Keystone's Morning Wake-Up 10/24/13; AMZN; F; MO; MMM; MSFT

The market saga continues. The bulls run all year long and here we are in October nearing Halloween at all-time market highs. The 18-year stock cycle is the most reliable cycle and markets remain in a secular bear from 2000-2018. Sure does not feel like it considering the over 4-1/2 year bull rally now in place. This type of countertrend cyclical behavior is common within the larger secular moves. This rally is one of the top five longest bull rallies in the history of the stock market. It is reminiscent of the October 2007 top that peaked after a 4-1/2 year run from the March 2003 bottom that was marked by the start of the Iraq War. Yes, sadly, war is bullish. The current secular bear market has 5 more years of life in it despite this continuing over extension to the upside due to the Fed and other global central banker money-printing. No one knows exactly how much fluff and air is under the markets; somewhere between 0 and 50%. The obscene market pumping actions by Fed Chairman's Greenspan and Bernanke have several more years to play out. We have only seen the positive side so far. QE Infinity is losing its effectiveness and is now increasing the debt while doing nothing for the economy as evidenced by the ongoing structural unemployment. The Fed knows this. But, as Alfred E. Neuman says, "What, me worry?"

The low CPC and CPCE put/all ratio charts highlighted on the weekend signal a significant market top at hand and must be respected. Type 'CPC' or 'CPCE' into the search box to the right to bring those charts up for continued study. The VIX was under 13 over the last four days and closed at the lows yesterday at 13.42. No one is bearish the markets. Even those pundits, analysts or traders that wax worry in the media are buying stocks on the long side 10 minutes after their interview ends. Ma and Pa are jumping on board all the market hype placing their life savings into dividend stocks. SDY and DVY charts illustrate the current dividend stock bubble that is long in the tooth and prime for popping. Thus, the anticipation is for markets to place a top over the coming days.

This paragraph is very important. When the markets top off and begin to sell off over the next couple weeks, watch the utilities. If UTIL stays above 500, the market move lower will be tame, similar to September's drop, perhaps 80 or so SPX handles then recovery. This is a good outcome for bulls since equities will recover and probably finish the year strong. Conversely, as equities begin to sell off, if UTIL drops under 500 and heads lower, under 490, and lower under the 50-week MA  now at 485-ish, big trouble is ahead for the broad indexes and this pending market sell off is likely the real deal with -5%, -10%, -15% and even a lot more likely ahead. So monitor the concept in this paragraph over the next month. Of course, if UTIL loses ground at any time moving forward, today and forward, that will bolster the bear case. Watch the 10-year Treasury yield, now at 2.50%. A move higher in yields will typically send utes lower while a drop in yields will send utes higher.

Returning to earth and addressing the day at hand, utilities, semiconductors and copper are dictating market direction. Watch UTIL 498.03 (now above causing bullishness), SOX 488.95 (now above causing bullishness) and JJC 40.19 (now below causing bearishness). Thus, bulls need higher copper for party time while bears need lower utilities and semiconductors to accelerate the market downside. If all 3 parameters remain status quo, the markets will stagger along sideways. Keybot the Quant is short the markets. If JJC moves above 40.19, and SPX moves above 1752, and both remain above, Keybot will likely flip back to the long side. Copper is up a touch in early trading. For the SPX starting at 1746, the bulls need to push above 1752 to ignite an upside par-tay back to the all-time high at 1759. The bears need to push under 1741 to accelerate the downside. A move through 1742-1751 is sideways action today.

China PMI is better than expected. Eurozone, France and Germany PMI's are above the 50 level showing expansion but a touch weaker than expected. The euro pops above 1.38 overnight, then dropped back under, now back above at 1.3804. International Trade and Jobless Claims are 8:30 AM. The JOLTS Job Openings Report is 10 AM. New Home Sales were scheduled for today at 10 AM which would create a market pivot point, but it is unknown whether this release will occur today due to the shutdown?  Natty Gas Inventories 10:30 AM. Kansas City Fed Mfg Index 11 AM. 30-Year TIPS Auction at 1 PM. Notable earnings are AMZN, CERN, CL, DO, DOW, EMN, FLS, F, HSY, IP, LUV, MTW, MO, MMM, MSFT, NBR, PHM, RYN, RTN, RS and UA, so a great cross-section of tech, chemicals, auto's, paper, blue chips, defense, steel and retail.

The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours ahead. Bulls will try to create a positive 8/34 cross at the bell this morning to win back control. S&P futures are +7 and a gap-up would create the positive 8/34 cross. Watch the 8/34 cross, UTIL 498, SOX 488.95, JJC 40.19 and SPX 1752 and 1741 since these parameters dictate today's market direction. Keystone updated the Positions and Picks page mid-week and, perhaps not too surprisingly considering the leaning-bearish meme, there are more potential short plays rather than longs. Interesting and attractive potential short picks moving forward include AMZN, CELG, PXD, DG, LKND, FB, NFLX, IYZ, DPZ, LMT, LOW, CBS and BSX, if they exceed their short entry targets.