Keystone's Morning Wake Up 12/9/11

The projection was for the trading week to reach a crescendo today and the action is not disappointing. European markets were lower last night until the 200 billion euro announcement for the IMF hit and bounced the indexes.  U.S. futures are creeping upwards slowly. The E.U. Summit will toss the markets like a rag doll, up or down, so lots of drama is in store for the day ahead.  The full moon and eclipse is adding icing to the top of this theatrical market cake.

The Shanghai Index, SSEC, closed at a 33 month low; now at that critical 2300 level Keystone highlighted in the SSEC chart a few posts back. Type ‘SSEC’ into the search box to view the importance of SSEC 2300.  Korea lowers its 2012 GDP forecasts, another signal of a global slowdown. Note that platinum lost the critical 1500 level, further signs of a slowing global economy, deflationary, see if that holds.

Keystone’s SPX:VIX Ratio Indicator is at 40.35 favoring the market bulls—bears need to see the ratio fall under 35 to prove they have strength. NYAD printed a very low -2200 yesterday so this is consistent with where a snap back rally should occur. Sometimes a flush occurs early in the next session (today) to print a lower -2300 to -2500 number and then the snap back rally follows.  The BPSPX remains on a buy signal since it had reversed from 50 up to its current level of almost 62. The TRIN printed a lofty uber bearish 5.2 which pleads to have a snap back rally to remedy this high number. The utes, retail and financial sectors continue to support the bullish side of the markets. The XLF 12.75 level, however, is nearby, which is where the bears take over again.

Semiconductors gave up the ghost in the final minutes of trading yesterday so watch SOX 371.30 closely today. SOX is bearish now and will weaken the broad markets unless the market bulls move the SOX back above 371.30. Interestingly, Texas Instruments last evening said sales will be below prior estimates due to weak demand for electronics components.

The SPX dropped over 1% in the final 20 minutes yesterday offering up a ridiculous trading environment. Trading small and staying nimble are key elements in these markets as well as having Keystone’s algorithm, Keybot the Quant, on your side to provide a smooth path thru the market mine field. For the SPX today, starting at 1234, if the bears can push under 1231.50, the downside will accelerate.  Futures are green at this early hour.  The market bulls need to push the SPX up to touch the 1261 handle, if so, the upside will accelerate.  A move thru 1233-1259 is sideways action. SPX 1235 is strong sturdy support. Price will have to recover back above 1235 today otherwise the market bears will gain strength.

Markets are at a critical juncture now and the E.U. Summit news will push the indexes one way or the other.  The market bulls are in favor as the indicators above highlight but all is subject to whether or not Merkel coughs or if Sarkozy scratches his …well, nose.  SOX 371.30 is the most important thing to watch as the bell rings to determine market direction today.  U.S. futures currently project an opening for the SPX of up 7 points, the Dow Industrials would open up 70 points, and the Nasdaq would open up 7 points. Consumer Sentiment hits at 9:55 AM serving up a potential market pivot point in and around 10 AM.