Keystone's Morning Wake-Up and Midday Market Action 9/30/13; CR Deadline and Government Shutdown Only Hours Away

The House returned a new CR bill to the Senate but this will not be addressed to 2 PM. The Senate and Whitehouse already say it is dead on arrival since it includes a delay of Obamacare for one year and a roll back on the medical device tax. The Senate and Whitehouse want a clean bill without any Obamacare stipulations and will likely meet at 2 PM, strip out the Obamacare stuff, and return it to the House. The politicians are dysfunctional. No one will talk to each other and each side simply repeats what it is doing. Leadership is absent from President Obama so politicians flounder around and foster bipartisanship. The CR deadline is midnight tonight so if an agreement is not reached, the government shutdown begins tomorrow. Overnight, the 10-year yield drops under 2.60%, China manufacturing data is weaker than expected, and Italy's fragile coalition government is falling apart. S&P futures are -15 at their overnight lows. Dow -129. Nasdaq -25.

The market action begins where it left off Friday. XLF 20.01 is very important. Equities will extend the downside, and it will be sustainable, if XLF drops under, and stays below, 20.01. Also watch UTIL 483.57 (now creating bearishness), JJC 40.02 (now creating bullishness) and GTX 4889 (now creating bearishness). The movement of these four parameters will send markets in the same direction. For the SPX today, a down open is on tap.  Key SPX support is 1691, 1685, 1684.97 (200 EMA on the 60-minute), 1684.74 (20-day MA), 1680.18 (50-day MA), 1669, 1657, 1652, 1649, 1639 and 1627. The SPX is above the 200 EMA on the 60-minute chart signaling bullish markets for the hours and days ahead, however, the 8 MA is below the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours ahead. One of these will flinch.

Today is the EOM and EOQ3. Earnings season begins next week with AA next Tuesday. Chicago PMI is 9:45 AM today and may cause a market stutter step. Dallas Fed Mfg data hits at 10:30 AM. Markets are typically bullish from the last day of the month through the first four days of the new month, especially as a new quarter begins, however, the political turmoil will override seasonality factors. A new moon occurs on Friday and markets are typically weak moving through the new moon. Keystone's eclipse window remains open for a major market selloff (see this morning's chart) to occur and the SPX is currently about 40 handles off the top. The low CPC and CPCE put/call ratio's are flexing their muscles creating equity selling due to the uber complacency these days. Everyone is bullish and even today will likely champ at the bit to buy one of the dips. Since the Senate does not convene until 2 PM, equities may take the initial drop, then travel sideways until later this afternoon. Watch XLF 20.01 as the main market metric today. Market bulls are okay if the XLF stays above 20.01. If XLF fails at 20.01 it signals sustainable market weakness ahead. The VIX at 15.46 is far above the 200-day MA at 14.45 which is a very bearish signal for markets. Bulls got nothing unless they can push the VIX under 14.45.

Note Added 10:24 AM:  The markets are off and stumbling. SPX LOD is 1674.99 so watch this number. The 50-day MA is 1679.96 so a fight is occurring now for this support. Bounce or die. XLF is 19.91 a dime under the bull-bear line in the sand at 20.01 ushering in sustainable market weakness. VIX jumped over 17 now at 16.88. UTIL dead flat at 482.14 remaining under 483.57. The SPX lost the 200 EMA at 1684.88 on the 60-minute signaling bearish markets for the hours and days ahead. The SPX dropped to a 1674 handle so far, the top of the 1671-1674 gap, and is now bouncing likely to back kiss the 1685 which would be a critical test today. Bounce or die. Keystone took profits on the ERY long trade exiting the position. Also bot more JCP at the early low, adding to this ongoing long, then as JCP jumps higher, took profits for the dead-cat bounce exiting the trade. Will consider reloading JCP after it drops moving forward. Also bot more URA since the attractive positive divergence remains in place. Also bot UUP for a near-term bounce as per this morning's dollar charts.

Note Added 10:31 AM:  SPX is 1682.52 floating higher to back test the critical 200 EMA. TRIN spiked to 2 now down at 0.86 to help the bulls. SPX now moving sideways through the range with 50-day MA at 1679.97 as support and the 200 EMA at 1684.87 and 20-day MA at 1687.18 as resistance, call it 1680-1685.  Bulls win above 1685. Bears win below 1680. No sign of the Senate as yet. They are busy receiving massages and drinking booze; they will stagger to work at 2 PM.

Note Added 10:41 AM: Watch the 200 EMA at 1684.88, a big test for price now. Bounce or die from this level. The lower price today on the 1-hour SPX chart turns the falling wedge (see this morning's chart) into more of a downward-sloping channel now since the RSI prints a lower low. Looks like the SPX 1671-1674 gap may come.

Note Added 10:46 AM:  Here is the test of the 200 EMA.... 1684.85 ... 1684.69 ....it is bounce or die time. A collapse under 1685 locks in the negative 200 EMA cross and signals negativity moving forward. Bulls must keep their heads above water above 1685.

Note Added 2:06 PM:  The Senate has started voting on the House bill which they will no doubt turn down, then return a clean bill to the House and blame the House for the government shutting down. In reality, probably all three branches will get blamed equally; the president, Senate and House; all three are dysfunctional. The SPX played around at the 1685-1687 resistance and is now at 1683, so the bulls are having difficulty recovering today. Note the SPX 20-day MA at 1687.27 and the HOD today is 1687.26. Obviously, the 20-day MA now holds serious clout as resistance above. Watch the bracket formed by the 20-day above at 1687 and 50-day below at 1680. The 200 EMA is 1684.84 and tells you who is winning. XLF is 19.94 after back kissing the critical 20.01 about one-half hour ago. UTIL is 481.73. GTX 4841. TRIN 1.35 in the bear camp for today.

Note Added 3:00 PM:  Senate votes to strip the Obamacare provisions and send the CR bill back to the House; the game of ping-pong continues. XLF marched higher to 19.97 but slips lower again, and the broad indexes weaken in sympathy. Bulls are in trouble as long as XLF stays under 20.01. XLF 19.90. SPX now coming down for a look at the 50-day MA at 1679.96.

Note Added 3:16 PM:  The SPX is testing the 50-day MA, bounce or die.