Keystone's Morning Wake-Up 5/1/12

May is here, perhaps a time to sell and go away.  The RBA cut rates by 50 basis points instead of the consensus estimate of 25 basis points. China manufacturing data was in line with estimates.  Interesting to see commodities and copper lower.  The dollar is weaker so you would expect the opposite.  The day is young and the dollar is only red by a smidge so it may be green by the time this message is typed.  The strength in copper yesterday prevented the market bears from making any headway to the downside.  This strength may have been in part due to traders front-running the Aussie and China news looking for a bump in stimulus with the lower rates while at the same time looking for higher growth from China. The weakness in copper is interesting since the news overnight should actually be friendly for the bulls. Instead, futures are on the flat to down side with tech weakness slightly leading providing the bears some early street cred.

The ISM number is released at 10 AM which will be a market pivot point. The energy markets will react so watch XLE as well as individual oil and gas companies. The three key sectors and levels to watch today are SOX 418.25, JJC 48.40 and XLF 15.20. The bulls need higher semi's to take the broad indexes another leg upwards.  The bears need to see copper or financials or both lower to usher in market weakness.  If SOX does not move above 418.25 to help the bulls, and JJC and XLF does not move low enough to help the market bears, the broad indexes will continue to stumble sideways.

Watch which side the VIX price exits out of a bracket formed on the top side by the 20-day MA at 17.82 and the bottom side by the 50-day MA at 17.10.  The VIX begins the day five pennies above the 50-day MA on the verge of making the bulls happy.  If the VIX moves up thru the 17.82 signaling a market bear victory, watch 18.10. If this level is pierced to the upside the broad indexes will already be selling off strongly.  If the bulls keep the VIX in the low 17's or lower, the markets continue merrily along sideways with a sideways up bias.

For the SPX today starting at 1398, watch 1403, five points higher. The bulls need this print to launch an accelerated upside move.  The bears need to push lower under the critical 1394 support level (remember yesterday's action when price tested the 1394 S and bounced) to accelerate the market downside.  A move thru 1395-1402 is sideways action. The Fed heads are out in force all day long today blabbing so traders will play the game of listening for any mentions of QE3. The 10 AM pivot area will be an important time for today's trading.