Keystone's Morning Wake-Up and Midday Market Action 10/1/13; October Q4 Begins with U.S. Government Shutdown; ISM Mfg Index

President Obama takes to Twitter and tweets "They actually did it," referencing the government shutdown, as if he was not involved. The blame game begins as each side points fingers at the other. The House and Senate could not reach agreement so the government goes into a shutdown. About 800K jobs will be placed on hold; those folks will take time off without pay. Non-essential functions will be cut first such as parks. GDP will likely receive a decrease of about 0.2% for each week the shutdown lingers. Global markets, however, are higher and do not care, what shutdown? Traders remain complacent, with near everyone continuing to call for further all-time market highs and the SPX towards 1800. Japan increases the sales tax from 5% to 8%. The China PMI data was weak. The Eurozone and U.K. PMI's were slightly lower than expected. Italy's youth unemployment is now over 40%. And yet the markets move higher. This behavior verifies the faith and confidence that traders have in the Fed and other central bankers easy money policies. The markets continue to climb a wall of Fed. S&P futures are up +5 but were up +9 a couple hours ago.

Financials and utilities, XLF 20.01 and UTIL 483.57, respectively, remain important. Bulls need to turn one or both back to the bull side to regain the upside mojo. Bears need to keep these two negative while also moving copper lower. The SPX played around three key levels yesterday; the 50-day MA 1679.97, 200 EMA on the 60-minute at 1684.80 and 20-day MA at 1687.17. The SPX is under the 200 EMA signaling bearish markets for the hours and days ahead, however, the futures point to a higher start so a battle will occur today again at these key levels. For the SPX today starting at 1682, the bulls need to push above 1687 to unleash an upside acceleration. The bears need to push under 1675 to accelerate the downside. A move through 1676-1686 is sideways action today.

The VIX is 16.60. Keep watching the 200-day MA at 14.45, and Keybot's number at 14.70. Market bears remain in fine shape if the VIX remains elevated above these levels.  The political drama will continue with the debt ceiling limit on 10/17/13.  Since the government shutdown is occurring and saving money, the 10/17/13 deadline date can now easily slip into the following week. The politico's have likely resigned themselves to sorting out the government funding and debt ceiling limit problems at the same time now, over the next couple weeks into the mid-October deadline. Interestingly, the complacency and lack of concern by traders over the shutdown, with global markets actually running higher, provides no incentive for politicians to reach an agreement. This is the same problem with QE. Nations have no incentive to clean and organize their fiscal houses since the easy money is flowing like water continuing the happy party. Construction Spending and ISM Mfg Index data is released at 10 AM and will create a market pivot point. The health exchanges open today for folks to enroll into the Affordable Care Act (Obamacare). A Bradley turn window opens today through 10/15/13 for a major market move to occur either strongly up or strongly down (Bradley's do not forecast direction). Markets are typically bullish from the last day of the month through the first four days of the new month, especially for a new quarter.

In a nutshell, use the moving averages to gauge market direction, the 200 EMA to see if the bulls or bears are winning, XLF 20.01 and UTIL 483.57 to gauge if any upside market strength exists, and SPX 1687 (bulls win) and 1675 (bears win).

Note Added 10:51 AM:  Markets place a bottom at 10 AM and move higher. The SPX moves up through 1687 so price accelerates into the 1690's. The 1691-1692 level is very strong S/R. UTIL moves above 483.53 causing bullishness. JJC drops under 40.13 causing bearishness. The copper weakness offsets the utility strength. XLF is on top of the critical 20.01 bull-bear line in the sand right now. As financials go, so goes the markets. The SPX is above the 200 EMA on the 60-minute chart at 1684.79 signaling bullish markets for the hours and days ahead but the 8 MA remains under the 34 MA on the 30-minute chart signaling bearish markets ahead. One of them will flinch. The 8 MA is heading higher for a potential positive 8/34 MA cross today which would give the bulls the nod. The SPX is above the 20-day MA at 1689.89.  Markets are typically bullish from the last day of the month through the first four days of the new month.  Watch XLF 20.01 and the SPX 8/34 MA cross on the 30-minute.

Note Added 11:00 AM:  XLF 20.01. High drama. Bulls win if XLF moves above 20.01-20.02 since SPX will move to 1700+. Bears will send equities lower today, under 1690 and towards the moving averages again, if XLF is unable to overcome 20.01-20.02.

Note Added 3:13 PM:  The XLF pokes up through 20.01-20.02 today creating market lift but is petering out, now back down for a back test of this critical bull-bear line in the sand. UTIL drops under 483.53 creating bearishness. JJC recovers above 40.13 creating bullishness. So lots of jockeying for position. SPX sits at 1690 under the strong 1691-1692 S/R. The 20-day MA is 1689.69.

Note Added 3:18 PM:  XLF 20.00. Bounce or die time. As financials go, so goes the markets into the closing bell. SPX 1691.

Note Added 3:24 PM:  XLF 19.99. SPX 1689.41 losing the 20-day MA.

Note Added 3:35 PM:  XLF 20.00. SPX 1691.

Note Added 4:14 PM: XLF was goosed in the final minute, ditto utilities, check the one-minute chart, quite a sight, from 20.01 to 20.10 in a heartbeat, so SPX leaps to a closing print of 1695.00. XLF 20.01-20.02 remains important for tomorrow, as well as JJC 40.13 and UTIL 483.53. All 3 are creating bullishness. The bulls have the markets on a silver platter right now. Tomorrow's opening bell is uber importante. Keybot the Quant is in position to flip long now and if the SPX moves above 1696 tomorrow (keeping it simple), the algo will likely flip long.