Keystone's Morning Wake Up 12/13/11

Best Buy missed earnings estimates, no surprise as the standard water cooler joke bears repeating, "Best Buy? They are simply Amazon's showroom." Which is true, shoppers go to BBY to touch and test the merchandise, as well as pick the geek's brains, only to say thank you, and return home to buy the item on line. BBY is on the wrong side of that one.  Retail Sales dissapointed as well but surpisingly the futures are staying on the green side.

Business Inventories are at 10 AM, which creates a potential market pivot point. Ditto the 10-Year Note Auction at 1 PM. Ditto the Fed Announcement at 2:15 PM. This is the final meeting for 2011.  There is no press, or rather desk, conference today. Watch to see if quantitiative easing is mentioned in any way no matter how small. QE3 is not expected until we move into 2012 but the adjustments to wording is important. A morsel of QE talk will likely bounce the markets. No QE mention will weaken markets.

Typically, during OpEx week, markets are buoyant from Tuesday into Wednesday. With the twist and turns ahead today, however, the trick is determining where the lows would occur today.  The NYSE traded at only 50% of its average 10-day volume. Traders must be slipping out the back door when no one is looking. Yesterday I saw a tumbleweed roll thru the floor. I hear crickets in the background. The robots are around since they do not receive holiday time off. Christmas is only 11 days away.

Copper, semiconductors and financials gave up the ghost yesterday prompting Keystone's algorithm to move to the short side. So today we see if Keybot wants to whipsaw back to the long side or if the algo is content with motoring along on the short side. Thus, the same three sectors are key today. Watch JJC 45.40, SOX 371.30 and XLF 12.82.  XLF is dancing on top of that level so the financials will greatly effect market direction today. The retail sector will now come into play as well so watch RTH, the 110-ish level.

Checking the very short term indicators, NYAD dropped to -2100 but closed off the lows at -1800. This is a low number agreeable to markets rallying but a close or intraday low lower than the -2100 would seal the rally deal better.  TRIN closed at 2.36, it was up over 4 during yesterday's session, so it is consistent with wanting to now see a market bounce due to the strong bearishness. The VIX was flat to down yesterday, odd behavior considering the market selling. The CPC put/call exhibits similar odd behavior dropping yesterday indicating that traders were jumping on the bull train despite the market selling off. Thus, many traders believe in Santa and the Santa Claus Rally and expect to receive a pony over the next 2 or 3 weeks. Perhaps they will receive a gift from the pony instead, one that requires a shovel.

The SPX lost the 1235-1268 nine-day channel yesterday, but price did recover into the close to print 1236 a hair above the critical and sturdy 1235 support.  Bulls need 20 points of upside, to touch the 1255 handle, if so, the markets will accelerate higher. That is a formidable move, however, retracing yesterdays drop.  The bears have it easier, only needing to print 1227 to get the downhill bear momo going again. A move thru 1228-1254 is sideways action.

In a nutshell, watch XLF 12.82, SOX 371.30, JJC 45.40, RTH 109.75 and SPX 1227/1255 to determine broad market direction. The 10 AM, 1 PM and 2:15 PM times are all potential market pivot points. The Fed anouncement serves as a crescendo for today's action, thus, markets may be choppy and flat into the 2 PM hour. European news continues to be the main market driver. For now, bond yields are behaving themselves. Global markets are walking on eggshells currently.