Keystone's Morning Wake-Up 8/21/12

The bears ran with the ball at the open yesterday but fumbled about one hour into trading.  The 8 MA would not cross under the 34 MA at 10:30 AM so the bulls took the ball back and headed higher into the close.  The important 1419 and 1422 closing and intraday highs continue to loom above. Futures are up currently which point to another attack of these levels to begin the day.  Tech and the broad markets both finished the day flat reinforcing the sideways market move.  At this writing, the futures show tech leading to the upside so this is a feather in the bulls cap to start the day.

For the SPX today, starting at 1418, after closing at the highs, the bulls only need a smidge of green in the futures to launch an upside move and the futures are green for many hours now. Thus, watch the key 1419.04, 1422.28 and 1424 resistance levels to begin the day.  The resistance levels typically must be held for seven to ten minutes to lock them in, so if the opening bell shows a spike higher in the markets, the move will be important in the early minutes.  The bears need to push lower, to yesterday's lows, under 1412, and a downside move to 1406 would occur in quick order. A move thru 1413-1417 is sideways action.

Copper fell yesterday which immediately told you that some market selling would be on tap. JJC 43.65 remains a key level that the market bulls need to signal that the recent market rally is the real deal.  Copper is up strongly this morning, about 1.3%.  Applying this to the JJC, starting at 42.85, would project a price move of about 56 cents, 43.41-ish, which would still be under the critical 43.65. Watch copper closely today, it tells you a lot independent of which direction the broad indexes may or may not be moving.  Bulls will run out of gas and the rally will fade if JJC 43.65 is not taken out. The utilities were flat yesterday, continue watching UTIL 472 as a signal of market trouble, now at 479 with a dragonfly doji candlestick and falling wedge on the daily chart that indicates the utes probably need a relief bounce right now. The daily chart profile remains weak and bleak moving forward, however, so a bounce to the 50-day MA at 482 may be in order and then roll over again. If money plans on moving back into the utilities today or tomorrow, then this may pertain to slightly weaker broad markets, since traders would be seeking safer plays instead of risk.

One of the most interesting aspects of the market now is how the bulls keep floating the indexes up on low volume, volatilty is very low, all based on Bernanke and Draghi delivering birthday presents only days from now. Note the commodiites index, CRB, at 305.  Bernanke has no intent whatsoever of supplying QE at this juncture. The markets have pulled out of a deflationary and disinflationary funk this summer, albeit by a smidge, so Bernanke will see no need to act with the CRB at 305.  The CRB will have to drop under 270 which will confirm serious deflationary troubles, that will cause Bernanke to act, not 305.  Thus, what happens when traders realize that that QE3 is on a milk carton?

The euro is over 1.24 creating market happiness. The dollar is moving lower this morning, keep watching $USD 82.6; below and bulls are happy, above and market bears are happy.  Thus, this morning, the asset relationship in control is euro up = dollar down = copper up = commodities up = equities up. Europe is up.  The markets view talk of Germany warming up to the ECB buying Spanish and Ialian debt, as well as leniency for Greece, as positive news items. Go figure. Watch the 30-minute chart as outlined this morning especially the 8 and 34 MA cross. Watch the SPX and COMPQ percentage relationship to see which way tech leads today.  Watch SPX 1418 and 1412, also JJC 43.65 and UTIL 472.  Nothing to it.  The bulls are driving the bus. Keystone will likely be tied up today again but this road map will tell the tale.

Note Added 8/21/12 at 7:15 AM:  Copper is now up 1.45%, applying that to JJC would project an opening print at 43.47-ish, venturing close to the uber important 43.65 level. Watch it closely today.

Note Added 8/22/12 at 4:36 AM EST: Tuesday Recap; In Tuesday trading, the strength in copper in the morning, as well as the weaker dollar, which go hand in hand, set the table for the opening market launch.  JJC went over 43.65 after subbornly refusing to bless the rally for the last couple weeks or more. Copper now says the market rally is real. Late day, JJC stumbled, but recovered again into the close.  For Wednesday's trade, today, watch JJC 43.61, and it begins above, in the bull camp, creating market strength. If JJC loses 43.61, more selling will occur in the markets. Utilities were very weak again yesterday, UTIL printing under 476, moving ever nearer the danger level at 472 that will signal major market trouble.  The price action for UTIL, with the falling wedge and positive divergence setting up, likely wants to see a bounce, however.  Watch UTIL 472.  If JJC falls under 43.61 AND UTIL falls under 472, Keystone's algorithm, Keybot the Quant, will likely flip to the short side. Otherwise, the bulls continue to drive the bus.  Remember the springtime highs in the market?  We were watching to see if the SPX could fill the gap from 2008 at 1424-1426-ish.  Price ventured higher in March and early April, only to fall short, and then the SPX tumbled lower.  That left unfinished business in place, the gap remained open.  Until yesterday, when price came up to fill that gap, satisfying that unfinished business, the SPX printed a HOD of 1426.68 (write this number down for the future), then the SPX promptly fell on its sword, commiting hari-kari. Thus, the action forward will be interesting. For Wednesday, watch JJC 43.61, UTIL 472 and SPX 1413 to determine market direction.

Note Added 8/22/12 at 6:05 AM:  Copper is down 0.3% today. Adapting that to JJC 43.68 (closing price) yields a start for JJC at 43.55 for today, which would be under the 43.61 level and a return to the bear camp.