Keystone's Morning Wake-Up and Midday Market Action 10-11-13; Shutdown Day 11; Debt Ceiling Limit 6 Days Away; JPM; WFC; Consumer Sentiment

JPM and WFC bank earnings are on tap over the next hour and will move markets. The political negotiations over the government shutdown and debt ceiling limit continued last evening. Today we find out if any progress is made. The situation may set up for a long pizza weekend with politicians announcing a deal on Monday? Wall Street may be willing to provide the politico's the benefit of the doubt and let the next few days play out, afterall, the long side firmly committed themselves yesterday to further upside. Futures are flat awaiting the JPM and WFC earnings. Typically, after a big up, or down, day, markets will tend to move flat the following day to absorb the energy for the move in that respective direction.

PPI and Retail Sales are scheduled at 8:30 AM but this data is cancelled due to the shutdown. Consumer Sentiment is released at 9:55 AM and will create a pivot point. Business Inventories are 10 AM but this also cancelled due to the shutdown. Fed's Powell speaks at 11 AM and Fed's Rosengren at 1:00 PM. The market drivers today are JPM, WFC, Sentiment and the political clown show.

Keystone's broad market trading algorithm, Keybot the Quant, is long. Watch UTIL 485.90, 483.63, XLF 20.02 and GTX 4888. All are bullish. Bears need to move at least one parameter to the bear side to stop the market upside, if not, the bulls continue higher to SPX 1697-1698 resistance then 1706 R. Watch JJC 40.19 which is now creating market negativity. The bulls will easily push the SPX 1700+ if JJC overtakes 40.19. Since the SPX closed at the high at 1692.56, the bulls only need a smidge of green in the futures to light the way several handles higher. JPM is moving higher before earnings now only a few minutes away.

Note Added 7:01 AM:  JPM beats on bottom line but is one hair light on top line revenue. Legal expenses are high and cutting into profit but JPM keeps making money. The top line is light which hints that other banks may be light as well. JPM pops about +1% pre-market. Futures remain flatish.

Note Added 7:38 AM:  JPM now up over +2%. Copper is moving higher and will supply bull fuel for markets. S&P's creeping slightly higher off the flat line. WFC earnings are on tap 8 AM only minutes away.

Note Added 8:05 AM:  WFC beats on EPS by 2 pennies but is light on top line revenue. The light top lines now set a possible trend for banks and places pressure on C, BAC and other earnings next week.  Mortgage applications drop dramatically year-over-year placing the constantly-touted housing recovery into question. The light top line revenue numbers were a theme the last earnings season across nearly all sectors. Companies can only increase profit by increasing sales, or decreasing expenses, such as reducing headcount. If the top line revenues continue along flat and falling, the only way that companies can maintain EPS targets is to reduce expenses but maintain output at the same productive levels. Companies can only cut so far, and most are at bare-bones levels right now. The only folks working now are the skeleton crew of key core employees, or any employees that have photos inside a manila envelope showing the boss in a compromising position. Everyone else is in the unemployment line or receiving a flat nose due to all the doors slamming in their faces as they plead for a job to support their family. The 'top line shortfall' rhetoric should heat up for Q3 earnings season in light of JPM and WFC results this morning. WFC is up a touch pre-market, JPM is up but less so at about +1.5%, and futures are now leaking on the bear side of flat. S&P's -1. The financials did not deliver the rocket fuel that long traders wanted today.

Note Added 8:17 AM:  WFC now -1.5% pre-market. Copper drifts negative.

Note Added 9:34 AM:  GTX is 4879 now below the 4888 bull-bear line.  XLF is 20.11 staying above the 20.02 bull-bear danger line. The weaker commodities create market weakness. Use these two parameters as a rudder today that steers the market ship.

Note Added 10:25 AM: SPX comes up to test the 1697-1698 resistance. HOD 1696.69. GTX spikes above 4888 to 4896 so this will aid bulls. VIX is 15.61. If VIX 15.00 fails, the bulls will be guaranteed a ride well above SPX 1700. The bulls are in control thus far today. Consumer Sentiment was on the weak side as most folks are sick of the political clown circus and economic malaise that lingers on. Watch the battle at 1697-1698 R. The indicators on the SPX 2-hour and 1-hour charts continue to show a mixed bag of overbot conditions and some additional long and strong juice available. So this action may continue for several more candlesticks (from 2 to 6 hours which takes the markets to the closing bell today and/or into Monday morning). If the political discussions continue all weekend long with pizza parties and pots of coffee, Monday morning may be an epic market day. Perhaps price bounces mainly along the S/R at 1697-1698 today, with 1706 R, and 1691-1692 S and 1685 S below serving as limits. The action may heat up later this afternoon once the politicians wake up and start drinking and commenting on the shutdown and debt ceiling negotiations. Note that gold is down to 1264 coughing up 33 bucks today. The gap mentioned in this morning's chart is here, at 1263-1266, so the gap fill is satisfied. This is it. The whole ball of wax. The big enchilada. The last chance corral. Bounce or die time. Either gold recovers big from here or the path to 1200 is next.

Note Added 12:19 PM: The House is offering a deal for the debt limit to be raised for 6 weeks to 11/22/13 and government shutdown to end until 12/15/13 in exchange for spending cuts. Hard to imagine why the markets are so exuberant over a potential resolution that simply continues the turmoil moving forward. Go figure. Equities jump higher on the positive news. SPX breaks through the 1697-1698 resistance and sets sight on 1706. GTX is fighting at 4888 and JJC at 40.19. Bulls need commodities and copper on their side to gain upside momo. Bears need to push GTX under 4888 and keep JJC under 40.19 to place a lid on the market upside.

Note Added 3:09 PM: GTX moves to and fro along 4888 which sends equities to and fro. GTX is 4892 helping the bulls. JJC is under 40.19 helping the bears.  Gold sits at 1268 just above the gap. Keystone exited the UUP long dollar trade which is a flat trade. Will look to reenter. Still like the dollar long which would be in conflict with gold moving up as well, however, nothing is normal in the markets these days. The dollar and gold inverse relationship is not in sync lately so it would be possible for both the gold and dollar to lift.