Keystone's Morning Wake-Up 6/14/12

Happy Flag Day. Thank you to all the veterans out there. The Spain 10-year yield hits 7% placing global markets in a tizzy. The Moody's and Egan-Jones downgrades of Spain yesterday having an affect.  The 7% level is where the other countries received a bailout of their sovereign debt. Europe's hand is being forced by the markets. Two days of trading remain before the Greek tragedy plays out on the weekend. The daily pattern of the broad indexes starting last Thursday is down Thursday, up Friday, down Monday, up Tuesday, down Wednesday. Thus, up today or will this overall sideways trend into the Greece elections break today?  The SPX continues to move thru the sideways 1307-1326 channel that Keystone identified a couple days ago. The SPX is also bracketed between the 50-day MA at 1351.26 above, and the 200-day MA at 1290.58 below, using the 20-day MA at 1310.82 as support. Watch the price action in relation to these important moving averages closely.

When markets sell off significantly on a Wednesday, a nine point drop in the SPX yesterday qualifies, the weakness typically continues into Thursday.  The S&P futures have been flat this morning now trading up a couple points. Thus, perhaps if an opening pop does occur it should be faded, then when a lower low than yesterday's close is placed, perhaps around 1313-1314, the markets may resume the existing week long trend and move up today. This analysis is the equivalent of throwing a dart at a dart board so the action will simply need assessed as it occurs in real-time. The CPC chart hints that markets are near a bottom and ready for a bounce, either right away, or directly after any market move lower occurs.

The retail sector, RTH, dropping under 41.10 yesteday is very significant. This will create strong negativity for markets. Thus, at the opening bell, watch RTH 41.10 closely. If the RTH stays below, the bears got game. If the RTH moves back above 41.10, the bulls got game. For the SPX starting at 1315, the bears need to push under 1310.50, if so, a market acceleration to the downside will occur. More importantly, if the RTH is under 41.10, and the SPX is under 1310.50, it is very likely that Keybot the Quant, Keystone's proprietary algo that trades two-thirds of the overall portfolio, will flip to the short side. The market bulls need to push the SPX back up to touch 1327 to accelerate the upside.  A move thru 1312-1326 is sideways action today.  The CPI (Consumer Price Index), a gauge on inflation, and also Jobless Claims hit at 8:30 AM and will impact the futures. A 30-Year Bond Auction occurs at 1 PM. In a nutshell, the bears are on the verge of providing a large push lower if they can keep the RTH under 41.10 and force the SPX under 1310.50. Otherwise, if the bulls prevent this failure, the markets should bounce to satisfy the CPC's higher numbers.

Note Added 6/14/12 at 8:50 AM:  CPI shows modest inflation pressures if that and in fact data more in keeping with Keystone's deflationary theme.  Jobless claims rise as well. How are companies expected to hire when they have no business and they are actually laying people off? As any older person will tell any younger person, "save your money." Futures are back to the flat line. It's all about RTH 41.10 and SPX 1310.50 at the opening bell.