The S&P downgrade of Spain last evening to just above junk status dropped the euro into the 1.2850 area. The Spain 10-year yield moves up towards 6%. The most surprising news yesterday is not reported anywhere and that was the television interview with the CEO of IP (International Paper) that said he thought China's growth rate was only 2 to 3% far below the 7 to 8% that continues to be bandied about. He cites the flat electricity usage as verifying his observations. That is phenomenal, a 2 to 3% growth rate, if true, would launch China into chaos. The Chinese are focusing on the Japan island situation now which provides some country unity but China may actually be on the brink of a hard landing. FDX helps the bulls by increasing their forecasts. Brazil and Korea cut rates so the global debasing continues, the race to the bottom, which lessens the affect of the Spain downgrade and provides copper a lift. This action will keep JJC elevated and contributing bullishly to markets. The bears need JJC to drop under 46.35 to create market negativity. VIX 16.90 and RTH 44.50 are important moving forward, both are bullish, watch to see if either one turns bearish which will create market negativity. UTIL is under 481.36 so markets will remain bear-friendly moving forward. The futures are up at this writing so watch to see how the utilities sector plays out. If UTIL moves above 481.36 a more sustainable upside market rebound rally will occur. If UTIL stays below 481.36 today, the bulls got nothing.
For the SPX starting at 1433, the bears only need a couple points lower, to drop thru 1431, and a downside acceleration will occur. The SPX would drop to test the 50-day MA at 1426 and strong support at 1424. Alas, the futures are actually higher at this writing. The bulls need to push above 1442.50 to launch an upside acceleration. A move thru 1432-1441 is sideways action. Today is the five-year anniversary of the absolute intraday tippy-top market top of all time on 10/11/12 at SPX 1576.
The International Trade, Import and Export Prices and Jobless Claims data hits within the hour. Jobless Claims will receive attention due to all the recent drama concerning BLS data reliability in response to the surprising 7.8% unemployment rate. Natty Gas and Oil Inventories are released this morning; oil is delayed one day due to the holiday. The 30-Year Bond Auction is at 1 PM. The first and only Vice Presidential (veep) Debate occurs this evening at 9 PM EST with Biden v. Ryan. Vice President Biden is known for his colorful gaffs so many folks will simply tune in from a comedy perspective. Reference the 'Presidential Election Plays' that Keystone posted this week since the stocks will likely move tomorrow in response to who wins the debate tonight. JBHT earnings are of interest todday to see how the trucking biz is doing. WGO will indicate the health of discretionary spending. Watch SWY this morning, the tight BB on the daily chart is going to squeeze a wild move out from its earnings release, this direction should commit so an interesting potential trade is to ride the momo direction on the move.
UTIL 481.36 and VIX 16.90 will determine market direction today. Above UTIL 481.36 and the market bulls will rule. If UTIL stays under 481.36 and the VIX stays under 16.90, markets move sideways. If VIX moves above 16.90, another down leg occurs for markets.
Note Added 10/11/12 at 8:54 AM: Jobless Claims drop a huge 30K. Calling Jack Welch, calling Jack Welch, report to your Twitter account immediately.
Boy, be careful everyone this morning. As you point out KS, we could still go lower after an early bounce. And I see that options and H&S targets are around 1400 or just below. NYMO can go lower. CPC and TRIN aren't bearish enough. We could drop quite stiffly into Friday and perhaps Monday before the OpEx week recovery (options next week were pointing to SPX 1450 or more). All this is just conjecture, of course.
ReplyDeleteThe new moon is Monday night so this may help Monday maintain weakness as well as the trend of down Monday's. OpEx Tuesday into Wednesday is typically an up move so that would be a target for a potential market bottom, Tuesday late morning or afternoon. But, that is miles away, this week still has two days to play out. UTIL 481.36 should be a very helpful guide, if utes stay under this level, the bulls should be all bark and no bite. If UTIL explodes above 481.36, then the rally has legs and someone probably fired a bazooka.
ReplyDeleteOther drama is more talk of a Spain bailout request, for the umpteenth time. If today moves along and this talk fades it should weaken markets. A Moody's downgrade of Spain debt is a big deal. If that occurs, global markets would gap down. The SPX was so close to the 50-day MA it really should go down to say hello at 1426.