Keystone's Evening Nightcap 1/10/13; The Eve Before WFC

'Twas the night before WFC, when all thru the markets, not a trader was stirring, not even on Forex. The WFC earnings hit in the morning and will immediately set the tone for trading on Friday. Traders expect big things from the banks and expect the financials to lead the markets higher moving forward. The WFC earnings release will immediately impact futures and the bulls only need to see a smidge of green in the futures (since the SPX closed at its highs) to create an upside market acceleration at the opening bell.  As this evening's charts show, the financial sector is bearish and the technical analysis says topping action is occurring right now for most of the banks, however, you can flip a coin for tomorrow.  AXP pre-announced earnings tonight and will follow up with additional details in the regular release next week. AXP met the EPS but was a hair light on revenue. AXP has started and plans on canning 5.4K workers so that gives them the easy EPS beat. Today was a bad day if you work in the financials sector due to mass layoffs by several companies; the guy in the black robe with the scythe offered no mercy.

The same five parameters are of prime interest in relation to market direction.  One of them will flinch and the markets will move in that direction. Today the bulls were joyous in moving GTX (commodities) above 4948 but price fell back under and stayed under as the  day played out. The bulls need to touch either UTIL 466.22 or GTX 4948 to develop a new leg higher for the broad indexes.  The bears need to touch either RTH 43.75, JJC 45.65 or VIX 16.40 to create a downside leg. If all five parameters remain as is, the markets will simply stumble sideways.  The SPX printed another new closing five-year high. Watch 1474.51, the intraday high from 2012, which would signify a true clean five-year price high if it is taken out. For the SPX tomorrow, the bulls simply need to see positive futures (dependent on WFC), if so, an upside acceleration occurs for the broad indexes.  The bears need to retrace today's move and push under 1461 to accelerate the downside. A move thru 1462-1471 is sideways action.

Aside from WFC earnings, the International Trade and Import and Export Prices hit at 8:30 AM.  Fed's Plosser speaks at 9:30 AM. The Crop Report is important tomorrow since this will impact the commodities markets.   The Treasury Budget is announced at 2 PM.  The new moon is coming tomorrow and Saturday and markets tend to be weak in front of the new moon. In a nutshell, watch the WFC earnings in the morning since that will set the tone, also the five parameters listed above. Wells Fargo carries the weight of the markets on its shoulders overnight and like Caesar in the Roman Empire days, WFC will provide a thumbs up, or thumbs down, as the sun rises on the East Coast.

Note Added 1/11/13 at 6:41 AM:  The euro is flat at 1.3260.  The 10-year yield is 1.88%. WTIC oil is pulling back this morning now at 93.23. Brent oil is negative as well now with a 110 handle (reference the oil charts from last evening). The WFC earnings are scheduled for 8 AM EST but do not be surprised if they hit at anytime now. Traders are looking for 88 cents and 21.3 billion. The expectation, as with all banks, is that they will beat handily.  The mortgage revenue and mortgage data is very important since WFC can provide insight into the housing sector more-so than any other bank. BBY will release holiday sales data at 8 AM. The BBY chart set-up is attractive now so discouraging data would be nice to see since it would offer an attractive entry for a potential long.  The Crop Report is scheduled for a late morning or noon time release. Also of interest, considering Keystone's growing negative attitude on the markets that are reflected in last evening's charts, is Tom DeMark calling a top in France and Germany (Keystone is short Germany) and other Euro indexes, and the SPX is only a day away from a sell signal. Tom is well-known in trading circles. He supplies his expert TA to large investment houses providing the institutions another tool to gain an advantage over the little guy.  Tom's method is based on looking at exhaustion trends in stocks using a Fibonacci 13 number. The following link from Bloomberg highlights DeMark's call. Watch the video in that link. It appears prudent to reduce long exposure, bring on short exposure, and raise cash. Tom says a blow-off move may occur with a spike to 1492 at which time a sell signal would occur for his system if the signal does not occur before then.   http://www.bloomberg.com/news/2013-01-10/demark-sees-s-p-500-falling-5-5-after-peak-near-1-500.html

Note Added 1/1/13 at 8:24 AM:  The WFC earnings are 91 cents versus the 88 to 89 cent estimate and the top line revenue is 21.9 billion beating the 21.3 billion, however, as far as banks go, this is nothing to write home about, big beats are expected, not paltry beats. WFC popped initially but remains weak in the pre-market trading under 35. Reference Keystone's WFC and XLF charts last evening for further study. The financial sector is a touch weak on the news but overall, the futures remain flat. Thus, the bulls are not yet receiving their smidge of positivity they need to ignite an upside acceleration at the opening bell.  The economic data hits in a couple minutes, perhaps that will choose the direction.