Keystone's Morning Wake-Up 10/3/12; Rajoy Says No Bailout; Presidential Debates This Evening

The big market mover over the last 24 hours is the ongoing Spain bailout drama.  One minute yes, one minute no, kind of like the Hokey Pokey, a fave wedding dance in America, ....you put your bailout in, you put your bailout out, and you shake it all about....  Markets have truly become a circus.  Recapping, a rumor was in the market overnight the night before about a Spain bailout imminent. This bounced futures higher. Yesterday morning the story changed to a Spain bailout coming by the weekend so the futures remained elevated.  Then, as Keystone mentioned here yesterday morning, Spain said all the talk is nonsense and Spain is not requesting a bailout right now.  Keystone waited to see the futures deflate expecting a four or five quickie point drop in the spu's, but, instead, the S&P's remained up eight as yesterday's opening bell rang.  After the U.S. markets were closed yesterday and thru the overnight, Spain's Rajoy unequivocally says that a Spain bailout is not imminent. Overnight futures were negative on that news, until 4 AM when the Nasdaq went positive; futures recovered and are currently flatter than Lady GaGa's abs.

Europe is a mess. German and France manufacturing data is weak. U.K. retail and services data is weak exposing an economy far weaker than analysts realize. Spain's drama continues with a bailout one day then no bailout the next day. Rest assurred that Spain has ongoing meetings behind the scenes with the ECB sorting out the details. The dramatics are simple posturing where Spain is trying to cut the best deal. Spain does not want to request the bailout and be left with no clothes, only sporting a barrel to cover themselves. They hope to maybe lose their shirt but perhaps keep their pants. Moody's will provide a sovereign review of Spain this month and the news will probably not be good. Moody's will likely use the information to justify their move with a Spain debt downgrade, to catch up with Egan-Jones' more timely Spain downgrades that are already occurring.

The competitive debasement for all countries continues with the RBA the latest to debase their currency. Keystone has asked for months, will the quantitative easing effects really matter when everyone and his bro are all racing to the bottom at the same time?  QE works when one, maybe two, major countries are implementing the concept, not when all countries are debasing.  As with currencies, it is always about the relativeness of the moves, country to country, that matters. If you decide to build a brand new large boat to out fish all the other fisherman, but, upon completion, look around and everyone else built a new large boat as well, you got nothing.

Sticking to technicals, something that makes far more sense than the macro machinations, watch the following short term indicators to determine market direction for the minutes, hours and days ahead. First, the COMPQ versus SPX percentage move today. Tech led to the upside yesterday but when the COMPQ faded and tech and broad indexes were moving at the same percentage, the markets weakened. The bears, however, could not get tech to lead lower, and in fact, AAPL bounced late day, the COMPQ took off to the upside, and the markets rallied into the close. Second, watch the euro, now over 129 and allowing markets to remain buoyant.  Watch the 128.75 and 128.30 levels which will create strong broad market selling.  Third, watch the SPX 30-minute chart, the 8 and 34 MA cross, which is now bearish, as highlighted with this morning's chart. Most importantly, watch UTIL 472.06 and VIX 17.25. As long as UTIL stays above 472.06 and the VIX stays under 17.25, the market bears got nothing. If either of these two turn bearish the market selling will increase substantially. If one of the two turn bearish and the SPX moves under 1439 and lower, Keybot the Quant, Keystone's algo, will likely flip short.

For the days and weeks ahead, watch the BPSPX as highlighted in last evenings chart, the 73.4 level, bulls win above and bears below. Bears win big if the 70% level gives way int he days ahead. Also, watch the slope of the SPX 150-day MA line. If the slope flattens and turns negative, that will signal a cyclical bear market starting.  Likewise, watch the UPS 20-week MA and 50-week MA cross. If the 20 MA crosses down thru the 50 MA, that will signal a cyclical bear market ahead for equities. Both of these signals are tracked on the Cyclical Signal page on this site. For any chart of interest, such as BPSPX, if reading this missive as a result of a GOOG search or a link from other trading sites, simply type the ticker in the search box above and the chart will come right up.

FDO and MON are important earnings reports today. FDO just reported in line with estimates. The ADP Jobs Report is about an hour away and this provides a hint at what the Friday morning jobs circus will bring to town.  Oil Inventories are at 10:30 AM.  The end of the trading week will now show a quickening pace with the Presidential Debates tonight at 9 PM EST, the ECB Rate Decision in the morning, the FOMC Minutes tomorrow afternoon, and then the main event, the Jobs circus Friday morning 8:30 AM EST.

For the SPX today, starting at 1446, the bulls need to push above 1451.50 to accelerate the upside. The bears need to push under 1439 to accelerate the downside. A move thru 1440-1450 is sideways action. In a nutshell, to boil down all this hot air, UTIL 472.06 and VIX 17.25 tells you everything you need to know concerning broad market direction today. Watch the SPX 20-day MA at 1445.51.

Note Added 10/3/12 at 8:29 AM: FDO is moving up pre-market. MON, an important ag barometer, missed on earnings and is receiving a beating pre-market. ADP report shows a boost in jobs so futures remain slightly on the positive side. ProShares announces ETF share splits so pay attention to that if affected. Keystone holds the thinly-traded SZK that will reverse split 1:4.  Other ETF's affected include BIB, SVXY, TBT, SDS, GLL, SDOW, SMN, UBR, RXD and BIS. So you will notice the number of shares, and the price, changing if holding any of these tickers. The changes are occurring now, over the next couple days. This link provides further information;

http://finance.yahoo.com/news/proshares-announces-etf-share-splits-123000132.html