Keystone's Morning Wake-Up 1/31/13

Dow Chemical misses bottom line EPS citing slowness in China and is down 3.5% pre-market. Chemicals and plastics are the building blocks of a global recovery. UPS misses on earnings citing a continued malaise in the shipping industry. UPS is in the top tier of bellwether companies and its results should discourage bullishness. Keystone's UPS 20 and 50-Week MA Cross Indicator continues to signal a cyclical bear market ahead by this tool but the other cyclical indicators remain bull-friendly. POT disappointed as well. Copper weakened on the news. POT may create a negative vibe with commodities.  UTIL 467.26 remains an important bull-bear line but at 473 the bulls are not concerned.  VIX 16 is another the bull-bear line in the sand, now at 14.32 so the bulls are happy (remember, volatility moves inverse to the broad markets). If the VIX moves above 16 the market selling will continue but, if the VIX stays under 16, the bears have no oomph and any pull  back in the indexes should be shallow. Dollar/yen tops 91 today not seen since summer of 2010; Japan is making good on their promise to weaken the yen (weaker yen means higher dollar/yen).

Watch the 8 and 34 MA cross on the SPX 30-minute chart to see if the 8 stabs down thru the 34, or not. If so, the bears receive a large feather for their hats and may gain downside momo.  For the SPX starting at 1502, the bulls need to touch 1510 which will accelerate the upside and begin the trek to the 1520's.  The bears need to push under 1500, only two points lower to accelerate the downside which will test the strong 1495-1496 support in quick order. A move thru 1501-1509 is sideways action today. Today is the EOM so the monthly charts receive new data points. Keybot the Quant was long for the entire month of January and remains long.  Keystone's shorter term trades, all bearish positions, have been beaten on the market run-up lately, but the negative divergence set-ups and overbot conditions in the charts provide reason to let them run. UTIL 467.26 and VIX 16 are key. If the bulls stay above 467.26 and below 16, respectively, the bulls have no worries. Farm Prices hit at 3 PM EST so that data will affect commodities.