Keystone's Morning Wake Up 10-5-11

Moody's downgrades Italy's debt overnight. Apple lays an egg. Greece now says the dough is there to keep them afloat until mid-November. The goal line continues to push forward in time, thus, a complicated solution to the Euro mess needs more time to develop. Perhaps rich Uncle China is feeding money to the Eurozone behind the scenes?

The clock is running so the same old dilemma exists.  A plan is needed quickly before global markets lose complete confidence.  If a plan is announced by the Eurozone quickly, however, and does not properly address the coming contagion that will occur in Italy and Spain, it will fail. If the Euro leaders put together a great plan to save the day and allow for containment of contagion in Italy and Spain, but, it takes too long and the clock runs out, then it will be a failure. Quite a pickle.

Meanwhile, protests in Greece crank up again, nothing like another day off. Tell those Germans to get back to work so they can send more lounge chairs and lotion to the islands.  Chairman Bernanke was screaming fire in a crowded theatre yesterday and that cast a pall on the markets up until late day when positive rumors out of Europe catapulted the indexes with a short-covering rally.

The jobs parade and circus kicks off this morning with ADP data so the media will be talking employment from now thru the Friday morning, always 'all-important', jobs report. Data is tame today with ISM Non-Manufacturing and Oil Inventories.  COST said they are raising the membership fee, so all of you that are wheeling out those 48 rolls of paper towels will now receive a kick in the pants as you exit the store.

Earlier in the week we saw how the put/call CPC was up above the 1.2 level, this is consistent with a market that does want to place a bottom and reverse upwards.  The NYAD had that extremely low -2500 on Monday indicating that a market bounce should occur.  Yesterday, intraday, the NYAD made it to -2400, another low print, but not lower than -2500, and considering that NYA price was lower, this is a positive divergence that helped the late day bounce. NYAD printed +633 so it would have some room upwards to +2500 before it would signal that a bull rally is too euphoric.

NYHL is down a huge -1338. That is an extremely low number, comparable to the Fall 2008 crash period. A number that low would be consistent with a market bouncing since it is such an extreme negative reading. Markets very much have a feel to them that they are traveling sideways awaiting an outcome on the Euro situation.

For today, use the utilities as the guide for the direction of the broad markets.  UTIL begins at 422. If UTIL moves above 424, bulls will be partying, and a recovery rally will swing along. If UTIL stays between 424 and 418, then the broad markets will stagger along sideways to sideways down. If UTIL drops under 418, specifically, 417.88, that opens the trap door for the bottom to fall out for the indexes.

The SPX closed only a point off the high yesterday so if the futures stay green and give the spoo's one point at the open, to pop the SPX up and over 1125, the bulls will enter in force and pump the markets higher quickly. Bears will simply try to stop the upward movement in the indexes by stopping the utilities, UTIL, from getting above 424. If UTIL, goes above 424, the market bulls will rule the day today.