Keystone's Morning Wake-Up 9/12/13

Import and Export Prices and Jobless Claims are on tap shortly. Natty Gas Inventories at 10:30 AM. 30-Year Bond Auction 1 PM. Treasury Budget 2 PM. None of these are particularly market moving. KR, LULU and ULTA earnings are on tap. LULU is puking -8% pre-market so this may impact the retail sector (RTH). The Fed decision on QE tapering is less than 5 days away. Putin keeps stirring the Syria pot keeping President Obama back on his heels in the twisted chemical weapons drama. Two 'errant' missiles were fired from Syria into the Golan Heights in Israel about 3 hours ago. Oil is moving higher on the continuing Middle East tensions that is developing into a sick soap opera.

The dollar/yen is 99.40 well off the 100+ numbers over the last few days where the weak yen fueled the market upside (weaker yen means higher dollar/yen currency pair). Yesterday was a wild market day with the Dow up 135 points and the Nasdaq negative. That is a rarity and very odd market behavior. IBM was up 4 points adding about 32 points to the Dow on its own. The low CPC and CPCE put/calls have been highlighted the last few days and both spike upwards. This is the juncture where market selling would be expected to begin, however, the put/calls can dip again, but, that will only set up the market top again. The hourly and minute charts are setting up with negative divergence and hint that the SPX and broader equities should roll over today. Of course, news events can send markets violently one way or the other at any minute.

The 10-year yield is 2.89%. As mentioned yesterday, the majority of traders expect either higher yields and higher stocks, or higher yields and lower stocks. Well, today appears lower yields and perhaps lower stocks. Lower yields and lower stocks is disinflationary and deflationary behavior. The drop in volatility provided yesterdays bull fuel. Watch VIX 14.58. The market upside will stall if VIX moves above 14.58. Copper and commodities are key; watch JJC 39.94 and GTX 4882. Bears can stop the upside move in equities if they attain either of these levels. JJC begins at 40.22 and in early trading, copper is down -1.6%, thus, JJC is targeted to open at about 39.56 which would send copper back to the bear camp and stop the up move in equities. The bulls need higher utilities to pave the way to SPX 1700+.

For the SPX today starting at 1689, the bulls only need a smidge of green in the futures and an upside acceleration will occur. The importance of the strong 1691 resistance cannot be understated. Bulls win big above 1691. Bears are in business under 1691. The bears need to push the SPX under 1679 today to regain their mojo. A move through 1680-1688 is sideways action today. The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead, however, watch for a potential negative 8/34 cross today that would place the bears back in the driver's seat. Watch JJC 39.94, GTX 4882 and VIX 14.58 since any reversal of any one of these three currently-bullish parameters will stop the up move in equities.

Keystone took profits on some JO but maintains an ongoing long position and is in accumulation mode on the long coffee trade. Also took profits on KOL exiting this long coal trade. Lots of traders are now in coal and shipping stocks but they were highlighted here a couple months ago. The long WLT trade remains in place so that will continue some long exposure to coal plus the potential possibility of a takeover. Also bot ERY opening a new long position, which is the dangerous and speculative triple X inverse ETF that moves opposite to the energy sector. Reference last evenings chart. ERY is displaying very attractive launch-pad bounce potential due to the falling wedge, oversold conditions and positive divergence.