Keystone's Morning Wake Up 2/24/12

Interesting action lately with the bulls and bears fighting each day with neither side able to land the knockout punch. The stronger euro (euro now over 1.34 as this is written), weaker dollar, is continuing to run commodities, copper, gold, silver and oil higher, as well as equities. Technically, the  broad indexes are bracketed by the utilities on the upper side and copper and retail on the lower side.  For the bulls to push the broad markets higher they need to push UTIL above 452.91, and since that task has proved difficult this week, the market upside has been limited.  Starting Monday, however, the market bulls will have an easier path ahead since the UTIL only has to remain above 442.01 to affect the broad indexes positively. This changes the dynamics of the indexes and favors the bulls next week.  Watch UTIL closely and see where it closes today in relation to 442. Utility weakness in today's session would be viewed as extremely bearish since UTIL will be starting to work its way towards 442, but if UTIL remains flatish today, next week will set up as favorable for the market bulls.

Copper, measured by JJC, remains above 48 and this prevents the market bears from making any headway south. Likewise commodities, CRB. JJC and CRB are propped up by the weaker dollar which is occurring in concert with the stonger euro. Market bears need to see a weaker euro and stronger dollar, otherwise, the pain will continue. Since the utilities, UTIL, appear to want to stay above 442 for next week, at this juncture, the market bears need other sector indexes to cooperate to create broad market weakness. This weakness may appear in JJC and CRB--if the dollar strengthens. Another sector that Keystone's algo is increasing focus on is the retail sector, using the RTH as a measuring tool.  If RTH would drop under 39, that will spell trouble for the broad markets and take precedence over the affects of copper and commodity weakness.

The previous SPX S/R message provided the road map for the SPX today, watch 1363.61 and 1370.58 on the top side, and 1354 on the underside.  The move in the SPX today takes somewhat of a back seat to this ongoing drama described above with the utilities, copper, commodities and retail. Watch UTIL 452.91 for today and 442.01 at 4 PM today and all next week, JJC 48 and RTH 39.00. One of these three will tip its hand and that will indicate the path forward for the broad markets. The bulls may have weathered the storm over the last few days since the utilities sector is coming back their way, but, the numbers have to play out in the days ahead.

Interesting, Fitch just cut JCP to junk, with earnings hitting within the hour.