Keystone's Morning Wakeup 3/22/12

The China, Eurozone, France, U.K. and German manufacturing data all disappointed overnight. Futures were hit hard as the euro fell off a cliff about four hours ago on the news and remain near the lows.  The broad markets have languished sideways with a down bias for the last couple days. The trading is on very light volume. Yesterday Baker-Hughes warned that the continued dissing of oil rigs and drilling will result in a weaker economy.  Chairman Bernnake says the European crisis is not over and warns against complacency. The rise in European yields clearly illustrate the escalating concern this week.

On Tuesday, Keystone's SPXA150R Indiator dropped under 90 indicating market selling ahead.  Likewise, for the SPX 30-minute chart, the 8 MA fell under the 34 MA which is bearish.  Keystone has highlighted the uber bullish sentiment for over a month now clearly evident in the VIX, CPC put/call, Skew and even publications such as Investor's Business Daily that has reported uber bullishness by traders for the last few weeks.

Jobless Claims minutes ago are slightly better than expected but the futures are not impressed remaining at the low levels after the dire manufacturing data.  We watched the drama yesterday when copper, using JJC as the proxy, was on the verge of dropping into bear territory. Watch JJC 48.90 today since the broad markets are in big trouble should this level fail. Likewise the CRB 312.50 level.  At this writing, with the euro red, the dollar is up, and this will place downward pressure on JJC and CRB.  Watch UTIL 447 which also throws another bear log on the fire should it fail.

For the SPX today, starting at 1403, the market bulls need to push up above 1407.75 to accelerate upside market fun, however, considering the weak start on tap today, the bulls are not smiling.  The market bears need to drop the SPX under 1400.75, if so, the bears will growl strongly and accelerate the broad market downside.  A move thru 1402-1406 is sideways action. Using the eight negative spoo's in the futures, the 1400.75 should easily crumble at the open.  SPX S/R below is 1399, 1396, 1394, 1392.30 (10-day MA), 1391, 1389 and 1386. Price violating the 10-day MA will signal further downside ahead.  But, before the bears puff their furry chests out in a braggadocio maneuver, the S&P futures are down 0.54% while the Nasdaq futures are off 0.43%, thus, tech is not leading this downside move, so the market move lower should be muted. Watch the SPX and COMPQ percentages after the open since if COMPQ leads lower the markets will move strongly lower whereas if the COMPQ lags the SPX to the downside, the downside will not have much oomph.

A market pivot point will occur at 10 AM when the FHFA Housing Price Index and the Leading Indicators data is released.  The focus on the housing sector continues this week with results thus far in line with what is expected, perhaps a slight bias toward the bear side, so after the open we see if the FHFA brings balloons or a skunk to the bull party.  Natty Inventories at 10:30 AM are important as well as NKE earnings (4:15 PM EST) which will impact the retail sector.  Keystone continues to short retail, which is on the wrong side of the trade so far.  How bad can things be in retail land if unemployed and underemployed folks continue to buy overpriced tennis shoes? We will find out today. On the esoteric side, the new moon occurred overnight and is usually accompanied by market weakness, which has occurred the last couple days.

In a nutshell, since today may develop into a hectic day, focus on JJC 48.90, CRB 312.50, UTIL 447 and SPX 1400.75.  If any of these levels fail, the broad indexes will weaken considerably, multiple failures will usher in more sustainable downside.  Keybot the Quant, Keystone's proprietary algorithm that displays the ongoing market call in the left margin, will likely flip to the short side today if JJC loses 48.90 and SPX loses 1400.75. This morning we see what the bears got.