Keystone's Morning Wake-Up 6/7/12

Chairman Bernanke's number two, Yellen, beat the stimulus drum last evening. Australia GDP and employment data is encouraging over the last day. News is circulating that Spain will receive a bailout with minimal conditions. Futures enjoyed all this happy talk, remaining green in the overnight session. Then China released news that they do not plan to buy European sovereign debt, they will, however, buy hard physical assets. This deflated markets and the futures fell to the flat line and started to leak negative. China then announces a quarter point rate cut that catapults markets higher.  China is a shrewd negotiator and strategist; it will slap you down in one hand but then lift up with the other.

Many questions arise out of the move. Keystone thought Japan would move first, then the Fed, ECB and China would join in with stimulus as an overall coordinated move.  Today, however, China is the first out of the gate. Perhaps China wanted to move a couple weeks ago but held back providing the other nations time to work on the quantitative easing plan behind the scenes. We will see in the days ahead if China kicks off the global intervention, or, if China's rate cut was more of a one-off independent move. Perhaps the goal of China's move today is to help limp global markets forward to at least get thru the Greece elections ten days away.  The move by China should also put to rest the optimists saying that a soft landing is in place. Obviously, China is far more worried about a hard landing now that rates are cut for the first time in four years.

Typically, a 25 to 30 handle bump in the S&P's would be expected on the China cut. Futures bounced strongly on the news but appears stuck at a ten point gain. Perhaps this is not too much of a surprise considering the strong market move yesterday. The Jobless Claims data minutes ago does not move the futures either way with markets set for a higher open.  The SPX closed at the highs yesterday at 1315 so any smidge of green futures will launch another bounce and that appears on tap.  For the bulls to make any significant move higher, the NYA must move above 7644, now 130 points below at 7517. The bears are trying to stifle the upside momo and will accomplish that by preventing NYA 7644 while at the same time pushing the retail sector, RTH, under 41. If RTH stays above 41, and NYA stays below 7644, the markets will move sideways.

The uber high +2350 NYAD and low TRIN want to see a snap back sell move in the markets to relieve the positivity, but the China interest rate cut will now keep the party going at the opening bell, at least into Chairman Bernanke's appearance. Chairman Bernanke, thru his underlings or his own words, has promised a stimulus pony. He had better deliver that pony this morning at 10 AM EST and at least make mention that QE3 is on the way. The markets are already pricing it in and if Bernanke avoids mentioning QE this morning, and provides a donkey instead of a pony, the market mood will quickly sour. Thus, look for a market pivot point during the 10 AM hour. The China stimulus should pop commodities strongly. Easy money pumps the following asset relationship; dollar down, euro up, commodities up, oil up, copper up, gold up, equities up, so watch these areas for clues on market behavior.