Keystone's Morning Wake Up 11-22-11

The Nasdaq futures are down 0.71% while the S&P is down 0.50%. The Nas is leading the down side so that is favorable to market bears.  The GDP number is 2.0% a short time ago versus the prior 2.5% number so that created a black cloud for markets.  Merkel says there is "no new bazooka" to help solve the European problems. She needs to start shopping for one.  GS says "there is a lack of initiative to settle the European crisis," reversing their rosier outlook a month ago.

The political circus will always exist; it is much better to deal with the measurable parameters.  Keystone's SPX:VIX Ratio Indicator dropped under 35 at the open yesterday ushering in the broad market negativity. So watch the ratio today. Above 35 and market bulls are fine, below 35 and hang on to your hat, the market bears have gained control and will hang on to the markets unless the ratio moves back above 35.

The retail sector gave up the ghost yesterday. The utilities are the only major sector, as measured by Keystone's algorithm, providing bullish strength. For RTH, now at 108 and change, watch 108.75. The market bears are favored if RTH stays under 108.75. The market bulls will be driving markets higher if they move RTH back above 108.75.  Volatility is another marginal player currently that will verify market direction. If VIX, now at 32.91, moves under 31.50, the market bulls will regain control. For the SPX, strong support levels are 1191, 1183, 1181, 1178, 1173.

Thus, to keep things simple, RTH 108.75, VIX 31.50 and SPX:VIX 35 will dictate broad market direction today. Failure of 1183 support will usher in stronger selling today.