Keystone's Evening Nightcap 4/2/12

At the 10 AM pivot on the ISM data, the dollar weakened from that point on and copper, commodities, gold, silver and oil headed higher. Bullish traders love the weak dollar trade. Things are comical when markets now run higher without Chairman Bernanke saying 'accomodation'; the markets run higher simply because traders think that stimulus and quantitative easing will continue indefinitely. If not the Fed, surely a China triple R cut is perhaps coming at any time? The weak dollar, strong commodities, strong equities move is the standard quantitiative easing trade.

Tomorrow provides an interesting backdrop for this macro view since the FOMC Minutes will be released at 2 PM EST.  Traders expect the word 'accomodation' to show up many times in the minutes, over and over, perhaps an analyst will count them, The market reaction will be interesting if there is very little mention of  'accomodation' and in fact perhaps the Fed had discussed how concerned they are over markets continually reacting to stimulus news like a crack ho reacting to a lit pipe (broad indexes moving up purely on the easy money policies ongoing around the world instead of actual growth).  Perhaps the Fed contemplates the end to Operation Twist? Perhaps the Fed does not mention QE3 directly at all? Thus, 2 PM Tuesday is an obvious market pivot point.

Motor Vehicle Sales will hit during the morning, at various times, and markets will react to the numbers. Are folks out there buying new vehicles? Housing and vehicles are the two largest users of copper. Rubber will respond to vehicle numbers and is an important economic indicator.  Factory Orders are at 10 AM which will serve as a market pivot point.

CRB is above 312 and helps the market bulls while UTIL is below 463 helping market bears. The markets will sell off if CRB drops under 312 and the markets will rally if UTIL moves above 463. A strong dollar sends the CRB lower and a weak dollar sends the CRB higher. Also watch JJC 49 and SOX 426.50 as bull-bear lines in the sand. Interestingly, Keystone's SPXA150R Indicator remains under 90 at 89.58 despite the big market up day today.  Also the VIX was up with the market up strongly; the VIX should have dropped significantly for the rally.

For the SPX for Thursday, starting at 1419, the bulls need three points in the overnight futures to move back above the 1422 resistance it tested today, and an upside party will result.  The bears need to drive the SPX fourteen points lower to drop under 1405 to ignite strong selling, a difficult task but in the realm of possiblity.  A move thru 1406-1421 is sideways action. Bears want to see a strong dollar and CRB drop under 312, bulls want to see a weak dollar and UTIL move above 463. Interestingly, today, the SPX was within three points of filling the gap at 1425.

Keybot the Quant, Keystone's algorithm, remains short overnight into Tuesday.  If UTIL moves above 463, Keybot will likely flip back to the long side. CRB and UTIL will tell the tale tomorrow.