Keystone's Morning Wake Up 2/10/12

Futures are lower as the Greece deal stalls and the predictions of an agreement were greatly exaggerated. The European bond market is behaving itself, however, traders must be numb to this ongoing Greece mumbo jumbo. The markets float up each day on low volume, low volatility, experiencing a tech and commodities-led rally.  AAPL threw gasoline on the tech bull rally in January with blow-out earnings numbers. Ever since, the technology sector has become giddy, reminiscent of the dot-com bubble days, with coupon-clipping companies worth billions (Groupon), or electronic Rolodex's touted as break thru technology (LinkedIn), or social media platforms overdosing users with time-wasting ideas (Facebook, Zynga and others). In the dot-com days, traders were happy and giddy, the Pets.com offering was on the table, Webvan, and many others.  Who?  Exactly. There are a lot of great tech companies but traders forget the losers and the actual companies that called the dot-com bubble top such as Pets.com.

Right now, the markets are boiled down to Apple.  As AAPL goes, so goes the markets.  AAPL is such a big weighting in the tech and Nasdaq Indexes, that the parabolic rise in price has rippled thru to hype all of technology.  Quick, start a tech company in your garage since investors will be happy to throw money at you.  Alas, like a commodity chart going parabolic, the AAPL price should fall just as drastic to the downside. Keep AAPL on the screen all day since it is steering the markets. Since AAPL closed in the 490's, a 520 print is now likely.

As one of Keystone's trading guides, he uses an 80/20 rule; when a price closes above the 8 level it typically seeks the 2 level. Thus, an AAPL close above 480 opens the door to 520. For today, a close above 498 would open the door to 502. The markets need to pull back for a rest. Thus, perhaps the scenario ahead is for Apple and the markets to sell off, say to SPX 1326, then a bounce will bring prices back up to current levels or higher, when AAPL can print the 520, then the markets roll over for extended selling and downside action, which will eventually be saved by quantitative easing from the Fed, BOE and ECB.

The commodities are the other market driver recently. The rally, especially in copper and gold, developed as traders front ran the triple R easing announcement from China.  Oddly enough, the announcement has yet to occur but it is all priced into the markets already. In fact, with the China CPI yesterday, those listening for the sweet nothing's of China easing in their ears, instead hear crickets.

Note that over the last couple days volatility has shown life, watch to see if that continues. The chart set ups for the VIX, and other volatility plays are positively diverged so a launch should occur. Volatility up = markets down.

Talking technicals, same-o as last few days.  Watch CRB 310.50 for the bears to run and UTIL 453.69 for the bulls to run.  A bull-bear standoff exists otherwise. At the 4 PM close today watch for UTIL in relation to 451.17.  This is the number to watch for the utilities all next week.  Thus, if UTIL closes above 451.17 today, the bulls have a feather in their caps to start Monday's trade.  If UTIL closes today under 451.17, the market bears are steadily building strength and fully capable to start taking the broad indexes much lower.

For the SPX today, starting at 1352, if the market bulls achieve 1354, the upside fun will accelerate once again.  If the market bears can push under 1345, the downside will accelerate with large block sellers entering in force. The futures are set to test this 1345 level at the open currently.  A move thru 1346-1353 is sideways action. The SPX has strong support at 1337 and 1326 which serve as targets for where the dip-buyers may enter if the markets finally sell off.

The University of Michigan Consumer Sentiment at 9:55 AM is a market pivot point today.  Sentiment jumped a couple weeks ago which helped boost the bullish vibe so this number will set the tone for trading as the session plays out.

Note Added 2/10/12 at 8:26 AM EST:  The S&P futures are down -0.96% while the Nasdaq futures are down less at -0.86%. You know the drill by now, and since tech is not leading the weakness, any down move at the open appears to not have juice behind it, which should mute the market selling.  The market bears need to sell the Nasdaq stronger if they expect to increase the negativity and move markets lower.

Note Added 2/10/12 at 9:18 AM EST:  The CRB is dropping like a stone, now with a 311 handle, edging closer to the 310.50 level. Bears are trying to make a run, if the CRB drops under 310.50, the selling will remain strong and extended. If the 310.50 level holds, markets will continue sideways.