Keystone's Morning Wake-Up 3/13/14; Retail Sales; Business Inventories

Volatility continues to dictate market direction. The bears were happy with VIX moving above the 200-day MA at 14.70 but during Wednesday afternoon the VIX fell below this critical moving average which created the market buoyancy into the closing bell. Keybot the Quant remains short and the algo identifies VIX 14.02 as the key bull-bear line in the sand. Bears are fine as long as they maintain VIX above 14. Bulls will rule the markets if VIX drops under 14. If the VIX loses 14.02, and the SPX prints above 1868, and both remain bullish, Keybot will likely flip to the long side.

For the SPX starting at 1868, having closed at the high, the bulls only need to see a tiny smidge of green in the futures and this will set up a several handle run higher after the opening bell. S&P futures are +5 and have been positive all night long so the bulls are planning the several handle move higher. Retail Sales are released at 8:30 AM, along with Jobless Claims and Import and Export Prices, and will greatly impact the futures. The bears need to push under 1854 to accelerate the downside. A move through 1855-1867 is sideways action today.

Business Inventories are 10 AM and will create a market pivot point. Natty Gas Inventories are 10:30 AM. The 30-Year Bond Auction is 1 PM. Treasury Budget 2 PM. The 8 MA remains below the 34 MA on the SPX 30-minute chart (reference this morning's chart) signaling bearish markets for the hours ahead, however, the 8 MA is curling upwards and the bulls will attempt a positive 8/34 cross to take control of market direction. Bears must maintain the negative 8/34 cross or they will fold like a cheap suit. Key SPX S/R is 1884, 1882, 1878, 1874, 1871, 1868, 1859, 1853-1855, 1851 and 1848-1849.

Use VIX 14.02 and the 8/34 MA cross on the 30-minute chart as the two key determinants of market direction today. If the futures remain elevated into the opening bell, pay close attention to VIX 14.02 as the SPX jumps higher since this will tell you whether the up move is sustainable, or not.