Keystone's Morning Wake-Up 5/7/12

Futures continue to stage a comeback but a weak open is on tap nonetheless. Hollande beat Sarkozy by a narrow margin so the affect on the markets is less drastic; the narrow margin helps water down the socialistic tone, but this does not help Sarkozy now sitting in his bath robe, eating Oreo cookies, in front of the television set, wondering when the unemployment office opens.

Sticking to the technicals,  watch XLF 15.14, VIX 18.14 and RTH 41.35. On Friday, the collapse in financials caused the next leg down in markets, then the VIX moving above 18.14 helped provide further downside thrust.  Thus, for bulls to recover, they need to reverse the move in XLF and VIX. That may be a difficult task, however, at least at the open, since the XLF is set to open under 15 and the European banks are weak. So the bulls have their marching orders; push XLF back above 15.14 and VIX back below 18.14, othewise prepare for more punishment.

The bears are set to move markets lower, tests of SPX 1364 and/or 1361 would be in order. A new leg down in the broad indexes will occur if RTH loses the 41.35 level so watch this closely at the open as well. This is important for bulls as well since if the RTH level does not fail, that signals that the bulls are stopping the bleeding and staging a recovery bounce. The Nasdaq futures are down -0.33% while the S&P's are down -0.29% so tech is leading the downside by a hair, which is bear friendly. The economic data is not relevant until later in the week. SPX S/R (reference a few messages back), is 1370.58, 1370, 1369.10 (today only), 1368 (today only), 1366, 1364, 1363.61, 1363, 1361, 1359, 1358, 1356, 1351, 1350.28 (20-week MA) and 1347.

Interesting to see oil pull back. Seasonality-wise, that was expected. Type 'May Seasonality' into the search box above to review what is expected for this month; "Oil tends to stall in May and considering the back drop currently, perhaps WTIC (West Texas) and Brent Oil may start to trend lower. Last year oil headed lower in this time period right on cue."