Keystone's Morning Wake-Up 12/28/12; Fiscal Cliff Kabuki Theatre

The Fiscal Cliff Kabuki Theatre continues today with a meeting scheduled at the Whitehouse at 3 PM EST for the major players. Remember the similar meeting a week after the election, at the same time of day, on a Friday afternoon, which was simply a dog and pony show? The president wants it to look like he is in control and trying hard to find a solution so it is easier for people to blame the republicans. Same old stuff from both sides. All sides are simply using the meeting as an excuse to begin the weekend drinking early. The markets were rolling over yesterday, Keystone's SPX:VIX ratio failed at the 68 level, twice during the session, only to recover on the fiscal cliff optimism, an impressive stick save of the markets. Watch the VIX today to see if it can move up over 20 to help the bears, or not.

Watch SPX:VIX since 68 ushers in a wrath of trouble, as witnessed yesterday before the recovery rally.  A feather in the bear's cap is the failure of the 200 EMA on the SPX 60-minute chart. The 200 EMA is 1418.44 and the SPX closed at 1418.10 signaling bearish markets for the hours and days ahead. However, at 34 cents difference, this fight is not over and will continue today. Copper plays a key role lately. Traders are getting bulled up over copper in anticipation of new ETF's coming on-line next year, however, a chart such as SCCO is setting up with negative divergence showing that folks are likely becoming too enthusiastic about copper. Nonetheless, the JJC 45.36 helped support the bulls yesterday.  Watch JJC 45.36 today, if price stays above the bulls will maintain buoyant equity markets all day long, if JJC fails at 45.36, the markets will take a strong leg lower.

Three other sectors are important; SOX 377.10, XLF 15.85 and RTH 43.65. Semi's and financials are helping bulls while the retail sector is helping the bears. For the SPX today, beginning at 1418, the bulls have the easy road only needing to touch the 1423 handle to ignite an upside acceleration.  The bears need to push under 1402 which will create a downside acceleration into the 1390's. A move thru 1403-1421 is sideways action today.  Any changes here will directly move markets in that respective direction. The euro fell under 1.32 which is bearish for markets, now at 1.3186. The 10-year yield is  1.71% so watch which way it moves. WTIC oil sits on its 90 pivot and Brent oil sits on its 110 pivot. S&P futures are deteriorating over the last hour, now down seven.

The TICK machine hit both -1200 and +1200 TICK's yesterday, you do not see that often. It signifies a completely erratic, bi-polar market, ready to leap one way or the other but it does not yet know which way.  The NYMO is at -22, typically, that should move lower to -40, -60 perhaps -80, to signal a near-term market bottom.  Ditto the CPC put/call. Remember, we are looking for CPC at 1.20 and higher since that will signal fear in the markets and a good time to nibble and bring on long positions. The CPC inched up a touch yesterday but remains under 1.20.

Chicago PMI is 9:45 AM, this is important since it hints at what the ISM may hold when it is released on the first of each month.  Pending Home Sales are at 10 AM and Natty Inventories at 10:30 AM. Thus, no big movers today, markets will be more focused on the fiscal cliff circus with the clowns performing a dog and pony show at 3 PM. The markets will react wildly depending on if President Obama picks his nose or if Speaker Boehner coughs. A major Bradley turn date occurred last Saturday, and markets have fallen ever since so perhaps the turn was to the downside moving forward.  A full moon was two hours ago, markets tend to be buoyant into and around the full moon but the fiscal cliff drama dominates all market indications these days.  There are only two trading days remaining in the year. Monday is EOM, EOQ4, EOH2 and EOY. If the fiscal cliff drama turns into a Greek Tragedy over the weekend, next Wednesday, 1/2/13, will be the first day to trade off the news that we are all currently in mid-air, falling off the fiscal cliff. The bungee cord looks frayed.

Note Added 12/28/12 at 8:02 AM:  The president must have coughed, or, perhaps Leader Reid said it was all the republicans fault again, at any rate, the S&P's are now down over 8. The S&P's are down -0.57% with the Nasdaq down -0.54% so tech is not leading lower so the bears likely do not have much oomph despite the deterioration this morning. Watch copper and semiconductors closely. Copper was positive early this morning but has gone negative over the last hour. This will drag JJC lower and create negativity.  If SOX loses 377.10 as described above, the SPX will likely drop under 1400 and move into the 1390's.

Note Added 12/28/12 at 8:41 AM:  Futures deteriorated further but the euro started rallying now up over 1.32 to 1.3218. The S&P's are down 7. AAPL is down pre-market. The euro behavior is strange. The goose in the euro only resulted in a couple point improvement in the S&P's. The 10-year yield is 1.70% so it will be interesting to see if the 1.6x% handle appears today to verify bearish equity markets, or not.