Keystone's Evening Nightcap 2/8/12 -- China CPI

The China CPI was released minutes ago at 4.5%, the inflation is hotter than expected, the highest since October, and comes as a surprise since the number was decreasing each month, until now. Food inflation is strong which is worrisome since China has a history of turmoil during times of high food inflation.  This inflation data places the triple R easing plans in jeopardy and comes as a surprise.  Especially interesting is that the massive rise in commodites, especially copper, came about because of traders front running and anticipating the China easings and with this inflation data tonight the easing, that has to be priced into the markets already, is probably not coming in the short term afterall.

Lots of other drama in the coming hours. Greece is coming down to the wire. The ECB rate decision and press conference is hours away.  CSCO had great earnings but the stock was uninspired after hours. The tech sector remains key for the bulls. AAPL kicked off the party in January and tech has been a main driver of the market rally, so any stumbles now, in a big player like CSCO, or especially with AAPL, will hurt tech and thus hurt the broad markets.

The previous charts show that a spank down for the SPX and broader markets is on tap now, euro should drop, dollar should pop. For Thursday, the same two characters are in focus, utilities and commodities.  Watch for UTIL 453.69 which would signal the bulls winning.  CRB under 310.50 will signal the bears are winning. For now, neither wants to make a decision but one of them should commit tomorrow perhaps.  Considering China CPI data tonight, watch the CRB like a hawk.

For the SPX, starting at 1350, the market bulls only need a point, to touch 1351 and the upside party lives on with the indexes accelerating higher. The market bears need to keep the futures red and push lower to lose the 1342 handle, if so, the selling will accelerate in force. A move thru 1343-1349 is sideways action. Markets are currently unhappy around the world as this missive is written, responding negatively to the China news. Feels like the roller coaster is starting to pick up speed now, Greece and ECB are on tap.