Keystone's Morning Wake-up 4/13/12

Friday the 13th is here, watch out for any black cat's crossing your path.  Speaking of CAT, a proxy for China, the China growth number comes in at 8.1% overnight, falling short of the 8.4% consensus expectation, and far short of the 9-handle that many media jack*sses were touting. Many traders referenced the rumor of a nine percent plus number as the cause for yesterday's rally since that would ignite the need for more copper, commodities, iron ore, etc..., which in turn would boost equities markets. But, as Keystone mentioned yesterday, it's all rubbish talk. Expect a lot more of this moving forward.  What we did know yesterday, was the Yellen, Chairman Bernnake's right-hand man, er woman, was touting accomodation and stimulus as far as the eye can see, thus the addict (markets) rallied on the news of fresh supplies of crack cocaine (quantitative easing).

The Shanghai and Hang Seng indexes did finish higher, bolstered by the lower GDP since China is already addicted to the same QE crack, and traders are salivating over potential lowering of the triple R's (QE).  The China GDP was the weakest in three years, the fifth straight decline. Couple this with all the empty cities and even the fifth graders, that Jeff Foxworthy the comedian often cites, know that this story ends badly.  The commodities markets know as well, with the dollar higher and copper receiving a beating this morning. Dr. Copper is now on life support.

GOOG earnings last evening encouraged the bulls although a 2 for 1 stock split with the decision-making remaining in the hands of a chosen few adding to today's confusion.  India's Infosys guides lower which casts a pall over technology in general, and the European markets are hit with a double whammy of tech weakness and the lower China GDP, since Europe is China's number one customer. Credit Suisse cuts price targets on the miners adding to the weakness in the metals markets. Oil is selling off as well.

JPM and WFC earnings hit a short while ago, with both stocks bouncing on the news only to fall on their swords as further details were exposed.  The conference calls sounded more like the sales pitch at a used car parking lot, not to denegrate noble car salesman as compared to bankers.  The notable market laggard yesterday was AAPL and has Keystone has pointed out recently in the charts, the negative divergence spank downs continue for this high flyer. Apple is the markets so as the roll over continues the market downside will be painful for traders that rightfully enjoyed the bull party once AAPL released blow-out earnings in mid-January.

The two days of market buoyancy began exactly on the Bradley turn date on Wednesday. This is why as a trader you must always keep an open mind to all information no matter how esoteric or eccentric it may seem.  It does not matter why a certain indicator or technique works, all that matters is the repeatability of the specific tool. In other words, if someting works as a forecasting technique, do not get caught up in how that tool works, simply follow it and use it in your tool box.  Moving forward, the next Bradley turn is Monday, 4/23/12, which opens a market turn window from 4/16/12 thru 4/30/12.  Next week is OpEx week where typically Monday is bullish, and also the period from Tuesday into Wednesday. The new moon is Saturday so market weakness would be anticipated in the back half of next week so correlating these factors would project some market buoyancy into mid-week next week and then perhaps the next Bradely turn would create the next pull back.

Drilling down into the technicals for today, watch VIX 19.30 (now bullish at 17.20) SOX 423.50 (now bullish at 424.16). The S&P futures project an opening of about down five handles so the VIX and SOX will tell you if the downside has legs or if the markets simply recover from an initial down move and perhaps stay buoyant into the middle of next week as highlighted above.  For the SPX today, starting at 1387.57, the bulls only need one measley point to accelerate the broad markets higher. If price moves above 1388, the market upside will accelerate and the bulls will look forward to a happy weekend.  The bears are simply trying to stop the upward momo and will accomplish this by driving volatility higher and the semiconductor sector lower.  A move thru SPX 1370-1387 is sideways action. If the bears gain traction today and the SPX drops under 1369, the selling will dramatically increase.

Keybot the Quant, Keystone's proprietary algorithm that took a decade to develop, flipped to the long side yesterday at SPX 1384. Watch for a potential whipsaw today or Monday. The markets should be quite a ride the remainder of April. The economic data this morning did not impact futures to any great extent, the markets basically traveling flat after the spank down from the weaker China GDP. Consumer Sentiment hits at 9:55 AM so expect a market pivot point to occur.  Chairman Bernanke speaks this evening but traders will not be able to react until Monday.  Watch the utilities sector closely today, especially in the last hour of trading. If UTIL remains above 451.20 for the closing print today, now at 453.39, this will set up next week in favor of the bulls. The S&P futures are down -0.48% while the Nasdaq is down -.43% so this hints that the downside action will be muted after the open.  Watch to see if AAPL weakens which will weaken tech in general and then provide fuel for a lower market move.