Keystone's Morning Wake Up 3/30/12

Today ends the week, the month, the quarter, EOM, EOQ1. Today also supplies the final prints for the monthly charts. A major market mover, commodities, measured by the CRB, fell 2% yesterday to close down 3% on the week thus far.  CRB 312 is a very important level, which helps create broad market buoyancy if it is above, but creates market negativity below.  Yesterday the CRB closed with a 305 handle. This move lower for CRB represents the first key piece of evidence that the markets are rolling over.  The market negativity this week was initiated by copper falling.  JJC fell below 48.83 to usher in the market selling.  In the final half-hour of trading yesterday, JJC popped above 48.83 and closed at 48.87, four pennies on the bull side. The recovery in the markets late day reflect this late day copper buoyancy. As long as the CRB remains under 312, the broad indexes will move sideways to sideways lower.

China PMI tonight will greatly affect copper, commodities and equities prices.  If the numbers disappoint, then copper will get hit and the broad indexes will drop come Monday.  If the numbers are better than expected, equities markets will favor the bulls next week.  Speaking of Monday trading, the utilities, UTIL, must close above 463 today, otherwise, the broad indexes will sell off further next week.  UTIL begins today at 456 seven points lower.  Watch this closely today. The market bears will have an all clear signal if UTIL does not print higher than 463 at 4 PM EST today, if the print is higher, the bulls will be celebrating all weekend.

Natty gas got whipped again yesterday closing at a 10-year low.  The charts remain favorable, however, so the drubbing should be coming to an end now, although the last month is like waiting for Godot.   NATGAS, UNG and BOIL charts are all positively diverged across both the weekly and daily charts so these current levels should serve as a base. Keystone is beat up in this one, taking a calculated risk ahead of yesterday's inventory data, which were larger builds (supply) resulting in price dropping.  The capitulation volume on UNG and BOIL charts is stunning. With the constant barage by media in recent days at how natty will plummet to a dollar or lower at anytime has caused traders to capitulate.  Once the inventory numbers hit yesterday and the build was seen, holders of UNG and BOIL were screaming, "Get me the H*ll out! I do not care what price! Get me the H*ll out!" This emotion reinforces the thought that a basing is now at hand for natty. Check out the uber strong capitulation volume on the UNG and BOIL charts for yesterday; the natty bulls threw in the towel and gave up.  This behavior creates bottoms. Also, air conditioning season is getting underway, growing season as well, and natty is a major ingredient in fetilizer production, also aluminum production consumes huge amounts of natty due to power consumption, and AA news may be on tap today. Hurricane season is at the doorstep which creates high drama for the oil and gas industries as the Gulf is targeted all summer long.

The real negative for natty yesterday, however, which went unnoticed by many, just as the CRB collapse this week is unnoticed by folks, is when President Obama speaks directly after the natty inventory data and does not mention natty. That is akin to kicking over someone in a wheel chair. All hope by natty bulls was lost, their shoulders slumped and heads hung low. How such a smart man as the President could be so naive about economics and what could save the country (natty) is astonishing. Instead of pushing electric golf carts, er, cars, solar, algae, and tilting at windmills, the President needs to focus on creating a friendly back drop to encourage natty vehicles, that do not require any new technology, natty vehicles are used for decades around the globe, and a buildout of natty infrastructure. Perhaps the private industries themselves can overcome the burden of clueless government and provide a path forward.

The labor assessment of Foxconn, AAPL's worker bees, was released yesterday and highlights violations and especially the long work hours where workers were forced to work over 60 hour work weeks as well as seven days per week.  No wonder many of the workers snapped and committed suicide, all over a material object, how sad is that? At least there appears that no child labor laws were violated although the information is still becoming available.  The child labor is what prompts people to action.  But, since everyone loves their smart phones, human's appear content in not caring about the Foxconn or other manufactuing facitlities practices. Interestingly, China has committed to improving the situation by summer of 2013, do you think that timing perhaps coincides with when the manufacturing needs due to sales projections will have already settled down?

Back to the technicals, for the SPX today, starting at 1403.28, the bulls only need to move up and over 1405 to accelerate the upside and this appears on tap according to the futures as this missive is written, perhaps some late week window dressing to close out the quarter. Overhead resistance is 1406, 1410, 1413, 1414 and 1419. The market bears need to push the SPX under 1392 today to reignite the market negativity.  A move thru 1393-1404 is sideways action. The dollar is weaker so this should help create buoyancy in copper, commodites and equities.  Tech and the broad markets are up about equal amounts in the futures markets so without tech leadership to the upside (RIMM and Foxconn may dampen tech spirits today), the move up due to the buoyant futures should be limited.  To keep it all simple and succinct, watch JJC 48.83, CRB 312, UTIL 463, SPX 1405 and 1392 to determine market direction today, and into next week. Univeristy of Michigan Consumer Sentiment is released at 10 AM which will create a market pivot point.