Keystone's Evening Nightcap 3/13/12

The week begins with a lackluster sideways move for equities markets.  The tech sector was leading the broad market lower which was a feather in the bears cap but AAPL remains elevated which keeps the bulls happy.  Apple is the markets, the punch bowl, the band, the caterer, all rolled into one. As AAPL goes so goes the markets and the negative divergence shown in the prior AAPL and QQQ charts show what is to come.  For the sixteenth time, Keystone mentions once again at how important the Retail Sales data is tomorrow morning at 8:30 AM EST. The retail data can make or break the markets.  In May 2006, markets were moving up and had the feel of loftiness; it was the retail sales data that created the catalyst that smacked the broad markets down back then. Can history repeat itself, or perhaps rhyme, tomorrow?

The charts are bear-friendly with negative divergences.  The topping process for the broad markets over the last three weeks continues along and tomorrow we will see if the second spank down off the top begins, or not.  Today was the lightest volume of the year so there are fewer bag holders showing up to buy shares. The utilties sector bounced strongly.  This is a defensive play, traders are looking for perceived safety in utes, staples, telecom and healthcare. The interesting aspect for the utilties is that since they are showing buoyancy, a market down move, should it occur now as the stars seem to be aligning, will result in markets coming back up again to the current highs.  The broad markets typically do not make a major long term substantial move lower unless the utes are moving ahead or concidentally with the markets. So this will require further analysis moving forward and left for another day.

This week is weighted in the bulls favor if you reference seasonality only.  OpEx Monday (today) is typically up and one could argue that this helped maintain the market buoyancy today.  OpEx Tuesday typically provides a long buying opportunity that can be played into Wednesday since bullishness usually occurs between this period.  In addition, the March FOMC meeting is up about 80% of the time.  The March OpEx week in general is also typically an up week about 80% of the time.  As discussed here many times, the seasonality factors, and other esoteric indicators are simply used to gauge the background trading current of the markets, like knowing if the wind is in your face or at your back. The seasonality factors can prove true this week with surprising results since a large drop could occur tomorrow, then bounce into Wednesday, then large down late Wednesday thru Thursday, where markets may recover back to the flat line for the week, all of which would fit the seasonality mold, so simply keep these factors in mind for the remainder of the week.

The major Bradley turn day is Friday so markets especially are susceptible to a trend change now thru next Wednesday, 3/21/12, so stay buckled in the whole time.  Continue to watch these levels for the following sectors; SOX 413.60 (now at 418.57), XLF 14.50 (now at 14.85), JJC 48.75 (now at 49.30) and CRB 313 (now at 316).  If any of these levels fail, the bears will throw confetti.  Of course watch volatilty as well, as described in detail over the last day.

For the SPX, starting at 1371, the market bulls only need two measley points higher, to overtake 1373, to accelerate an upside move tomorrow. The bears need the AAPL negative divergence to kick in, and the SPX to drop under 1367, if so, the downside will accelerate lower. A move thru 1368-1372 is sideways action but considering the sideways day today, tomorrow will likely result in one side or the other winning, so if bullish, you want to see SPX 1373 print tomorrow, if bearish, you want to see SPX drop under 1367. Retail Sales data at 8:30 AM EST will tell the story tomorrow. The FOMC meeting will obviously be important as well, especially for the afternoon trade, but the Retail Sales data will chart the path forward for markets.

Note Added 3/13/12 at 7:00 AM EST: The Retail Sales data is released in 1 1/2 hours. Traders have very high hopes for this number. Is the consumer shopping but buying less due to high gasoline prices? Is the per-ticket purchase increasing or decreasing? Is the overall amount of receipts increasing or decreasing?  The bulls are feeling good about the numbers as e-mini S&P's are up now at highs of plus 8 points at the important 1373-1375 area for the overnight session thus far.  The story will be told at 8:30 AM.