Keystone's Morning Wake-up 4/23/12

The HSBC Flash China PMI placed markets in a bad mood overnight with Europe news adding fuel to the negative fire.  The WMT bribery scandal, along with weaker than expected HAS earnings, should slap RTH (retail sector) down nicely after the open. U.S. futures point to a weak opening on tap but the volatilty, financials and retail sectors will determine the juice, or lack thereof, behind the move lower.  Interestingly, today is a Bradley turn date which forecasts a market trend change to occur for markets anytime early to mid-week.

Commodities, copper, oil, gold, and of course equities, and the euro are all weaker, with the dollar stronger; the asset relationship continually highlighted on this site (which works in reverse as well). Watch VIX 18.90. If volatilty spikes above 18.90 the bears got game.  Watch XLF 15.10, starting the day only nine pennies above. If the financials lose 15.10 the bears got game.  Watch RTH 41.00.  If the retail sector drops under 41 the bears got game, this is why the WMT news is so critical to the equation today. If two of these three occur and stay that way, Keybot the Quant, Keystone's algorithm, (shown at the left margin) will likely flip to the short side.

For the SPX, the bears only needed a couple red S&P futures points, and that is in place, to accelerate the downside.  Thus, the rupture of 1377 leads to a test of 1370 support.  Use the three sectors above as a gauge of the strength of the down move since without the above levels failing the markets could easily recover mid to late morning.  The commodities, rather than tech, are leading the markets lower. It will be important for bears to see the Nasdaq gain steam to the downside after the open, if this does not manifest, then that would hint at markets recovering from an early selloff. Watch Keystone's SPX:VIX Ratio Indicator, the 68 level, now at 79. The market bears need to see the ratio drop under 68 to show that the downside has legs, otherwise, markets should recover.  Early trading will be hectic. It will be interesting to see if Keybot flips short this morning, or not.