Keystone's Morning Wake-Up 5/9/12

Spain 10-year yield popped over 6% sending global markets into a tizzy this morning. Another country needs a bailout. The Spain market is down 3.3% today. U.S. futures are down about 12 S&P's. The market bears, however, need to push about sixteen points lower to accelerate the market downside, therefore remaining four points shy as this missive is typed. If the SPX falls under 1348 today, the markets will deteriorate quickly. The bulls want to push the SPX higher to touch 1369 which would accelerate the markets upward. A move thru 1350-1368 is sideways action today.

Watch four key metrics today; XLF 15.18; VIX 18.14; RTH 41.35; SPX:VIX ratio 68.  XLF and VIX are bearish, affecting the markets negatively, while RTH and SPX:VIX are bullish, affecting the markets positively. If no change occurs, the markets stumble sideways all day long.  If the bears push the RTH under 41.35 and/or the SPX:VIX ratio under 68, the markets will move strongly lower. If both fail, the SPX should slice down thru 1348 and begin a new leg lower.  If the bulls push the XLF above 15.18 and/or VIX under 18.14, the bulls will receive a market recovery bounce.

This evening, take a look at the CPC put/call chart. Broad market selling will continue moving forward, independent of any short term bounces, until the CPC prints 1.2 or higher. BPSPX is at 64.60 now well under 70 with a market sell signal firmly in place.  That said, the BPSPX chart is positively diverged wanting to see a recovery bounce. Watch the NYA closely. One of Keystone's secular indicators is the 40-week MA cross. NYA is now at 7887. If about 200 points are lost, where price violates 7621, the broad markets enter a whole new phase of selling and bearishness, triggering a secular bear market moving forward.

The market selling at the open, should the futures remain weak, are potentially setting up for a buy in anticipation of a relief bounce.  The NYAD printed a low yesterday at -1857 which is not low enough, in the -2100 area, to signal a bounce needed.  Pehaps with a strong downward push at the open the -2100 will be touched.  The TRIN spiked over 3 yesterday closing at 1.75, definitely favoring the sellers, so this reading would be agreeable to seeing some broad market upside today to relieve the market negativity.

On the esoteric side, the sun is shooting solar flares Earth's way that will hit starting now thru the next 20 hours. Interestingly, a solar flare hit in early August last year to kick off the waterfall crash in the markets. The S&P futures are down -0.71% now with the Nasdaq down -0.73% thus tech is not leading the broad market lower to any great extent. This hints that the downside move at the open may be muted and result in a bounce. XLF 15.18, VIX 18.14, RTH 41.35, SPX:VIX ratio 68, SPX 1369 and 1348 will dictate broad market direction today. Wholesale Trade is at 10 AM but this is typically not a market mover. Oil Inventories are at 10:30 AM.  The 10-Year Note Auction is 1 PM which may result in a market pivot point.  CSCO earnings are important today since Chambers (CEO) always provides valuable insight into the status of tech and the general economy.