Keystone's Morning Wake-up 4/16/12

U.S. futures continue to inch higher this morning.  Empire Manufacturing Index, and especially the Retail Sales numbers, at 8:30 AM EST will affect the futures as well as earnings releases which now continue in full force moving forward.  C and MAT are companies releasing earnings today; C will be influential for the banking sector, XLF, and MAT will confirm, or not, the retail sales data. C is also important considering that GS continues to sell shares in ICBC Bank (China) and the French banks are selling off today. The euro dipped under 1.30 this morning responding to the European bonds blowing out discussed in the previous message. 

Sticking to the technicals to figure out this ongong wild market roller coaster ride, UTIL, XLF, VIX will dictate the broad market direction today. These sectors are identified by Keystone's algorithm that scans the market continuously identifying the current factors that move the markets. UTIL and XLF are in the bull camp to start the day, VIX is in the bear camp. Watch UTIL 451.20 all week long. If UTIL stays above, this creates broad market buoyancy, if below, it creates market negativity.  Watch XLF 15.09 today. If XLF stays above, this creates market buoyancy, if below, it creates market negativity. Watch VIX 19.45 today. If VIX stays above, this creates market negativity, if below, it creates market buoyancy.

In addition, watch Keystone's SPX:VIX Ratio Indicator, the 68 level. The ratio is at 70.09 to start the day which favors bullish market action. If the ratio drops under 68, the markets will sell off strongly. If the ratio stays above 68, market bulls are fine. The SPX 30-minute chart shows the 8 MA under the 34 MA which is bearish for markets so you can understand the bull-bear tug-o-war occurring now. The commodities and copper weakness is very negative for the markets into the intermediate term. If Dr. Copper is sick, the markets are sick.

For the SPX today starting at 1370, the bears only need to see red futures, even a tinge red, since if the SPX drops under 1370 a move down to 1363-1366 support will quickly occur.  The bulls need to keep the futures on the green side, keep UTIL and XLF elevated (positive C earnings will help) and move volatility lower.  A move thru SPX 1371-1386 is sideways action.  The futures are up as this missive is written showing a three handle gain on tap for the SPX currently.  Thus, if the markets do head higher, see if the VIX drops, if so, the bulls got game, if not, they got nothing.  Conversely, if the futures turn red over the next couple hours and markets fall at the open, see if UTIL and/or XLF drops, if so, the bears got game, if not, they got nothing.

If markets sell off see if the SPX:VIX ratio drops under 68, if so, the makets will sell off strongly with the Dow Industrials dropping triple digits. If the ratio stays above 68, the bears got nothing.  Watch the SPX 30-minute chart monitorinig the 8 MA and 34 MA cross to tell you the direction of the broad makets and pay attention to any curl in the 8 MA line.  See, it is that simple, nothing to it. The futures currently show the S&Ps up 0.33% while the Nasdaq is up 0.29% thus, tech is not leading the broad market higher, therefore, the up move currently projected for markets will be muted and not have much oomph. The U.S. 10-year note yield is back under 2%. UTIL, XLF and VIX will tell the story when the bell rings.

NOTE: The market action will not be updated today until this afternoon but, with the information above, all of you will easily be able to gauge the broad market direction on your own in the morning session.

Note Added 4/16/12 at 7:27 AM EST:  MAT earnings disappointed with Barbie and Ken sitting on the store shelf instead of under the children's beds. The Retail Sales in one hour will need to be better than expected to keep the futures buoyant.  C earnings hit in less than one-half hour and this will obviously impact the futures and XLF today.