Keystone's Morning Wake-Up 12/13/12; Retail Sales; PPI; Claims; Business Inventories

Chairman Bernanke wakes up under his desk this morning shell-shocked from the markets non-positive reaction to his continuous money-pumping.  The SPX is at 1428. A remarkable closing number yesterday considering several parameters. The SPX is under where the Fed announced QE3 Infinity in early September at SPX 1438.  The SPX is under where the Fed announced QE4 Infinity and Beyond yesterday at SPX 1430.  The SPX is under where the election day top occurred at SPX 1429.  Keystone has highlighted the importance of 1433 resistance once the mid-November rally began. The SPX punched thru 1433 on Tuesday but quickly failed. Yesterday, price punched substantially thru 1433, only to crumble into the close and lose the 1433 level. Use SPX 1433 as a direct gauge of who is winning the overall market game; bulls above 1433, bears below 1433.

The jump higher in volatility emboldened the bears yesterday, therefore, continue monitoring VIX 15.79 today; bears are happy with VIX above 15.79, bulls are happy below.  The retail sector is also influencing the markets right now.  WMT, BIG, DG, are all taking the pipe. This is concerning since it says the lower income folks are really struggling these days despite the ivory tower economists prognosticating blue skies ahead. Retail Sales data hits at 8:30 AM EST. The importance of this data cannot be understated.  There will be affects from Hurricane Sandy, and the automobile sales will have to be studied, and an early gauge on holiday shopping will be provided, all will directly impact the RTH and XRT retail sector indexes. Keystone's algo identifies RTH 44.35 as an important bull-bear line.  If the RTH drops under 44.35, the markets selling is going to accelerate. The bulls must keep RTH above 44.35 with all their might, otherwise, they will lose control of the markets.  The Retail Sales data will directly impact the RTH which starts at 44.76. To keep things simple, pay attention to Retail Sales and watch VIX 15.79 and RTH 44.35 closely today to determine market direction.

Jobless Claims and PPI (Producer Price Index), a gauge for inflation, are released at 8:30 AM with the Retail Sales. HOV and PAY earnings are of interest. The drama will continue with Business inventories at 10 AM which will create a market pivot point. For the SPX today, starting at 1428, the bulls need to touch 1439 to accelerate the upside to 1441 and 1446. The bears only need one measly point lower, to drop under 1427, and the market downside will accelerate. Thus, watch the S&P futures closely especially after the 8:30 AM data. A move thru 1428-1437 is sideways action today. VIX 15.79, RTH 44.35, and SPX 1427 and 1439 dictate broad market direction today.  Keystone's algorithm, Keybot the Quant, is long going into the opening bell, however, if RTH drops under 44.35, and if the SPX drops under 1427 and moves lower, Keybot will likely flip short.

Note Added 12/13/12 at 9:02 AM:  Retail Sales were lower than expected but taking out auto's and gasoline the numbers were better than expected. Thus, the dance continues.  Bulls need the VIX under 15.79. Bears need the RTH under 44.35. Status quo, with neither flipping sides, results in flat markets.