Keystone's Morning Wake-Up 7/5/12

The holiday fireworks may have ended last evening but the smoke continues to drift thru global trading floors. This morning has supplied much drama. The BOE announced further stimulus measures as expected. At the exact same time, China announed banking and triple R cuts. These actions launched the S&P futures but within minutes, China retracted the news. The futures tumbled lower. Then the ECB cut by a quarter as expected so futures were flat to down since the quarter cut was priced into markets. The ADP Employment data announces blow-out numbers, 176K versus 100K expected. This lanched futures again.  Then minutes ago, the Claims numbers were slightly better providing some additional buoyancy in markets. Then, trap door, futures fall out of bed. Maybe the markets are simply sick of the seesaw and needed to jump off in one direction or the other.  Draghi says that the "downside risk to growth has materialized," which is likely the tape bomb that has taken the futures lower. Draghi may be lumping Germany into the mix now creating trader angst. S&P futures are down six as htis news occurs.

Setting this macro and news-driven circus aside, and using the more-important technicals to gauge the path forward, four items require watching today; commodities, copper, semiconductors and the NYA 40-week MA. Watch CRB 297 (now bearish at 293). Watch JJC 44.35 (now bullish at 45.09). Watch SOX 384 (now bullish at 390). Watch NYA 7725 (now bullish at 7902).  Thus, the bullishness over the last couple days is due to the buoyancy in JJC, SOX and NYA. If any of these turn bearish the markets will sell off and the extent of the selling will depend on if one, two or all three of these characters turn bearish.

For the SPX starting at 1374, bulls only need one green point to launch further upside, but, after this morning's drama, the futures are red.  The bears need to push ten points lower, under 1364, to accelerate the downside. A move thru 1365-1373 is sideways action.