Keystone's Morning Wake-Up 6/26/12

The uber low -2048 for NYAD and high 2.42 for TRIN both desire a snap back rally move to relieve the strong bearish negativity. As seen by the CPC put/call ratio chart, however, more market selling is needed to set up a more attractive VST bottom for markets. The retail sector, financials and higher volatility all slapped markets yesterday. Note that WMT was green in the sea of red yesterday. The WMT daily and weekly charts are negatively diverged, however, making it a very attractive short play moving forward.

Watch RTH 41.27, now at 40.99, firmly bearish and creating market negativity. Watch VIX 18.90, now at 20.38. If volatility moves below 18.90, the bulls are back in business. If VIX stays above 18.90, the bull beatings will continue. For the SPX today, starting at 1314, the bulls would have to retrace yesterday's selloff to reignite any positivity, a formidable task. Thus, bulls will try to stop the selling by moving the RTH above 41.27 and/or VIX below 18.90. If one of these two characters turn bullish, the markets will at least be able to stabilize sideways today and develop an upwards buoyancy. If both turn bullish, the markets will decisively run higher. If both stay bearish, the markets will continue lower.

The bears need to drop under SPX 1309, if so, this will accelerate the market downside. The sturdy and strong 1307-1308 support level will fold like a cheap suit with the SPX only temporarily stopped by 1305 support before moving towards the psychological 1300 level.  Keystone's SPX Monthly with 12 MA Cross Indicator (reference the Cyclical Turn page on this site) identifies the 1292-ish level as the line in the sand where the market bulls truly fall down the rabbit hole, and this level is only 12 points away. One of Keystone's key economic numbers is Consumer Confidence at 10 AM so expect a market pivot point. The S&P Case-Shiller housing number is only a few minutes away; the data likely remains weak and gloomy for the housing sector. Preferably, some good news is desired since that may provide a nice entry for SRS, an inverse real estate ETF. The housing sector will probably not bottom for another year or two.

The SPX 20-day MA at 1320 failed yesterday which is a big deal. Use the 20-day MA as an important gauge for all your trades in any ticker, index or ETF. Thus, a back kiss of 1320 would be desireable to verify that down is the market direction. Note the healthy move in SVU, one of Keystone's long term picks, on the Positions and Picks page.  In a nutshell for today, watch RTH 41.27, VIX 18.90 and SPX 1309 to determine market direction. It is that simple. Pay atention into and thru the 10 AM pivot.