Keystone's Morning Wake-Up 6/28/12

How lucky we all are! As children, everyone wanted to go to the circus each day, and now, as trader's, we get to do just that. The main events today, under the Big Top, are the Euro Summit, where Merkel has Holande in a head lock in the back room of the hotel as this missive is written, and the Affordable Healthcare Act decision by the U.S. High Court. In addition, Congress will vote on a contempt charge for Attorney General Holder. The Middle East is a mess with Syria, Egypt and Iran, and on and on. If you are a person who likes to worry, you are in heaven.

Let's stick to the technicals since the responses to those events will display in the numbers in real-time moving forward. Keystone's algorithm identifies the key areas of interest that most impact the broad markets. Currently, four areas require attention; retail, financials, volatilty and the NYA Index. All four are bearish, retail and financials only marginally, so if any one or more flip bullish it will add buoyancy to the broad markets. If all stay bearish, the markets head lower. The four parameters are RTH 41.29, XLF 14.35, VIX 18.90 and NYA7688. Interestingly, the New York Times reports that JPM's trading loss may be larger than originally anticipated due to their trading debacle, and the stock is getting hit hard pre-market, down over 3%, was down over 5%; this behavior will taint the financials today, the XLF may want to now stay in the bear camp all day long.

In addition, the drama with Keystone's SPX:VIX Ratio Indicator is important. If the ratio drops under 68, now at 68.48, and stays under 68, the markets will drop large today, the Dow Industrials likely down triple digits. Watch the 8 MA and 34 MA cross on the SPX 30-minute chart, now bullish. Watch the SPX 60-minute chart to see if price drops under the 200 EMA; currently price is above this number (1330.27) and bulllish.

For the SPX, starting at 1332, the bulls only need three points, to touch the 1335 handle and a big upside party will result.  But the futures have something different in store to start the session. The bears need to push the SPX under 1321, if so, the downside will accelerate. A move thru 1322-1333 is sideways action. GDP is coming across the wires now........1.9%. No big surprise. Futures travel sideways with S&P's down 7 or 8.