Keystone's Morning Wake Up 11-14-11

Berlesconi stepped down on Saturday; Italy celebrates his departure. The worry is that Mario Monti may not be able to fix things in time. Mean while, Spanish 10-year's are now moving above 6% indicating that new contagion worries are surfacing for Europe. In the States, the debt deadline is only nine days away and Congress is not close to agreeing on how to cut the budget.  President Obama comments about China's unfair trade advantage by stating "Enough is enough," and "China needs to act like a grown-up economy. Don't take advantage of U.S. businesses." Typical political posturing and rhetoric that will lead to greater tension and potential trade wars around the globe as time moves along.

Let's stick to something that can be measured, the technicals.  Futures are red, they were up earlier, then flat, so oscillating across the flat line to start the week.  Watch volatilty, VIX, the 30.45 level as the bell rings.  VIX is under 30.45 to start and if it stays under, then the market bulls will maintain control despite any selling in the early going.  If the markets sell off and the VIX moves above 30.45, then the market bears have legs. To gauge any further down side, watch the financials, XLF. If XLF loses 13 then the bears have further legs and the down side will accelerate.  If XLF stays at 13 or higher then any downside in the broad indexes will be muted.

For the SPX, 1267 and 1272 (200 day MA) are important resistance above while 1258 (starting year number) serves as support below.

LOW earnings were encouraging although they are guiding lower for the path ahead.  JCP was in line. There is no economic data today so markets will be focused on Europe, and also the U.S. debt deadline. Use VIX 30.45 as the early gauge on broad market direction.