Keystone's Morning Wake Up 10-14-11

The retail sales data were buoyant, back-to-school sales a bit better than expected, so the already green futures, due to GOOG's earnings, move even higher, a joyous start is on tap. The 10 AM time, when sentiment and business inventories hit, is a market pivot point for today. The first hour of trading will be active.

The financials, XLF, made a run up yesterday afternoon to test 12.55-12.60, but failed, allowing the market bears to maintain the upper hand. If XLF moves above the 12.55 area after the open today, the market bulls will run.  Similarly, UTIL remains under 439, so watch to see if that level is regained, if so, this will serve as further bull fuel. A third metric to watch is the volatility, VIX, now at 30.70. If the VIX moves under 28.70, this adds additional bull fuel as well.

For the SPX today, the market bulls need to see 1207.50, and by the look of the futures, that should occur, thus, the buyers will enter in force driving the SPX up several more handles. The 1209-1210 resistance should be tested in short order, then 1215, then 1219-1220.  Market bears need to see the SPX drop under 1191. If an 1190 handle appears that will create an accelerated downside move.

For broad market direction today, since the markets will run higher at the open, watch XLF 12.55, UTIL 439 and VIX 28.70, as described above, since these three compadres will serve as a gauge to determine the strengh behind today's up move. If XLF and UTIL stay under the levels shown, while VIX remains above, the market bulls got nothing. If one or two move to the bull side this will support the market buoyancy today. If the market bears prevent any of the three from occurring the markets will reverse after the early pop and sell off today. Interestingly, the Nasdaq up percentage in the futures is slightly less than the S&P so this hints that the actual market up move may not be as strong as it now appears.

Key SPX S/R today is 1183, 1188, 1189, 1191, 1193, 1198, 1199, 1204, 1207, 1209, 1210, 1215, 1219, 1220, 1225, 1226, 1227 and 1233. Important SPX S/R clusters are 1198-1199, 1209-1210, 1219-1220, and 1225-1227.

Note Added 10/14/11 at 9:40 AM EST: XLF  popped higher at the open so this will help support market bulls today. UTIL not above 439, and VIX testing 28.70 but not down under yet, so the markets will remain buoyant but will not have additional fuel without the higher utes or lower volatility.  SPX attacked 1219-1220, and is now above, so watch the 1225-1227 cluster next which is very strong resistance. There goes the VIX under 28.70, more fuel for the rally.

Note Added 10/14/11 at 10:35 AM EST:  XLF and VIX fueled the early market upside today, but the XLF dropped back under 12.55, VIX back over 28.70 and UTIL is under 439 so the markets have weakened, the SPX is now using the 1215 as support. Without the utes, financials and/or volatility adding bull fuel, the markets will not go up and any gains today are in question.

Note Added 10/14/11 at 1:47 PM EST: XLF and VIX remain unable to make the transition to the bull side although the XLF is now at 12.50 only a nickel below 12.55. Between 1 PM and 1:30 PM, the utes, UTIL jumped above 439, this caused the broad markets to move upwards, but the utes fell on their sword and stumbled lower unable to hold the 439 level. Again, markets will not experience upside without at least one of these three creating the oomph.  Keep watching, UTIL now coming up to give 439 a try again and XLF trying to give 12.55 a go. Typically, Friday's experience afternoon buoyancy due to short covering ahead of the weekend but the nature of trading recently should negate these effects today. If XLF, UTIL and/or VIX cannot create the oomph, the markets should weaken.

Note Added 10/14/11 at 3:08 PM EST:  Note that XLF exploded above 12.55 just before 3 PM launching the broad markets. Watch to see if it holds.

Note Added 10/14/11 at 3:33 PM EST:  XLF is above 12.55, VIX just dropped sub 28.70 and UTIL is pennies away from 439. Market bulls are running strong. The upward indexes are fueled by semi's, retail, financials and lower volatility. Watch to see if the XLF and VIX hold.

Note Added 10/14/11 at 3:47 PM EST:  Hang on tight, Keystone's algorithm may want to go short....................

Note Added 10/14/11 at 4:23 PM EST:  Exciting finish. XLF launched and VIX dropped like a stone in the last four minutes of trading catapulting the SPX to close at the highs. With ten minutes to go in trading, the markets were actually starting to roll over but financials and volatilty saved the day.  XLF, VIX and UTIL will continue to dictate broad market direction.