21-11

The trading week is in idle mode so far, traders waiting on the Fed today.  The Existing Home Sales at 10 AM will provide a market pivot area this morning. Oil Inventories as well at 10:30 AM although lately the oil data is not as much a market mover. The markets have a bias towards Chairman Bernanke providing stimulus via Operation Twist, or perhaps more appropriately, Operation Twisted.  Yale's Robert Shiller says this move may not bring folks back to the housing market.  He further states that this strategy was not found to be a great success in the 60's either and homeowners are relatively insensitive to mortgage rates when they are lacking confidence.

This is also why extra money in the pay check, courtesy of a confused President and Congress, will do little good either, since folks will save the money rather than spend.  Jobs are the key. If you do not have one, you fear the sun rising each day.  If you have one, you are sick of the pressure the last couple years, doing more with less, having to keep your mouth shut since the slightest negative word will prompt the boss to tell you there is ten other people that want to sit in your seat. As the wise wives will typically instruct their men each morning; do three things today, keep your head down, your mouth shut, collect a pay check.  The U.S. continues to feel the effects of the housing crash, and will for some time, employment and housing is the whole ball of wax, just like in the 1920's and 1930's with the Florida Real Estate boom and crash and the Great Depression.

The broad market recovery rally last week was led by semiconductors, then retail, then utilities. Financials, copper and commodities, however, remain bearish. Thus, moving forward, the socks, retail and utes are key in determining if the good times roll, or if a face plant is upcoming. Of course the markets remain at the mercy of Euro news, a soundbite hitting each hour these days, and today is the all important Fed meeting and decision, but gauge any response in these macro events by using these three sectors as your instrument gauges.

The utes exploded higher yesterday indicating that the bulls may have some juice, but, as the previous post with the ute weekly chart discusses, the utility buoyancy should not last long. That leaves us with socks and retail.  If the SOX, now at 372.76, loses the 367.60 level, the broad markets will turn bearish again. So after clarity occurs from Bernanke today, monitor the semi's closely.  Retail, the RTH, now at 107.37, needs to maintain its height above the 104.60 level for the bulls to continue partying. Again, as today's news unfolds, watch RTH's reaction, if price maintains its level above 104.60, the bulls should be fine no matter what the gut market reaction may show.

For the SPX today, the market bears have the wind at their back since if they can push the index lower by only a point, from 1202 down to 1201, the sellers will enter in force today and drive the index down in short order to test 1198-1199, then 1193.  The market bulls need to get back up to 1220 to accelerate the upside fun, so this outcome only appears reasonable if Chairman Bernanke brings along Santa Claus today to announce further quantitative easing stimulus. If the SPX touches 1220, it has served as resistance for Monday's and yesterday's highs, then the third time may be a charm and the bulls will probably not look back.

Thus, we all wait as the Fed big wigs take advantage of the buffet table, sucking down free taxpayer-provided orange juice, dusting powdered sugar donut crumbs off their fifty dollar neck ties.  Once the news hits, focus on SOX and RTH to determine direction today. If the SPX loses 1201 early in the session, that will determine the early action.