Keystone's Morning Wake-Up 9/6/12; ECB Leaves Rates Unchanged; Draghi Announces Bond-Buying Plan

The big day is here.  Draghi's decision is on deck and will occur shortly, 7:45 AM EST, followed by the press conference at 8:30 AM EST. Flip a coin. These types of events are a toss-up.  The bollinger bands on the SPX daily chart are squeezed in tight signaling a large move on tap. For today, continue watching UTIL 467.35 and SOX 391, which are helping the bears, and VIX 18.35 and JJC 43.70, which are helping the bulls. Any changes to these four parameters will show the broad market direction. Remember, VIX moves inversely to markets so below 18.35 is bull-friendly and above 18.35 is bear-friendly. Note the copper weakness this morning.

For the SPX, the bulls need to touch 1409 and the upside will accelerate to 1419, perhaps 1427. The futures are agreeable to this move now, pre-Draghi.  The bears need to push under 1401 and the downside will accelerate to 1391.  Today we should see resolution of the sideways channel thru SPX 1399-1413 ongoing for over a week. Watch the 8 MA and 34 MA cross on the SPX 30-minute chart which is currently bullish. Keystone's algorithm should flip to the short side if the SPX drops under 1401 but at this time, the futures show a different plan.  Plenty can happen pre-market, however, with economic data on tap as well. Time to check the helmet and prepare for the excitement minutes away.

Note Added 9/6/12 at 7:49 AM:  ECB leaves benchmark interest rate unchanged at 0.75%. Many analysts expected a 25 bip cut. A cut would help lower the euro which would help bolster Germany's and other Euro nations' manufacturing industries and would help increase growth in Europe. Apparently, Draghi does not care about growth. European equity markets remain up on the day from one-half to over one percent.  The euro is at 1.2632 at the highs today as a result of the ECB's surprise of not announcing a rate cut. The U.S. futures remain higher, somewhat unresponsive on the news, perhaps a tiny hair weaker. Each day brings a new twist and turn.  All eyes are now focused on the press conference at 8:30 AM where the horse's mouth (Draghi) will provide details on the ECB's plans moving forward.

Note Added 9/6/12 at 7:56 AM:  The buoyant euro, due to no rate cut, effects the asset relationship; euro up = dollar down = commodities up = gold up = equities up, however, oddly today, copper is weak. Gold is 1712 tagging the 1710-1730 zone. The break thru and close above 1680 should lead to 1720.  These are important days for gold. If it reverses back down it will be now, from 1712-1730, if it continues up, the rally is the real deal and the gold bulls will be in clover.

Note Added 9/6/12 at 8:36 AM:  Draghi is speaking in the press conference.  The GDP estimates for the Eurozone are now lowered to -0.4% from -0.1%. So growth projections are worsening but he would not provide a rate cut to boost growth.  It is all a mess. Draghi says the ECB will act as a back stop. The one promise that he will keep is the one promising continued hot air. S&P futures are now at +6.40 pulling back from the 9+ area. The euro remains elevated. Copper is printing at the lows today.

Note Added 9/6/12 at 8:47 AM:  Draghi says ECB bond purchases will be unlimited and fully sterilized (inflation effects should be minimal). The sterilization aspect likely apeases Germany. Keystone jokingly describes the ongoing circus, 'as the press conference continues, Draghi places a top hat on his head, springs to his feet, Merkel tosses him a cane from stage right, and he begins tap dancing while describing the ECB bond-buying plan. It is all smoke and mirrors'. Draghi says ECB decision was not unanimous, there was one member that dissented. Any country desiring aid, such as Spain, must request aid and would be subject to conditions. This is what worries Spain, exactly what those conditions will be. The futures leak slightly lower as Draghi continues speaking. Copper continues to print at the lows. If Draghi wants to help the markets, he should stop talking.