Keystone's Morning Wake-Up 1/8/13; Earnings Season Begins

The broad indexes had a downward bias yesterday but the session was lackluster overall, bears had no oomph, bulls had no oomph, and volume was lower than any day last week.  Bombshell news hit last evening with YUM, a key bellwether due to KFC chicken restaurants, announces weaker sales in China. The great inflow of folks from rural life into the bustling empty cities must be slow in coming and folks are pulling back their spending.  NFIB Small Biz Optimism Index provides a gauge on what business owners and managers are thinking at 7:30 AM EST.  Fed's Lacker speaks at 1:30 PM.  Consumer Credit is 3 PM, likely to show that the spending on the holidays made strong use of the magic plastic. The big excitement today is double A, Alcoa, reporting after the bell, always serving as the kickoff for quarterly earnings seasons.  AA and MON are key earnings today. MON will impact the ag and commodities (GTX) sector.

The bulls could not push UTIL thru 466 yesterday so the broad indexes sold off. The bulls need to push thru UTIL 466 or thru GTX 4950 to drive markets higher.  The bears must push the RTH under 43.80, or JJC under 45.75, or VIX above 16.40, otherwise, they got nothing. For the SPX starting at 1462, the bulls need 1466.50 and the bears need 1457 to create acceleration moves. A move thru 1458-1465 is sideways action.

German manufacturing data just hit and is weaker than expected. Eurozone unemployment rate hits 11.8% another record. The euro, however, holds up above 1.31.  Futures are flat.  Markets are meandering waiting for a catalyst.  The rally last week consisted of a lot of small cap speculative stocks making wild moves higher on short squeezes. AAPL was flat yesterday and tech not leading the broad markets lower removed any hopes for the bears on the downside. Oil remains elevated which is bull friendly for markets. The new moon is Friday where markets may lean towards weakness late week. Also, there is an increased likelihood of military actions occurring now thru Sunday to take advantage of the cover of darkness.

VIX and CPC put/call continue to show complete fearlessness and complacency in the markets. NYMO dropped yesterday so it either just identified a market top, or, the markets will bounce to print new highs today which would identify a market top today or tomorrow.  TRIN printed 1.20 at the close yesterday indicating steady-eddy, non-panicked, orderly selling. BPSPX remains on a buy signal now at 76.20. The SPX:VIX ratio is at 106.01 above the September market top indicating that markets are at a top. The SPXA150R sits exactly at 80.00 (80% of the S&P stocks are above their 150-day MA's indicating that markets are becoming toppy) so the move from here would be constructive in identifying the trend ahead, up for happy bulls, down for happy bears.

In a nutshell, watch GTX 4950, UTIL 466, RTH 43.80, JJC 45.75, VIX 16.40, and SPX 1466.50 (bulls win) and 1457 (bears win) to identify broad market direction today. The 1460-1461 strong support level remains in play. A push down thru 1457 will open the door to 1444. A thrust up thru 1466.50 will open the door to 1472.

Note Added 1/8/13 at 7:56 AM:  The euro falls under 1.31 now at 1.3096.

Note Added 1/8/13 at 8:26 AM:  NFIB Small Biz Optimism was more of the same, business owners are dealing with the same old hostile environment. MON earnings blew the cover off the ball, the stock is up 4.5% pre-market. This may provide oomph to GTX and provide bulls with the fuel to punch out new highs today.