Keystone's Morning Wake Up 2/28/12

The economic data hit minutes ago causing futures to pare gains that were enjoyed all morning long.  The euro is higher, and the Nasdaq futures are above the S&P futures, thus, the bulls have two feathers in their caps still yet. The SPX, starting at 1368 today, is set to challenge the 2011 intraday HOD again at 1370.58.  If the 1372 handle is touched, the bulls will enjoy more upside fun.  The market bears have to drive lower to yesterday's lows at 1355 if they expect to create any negativity.  A move thru 1356-1370 is sideways action today.

Watch the semiconductors, retail, financials and copper moving forward; SOX 412, RTH 39, XLF 14.40 and JJC 48.50.  The bulls enjoy prices above all these levels.  The market bears need at least one of these sectors to fall, otherwise, they got nothing.  Watch volatility, VIX, today since this soap oepra has surfaced again.  Volatilty should spike at any time, which would be in concert with the equities markets selling off. To gauge if this action occurs, watch the VIX 20-day MA at 18.54, the bears win a big fight if VIX moves above the 20-day MA. Market bulls win by keeping the VIX under the 20-day MA.
However, the bears will not be able to perform significant market damage unless VIX 23 and higher is printed.

Looks like the opening bell will provide drama at SPX 1370.58. Watch the 1372 which is the trigger for bullish acceleration higher.  Consumer Confidence at 10 AM is very important and will create a market pivot point.  Thus, the first half hour's action is not that telling but by 10:15 AM, the market tone will be set for today.  AAPL continues to play a key role; the negative divergence should kick it south now and the broad indexes should move lower in sympathy.

The LTRO holds the key to the markets fate this week as mentioned in the Key Events and Market Movers missive on the weekend. The consensus is about 500 billion euro's.  Traders have been talking about LTRO2 for a month now, there is positively some amount of LTRO2 priced into the equities markets already.  To handicap the drama, an LTRO2 of 500 billion or lower should result in a market sell off.  Any words from ECB leaders that try to back off the program will cause heavy market selling.

An LTRO2 of 500 or 600 billioin euro's will likely provide a market bounce, but the euro and the markets will probably be sold on the news resulting with markets leaking lower in the days following.  The big market plus would be shock and awe, making a statement with a 600 billion, 700 or even higher LTRO2. This is enough crack cocaine to explode markets higher in a wild orgy that will, at least, last until the next fix is needed in the near future. The expected 500 billion-ish number looks likely and the broad markets will probably leak lower in response to the news, barring perhaps a quick pop on the news. Traders have had a month to think about LTRO2 and thus buy the market day after day for a month expecting the announcement that occurs within the next 24 hours. Lots of drama ahead over the next day or two.

Note Added 2/28/12 at 9:01 AM: Case-Shiller housing data dissapointed, thus, the S&P's dropped a bit more now showing red. The bulls filttered away their upside move for the open.  The Nasdaq remains elevated above the S&P futures, however, so the bulls still have the strong tech feather in their rally cap's. AAPL behavior is critical today. The Consumer Confidence at 10 AM is extremely important today now that the economic data and Case-Shiller both disappointed.