Keystone's Morning Wake-Up 12/3/12; ISM

December begins.  China PMI shows expansion. Europe remains in contraction. The China manufacturing data provided a lift to copper but that has since petered out over the last few hours. Merkel is open to providing debt forgiveness to Greece in the future but she is simply promising a chicken in every pot right now since her election is only nine months away. Egypt remains in conflict.

For today, VIX 15.85 is driving the bus. VIX starts the week two pennies above in the bear camp affecting markets negatively. If the markets bounce, watch to see if the VIX drops under 15.85, if so, then the bulls will have a happy day. If the VIX does not move under 15.85, then the broad indexes will weaken and drift lower. XLF 15.65 and SOX 372.42 are also key parameters today, both are contributing bullishly to markets to begin the new trading week.

For the SPX, starting at 1416, the bulls need to touch the 1419 handle and that will ignite an upside acceleration. Scroll back to  the SPX S/R missive this weekend for further details but the 50-day MA at 1421.60 is very important moving forward. The bears need to see the 50-day remain as a resistance ceiling, the bulls want to punch up thru this ceiling. The bears must push under the strong support at 1412-1413 and a downside acceleration will occur. A move thru 1413-1419 is sideways action. The euro is above 1.30 which signals bullishness, but note the euro is piercing the upper BB, and filling the gap, at 1.3040-ish, as discussed last week. Scroll back to view the XEU euro chart or type 'XEU' into the search box above to bring that chart up for reference.

Watch the 8 and 34 MA cross on the 30-minute chart. Watch Brent Oil, now over 111.  Above 111 should provide a lift to equities, a move under 111 will help the market bears.  Egypt turmoil directly impacts Brent price.  Watch the the treasury 10-year yield, now at 1.62%. Traders continue to prefer the safety of bonds. If the yield moves to 1.63%, 1.65% and higher, the bulls are running the markets higher as well. If the yield drops to 1.60% and lower, the market bears will rule the equity markets. Here are handy market parameters that will directly gauge the direction of the broad indexes today, with their current status;

• SPX versus COMPQ, if COMPQ moves higher than SPX bulls win, if COMPQ leads lower, bears win. Futures show tech leading higher. Bullish
• Euro 1.30 level, above and bulls win, below and bears win. Bullish
• VIX 15.85, above and bears win, below and bulls win. Bearish
• XLF 15.65, above and bulls win, below and bears win. Bullish
• SOX 372.42, above and bulls win, below and bears win. Bullish
• SPX 30-minute chart with 8 and 34 MA cross, 8 above 34 bulls win, 8 below 34 bears win. Bullish
• Treasury 10-year yield 1.62%, below equity market bears win, above bulls win. Neutral
• Brent Oil 111, above bulls win, below bears win. Bullish

The starting consensus is bull-friendly and the S&P futures are up five, however, VIX 15.85 carries the strongest clout. The opening bell is about two hours away. There will be a market pivot point at 10 AM with the ISM data so the trend after the open may easily reverse.  Merry Fiscal Cliffmas. Many folks will be reciting "Ho, Ho, Ho" in the coming days. Keystone overheard a fellow downtown the other day yelling 'ho' so he must be in a very festive mood this holiday season.

Note Added 12/3/12 at 9:12 AM:  Spain requests a bailout but in true European fashion (no offense to all out friends across the pond), the games continue. It appears to not be a full-fledged bailout request, only a portion, and Spain will likely not have to admit they are in serious financial trouble. What a circus.  S&P's are up 7 on the news which makes sense since the full-fledged bailout request would have bounced the S&P's 10 to 30 handles. At 5 AM EST the e-mini's launched, so that shows the insiders already aware of the news which came across the news wires, for the regular retail traders, about 7:30 AM or so, after the futures were already up five or six handles.  The euro moves higher but not a big move, well above 1.340, however, which will create market buoyancy. The 10-year yield popped to 1.65% another feather in the bulls cap. Tech is leading the broad markets higher this morning which provides bullish oomph.  Looks like the bulls are going to run higher at the bell, watch the pivot at 10 AM since that may provide a change of direction.