Keystone's Morning Wake-Up 6/12/12

The Spain bailout move was short-lived, playing out mainly in the futures markets Sunday overnight into the opening minutes of trading yesterday.  The bulls happily showed up for trading yesterday, looking forward to a large up day and new leg higher for equity markets, instead, they had their head handed to them. The SPX topped intraday at 1336 then fell to a LOD at 1308, a 28-point intraday move. The 1307-1308 level is very strong support so watch to see if that holds today, or not.  An important development is the 20-day MA at 1312.32 failing. This moving average carries clout so watch after the open to see if the SPX can move back above, or not. The bears got game if the SPX stays under the 20-day MA.

Keystone's proprietary algorithm, Keybot the Quant, identifies the key market sectors at any point in time that most greatly impact the broad indexes.  Right now, the retail sector, RTH, is the most important. Adding more drama, Retail Sales data is released tomorrow, the most important economic number this week (Consumer Sentiment on Friday morning is important as well). Despite the large market drop yesterday, and the RTH dropping, it did not fall far enough to trigger more extensive downside, at least not yet.  For today, watch RTH 41.08, now at 41.17.  If 41.08 fails, markets will take another bear leg lower, the SPX will likely test 1300 and place its sights on the critical 1292 bull-bear line in the sand again. If the RTH does not drop under 41.08, the market bulls will stage a comeback.  Check the RTH before the open for the early indication of the fate of today's markets.

Utilities, UTIL, popped higher at yesterday's open but tumbled lower as the day moved along. Watch the utes closely since if they break down and start trending lower, this is an ominoous sign for the broad indexes. Today is a major Bradley turn date. The Bradley turns do not predict direction, only that these current days are a highly volatile point in markets where a major market trend change may occur. The markets were trending upwards into the top after yesterday's open. For the SPX today starting at 1309, the bears only need to push under 1308 and a downside acceleration will occur.  The bulls will try to stop the downside momo by preventing the SPX from falling under 1308 and keeping the RTH above 41.08. A move thru SPX 1309-1333 is sideways action today. S&P futures are up about seven points currently. In a nutshell, watch RTH 41.08, the SPX 20-day MA at 1312-ish and SPX 1308 to determine broad market direction today. Also, if the RTH drops under 41.08 and SPX falls under 1308, Keybot the Quant will likely flip to the short side. Otherwise, bulls will keep their heads above water.