Keystone's Morning Wake-Up and Midday Market Action 10/15/13; Shutdown Day 15; Debt Ceiling Limit 2 Days Away; C; JNJ; KO; CSX; INTC; YHOO

Today is the Feast of the Sacrifice, Eid al-Adha, for Muslims. One wonders if the bears will be sacrificed today? The political drama continues with a Whitehouse meeting and Senate solution expected by 11 AM today. The question is whether the House accepts the solution, or not. Since the president poo-pooed all the House republican solutions, the House will likely want to tweak the plan and the drama will continue. The polls are showing more negativity for republicans so this provides the House incentive to resolve the situation more quickly. The power of the liberal media causes the general public to think this way with the constant barrage of television and print commentary blaming republicans for the current situation. It is easy to train the minds of the masses since they only listen to news bites more concerned and preoccupied with their daily job and family life. This development is similar to the presidential election where the media was very instrumental in destroying Mitt Romney in every manner possible and providing the win to President Obama; the first media-selected and elected president in the U.S.'s history.  All is fair in politics; this is the direction that America desires moving forward.

The Tea Party folks are criticized by everyone these days and comically, they are the only fiscally responsible representatives remaining in Washington. In the end, we are all Keynesian's. The U.S. default talk is overblown. There is plenty of money and incoming cash flow to handle all interest payments so the political talk is fear-mongering. What would happen beyond Thursday is that about 20% to 30% cuts would occur across the board for government services. Plain and simple, the U.S. will not default, period. The current fear is that the global markets will misinterpret the seriousness of the situation and overreact.

Empire State Mfg Survey is 8:30 AM. Fed' s Dudley (part of the dove triumphant Bernanke-Yellen-Dudley) speaks at 10 AM so his words should pump markets higher. Fed's Williams speaks at 11:10 AM. Markets are typically bullish from a Tuesday low to a Wednesday high during OpEx week. Big-time earnings are on tap today including C, CSX, INTC, JNJ, KO and YHOO. JNJ beats on top and bottom lines. C just released earnings early and misses on the top and bottom lines; the stock falls over one percent. Markets are at the mercy of the political circus today.

The bulls need to push VIX under 15 to create an upside rally to SPX 1722, 1730 and new all-time highs (reference this morning's VIX chart). The bears can place a lid on the market upside if they achieve any one of these parameters; UTIL 484.03, JJC 40.19 and/or GTX 4888. The bulls will float markets higher if all 3 remain bullish. Copper is weak in early trading which should send the JJC into the 40.19 neighborhood this morning. The euro is dropping, now under 1.35, so the dollar is popping, commodities and copper are weaker. Gold sinks 20 bucks to 1256 now below the gap fill at 1262 that appeared promising as a floor for price. The 1252 support must hold for gold bulls or a move to 1220 is likely. Treasuries are trading today and the 10-year is sold with the yield up to 2.72%.  Higher yields may place pressure on utilities (UTIL). The VIX and SPX were both higher yesterday. One of them is wrong. Today we find out which. The broad indexes were all up universally between +0.4% and +0.6% yesterday indicating that the algo's and robots are in full control of trading right now. The RUT prints another new all-time high at 1090.30.

For the SPX, starting at 1710, the bulls only need a smidge of green and it is onward and upward to the 1720 and 1722 levels. The 1713 and 1715 resistance levels may put up a fight. The bears need to push under the strong 1691-1692 support level, which they were unable to do yesterday, to regain downside mojo. A move through 1693-1709 is sideways action today. Keybot the Quant is comfortably long right now but monitor the UTIL 484.03, JJC 40.19 and GTX 4888 levels closely. Strike up the calliope  Here come the politico's, nursing hangovers with orange juice and donuts at the perpetual free morning buffet, ready to perform at the circus for another day.

Note Added 3:37 PM:  The politicians play their games all day so markets move up and down in response to happy, or sad, talk, respectively. The 2-hour chart plays out pretty much as highlighted this morning. Note the RSI never reached overbot territory, it simply rolled over. If the politicians announce happy talk, and the SPX pops higher again, watch the indicators to see if the negative divergence remains in place, or not. The HOD is 1711.57 so 1712 is established as important resistance moving forward. GTX drops under 4888 and UTIL under 484.08 so the weak commodities and utes create the broad market weakness today. UTIL is teasing along just under 484 right now so watch to see if the bulls can recover into the closing bell, or not. The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullishness for the hours ahead, but only one single hair from the 8 stabbing down through the 34 for a negative cross to signal bearish markets for the hours ahead. Bears can create more downside mojo if they receive the negative 8/34 cross in the minutes ahead.

Note Added 3:48 PM:  VIX 18.36 moving higher so volatility was correct yesterday and the SPX was wrong. TRIN 0.82 helps the bulls today.

Note Added 3:50 PM:  Note that SPX LOD is 1695.93 remaining above the 20-day MA at 1693.64 so the bulls are not overly concerned. CSX earnings will provide input into the rails and how the shipping industry, and thus general economy is doing, as well as the coal industry since much of the rail shipping is coal. INTC and YHOO earnings will set the tone for tech and the Nasdaq tomorrow morning.

Note Added 4:06 PM: On the SPX 30-minute chart, the 8 MA is 1703.30 and 34 MA is 1703.20 so the bulls are in control moving into tomorrow. This 8/34 cross is important and hints that the opening bell tomorrow is very important. Either the SPX collapses and the negative 8/34 cross occurs, or the bulls are going to gap-up at the opening bell to prevent the negative cross; a decision must be made. INTC and YHOO both beat on earnings and INTC is up +1.5% and YHOO +4%. So the bulls are smiling since they have a couple feathers in their caps for tomorrow.