Keystone's Morning Wake Up 5/29/12

The charcoal smolters, the party hats are in the trash and the holiday weekend quickly comes and goes. Worries over Greece are now only overshadowed by Spanish banks that are under serious stress. The Spain 10-year yield is at 6.5% signaling trouble, the 6.5%-7.0% area is where the pain began last Autumn. The Asian and European equity markets, however, with the exception of Spain, are buoyant this week after China announced a cash for clunkers program and promised more stimulus. U.S. futures were over 10 handles higher in the overnight session.  But, China released a statement a couple hours ago stating that extensive stimulus measures are not planned. This dampened the mood pre-market although the S&P's are set to jump about six or seven points higher at the open.

Sticking to the technicals, with the SPX starting at 1318, the bulls need to move above 1324 to accelerate the upside for the broad markets. The futures place the bulls at the cusp of this goal. If 1324 gives way, the strong 1326 resistance will likely give way as well and price will target 1331 resistance. After that, a move to 1340 would be in order to perform the back kiss of the H&S neckline. The bears need to push under the strong support at 1314 today to accelerate the downside. A move thru 1315-1323 is sideways action.  Markets are at the mercy of Euro news.

The retail sector joined the bull camp on Friday and the RTH is a key market driver when the bell rings in an hour.  Watch RTH 41.15, if price stays above, the bulls will be in full control all day today and watch NYA 7637 to see if the bulls can regain the 40-week MA, if so, the relief rally will become a strong full-fledged upside bullish recovery rally.  If the RTH falls under 41.15 after the bell, this places the bears in the drivers seat despite what the broad indexes may be printing at the time.  If RTH fails, watch to see if SPX 1314 gives way, if so, a test of the SPX 1294 level, the critical 12-month MA, would be in order. If RTH stays above 41.15 and NYA stays under 7637, like it is now, markets will stumble sideways.

Typically when a month is down all month long, the last couple-few days finish with an up move.  The problem is that the markets bounced a week ago, prematurely, so the jury is out as the month of May finishes over the next three trading sessions.  The monthly charts receive a new data point this week at 4 PM Thursday.  Case-Shiller Home Price Index is important within the half-hour and the Consumer Confidence number, one of Keystone's key monthly numbers of interest, will create a market pivot point at 10 AM. Thus, the market move after the opening bell may reverse sharply at 10 AM.  Some window dressing may be in order but this is more important for the quarter which will be the last week of June. To keep things simple today, simply watch RTH 41.15, NYA 7637 and SPX 1324 and 1314; these four will dictate market direction today. Preliminary indications suggest the RTH will stay above 41.15 so watch NYA 7637. Otherwise, hang on, since any Euro news will immediately impact markets. Continue taking profits as they occur as markets become more choppy and erratic as volatility rises.